KPMG is delighted to be able to present our 2018 Budget and Economic Commentary on the member states of the Eastern Caribbean Currency Union (ECCU). At the time of this publication, Antigua and Barbuda, Grenada, St. Kitts and Nevis, Saint Lucia and St. Vincent and the Grenadines have released their budget statements for 2018. Our analysis has been compiled as a high-level review of the proposals made available to us.
Overall the ECCUperformed positively as economic activity expanded at 1.8% during the year, though at a slower rate as compared to 2016. The growth recorded in 2017 marked the seventh consecutive year the ECCUrecorded a positive growth rate. The construction sector primarily fueled the economic performance in 2017, supported by the transport, storage and communications, and wholesale and retail sectors. A notable decline was recorded in agricultural, and tourism and restaurants sectors, partly due to the devastating impact of Hurricanes Irma and Maria in September, 2017.
At a country level, six of the eight member countries experienced an economic expansion. All countries experienced inflationary conditions during 2017, with increases in consumer prices ranging from 0.2% in St. Kitts and Nevis to 3.0% in St. Vincent and the Grenadines. Economic activity in all member territories, except Dominica, is projected to increase in the short term, primarily driven by the construction and transport and storage sectors, combined with the recovery in tourism activity.
The Budgets for 2018 have been prepared with the aim of achieving increased purchasing power and private sector growth. We note that many of the Eastern Caribbean territories analysed in this publication have reduced or contemplated reducing the standard corporate or personal income tax rates. As witnessed in the previous years the Governments of the respective islands are continuing to focus on increasing economic growth, creating jobs, while consolidating on their fiscal balances. In addition, Antigua and St. Vincent and the Grenadines have proposed amending existing tax laws with the aim of simplifying tax administration procedures.
In this document, we have focused on the taxation proposals of Budget season 2018 and the impact on the relevant stakeholders. We hope this publication provides you with a general understanding of these Budgetary proposals.