Massive reduction in taxes announced in the National Budget is expected to stimulate business and consumption activity – Govt

The government says the massive reduction in taxes announced in the 2020/2021 National Budget is expected to stimulate business and consumption activity.

It says that the revenue policy environment has become very challenging as revenue levels continue to decline.

With private sector activity severely hampered by the crisis, revenue policy must provide the necessary impetus for growth.

The Ministry for Economy has said that keeping the economy afloat and supporting businesses and those that are unemployed is critical for immediate relief and long-term economic recovery.

It says increased external financing through multilateral partners like the Asian Development Bank, Asian Infrastructure Investment Bank, World Bank, and bilateral partners like the Japanese Government will help sustain expenditure, while quantitative easing measures through RBF purchase of Government bonds and other domestic financing will assist further.

The Ministry also says long-term improvements in other sectors are necessary to reduce our over-dependence on tourism.

It says reforms will be directed towards improving the ease of doing business to attract private sector investments, enhancing access to finance for higher investment opportunities, reducing tax rates and streamlining tax administration to support economic growth and stability.

The Ministry for Economy says targeted spending is necessary to stimulate economic activity and fund essential COVID-19 measures.

It says with expected revenue collections of $1.673 billion in the 2020-2021 National Budget and available net financing of $2 billion, the government has the capacity to spend a maximum of $3.674 billion, around $138.3 million higher than the COVID-19 Response Budget.