Higher taxes for the highest earners: tough budget makes unpopular decisions ‘for the many, not the few’
A higher rate of income tax has been introduced on St Helena as part of a tough Budget that has caused “disquiet” for some.
But Financial Secretary Colin Owen said it was a Budget for the benefit of the many, not the wealthiest few.
The highest earners will pay 31% tax on all income over £25,000. The basic rate of income tax rises by 1%, to 26%, on income over £7,000.
As one councillor observed, the tax bill for a person earning more than £75,000 will rise by more than the total annual income of Saints living on the Basic Island Pension.
A new disability benefit is being introduced, and rules are changing so that work over the age of 65 can count towards final pension settlement – helping to end an injustice that meant former Ascension workers were not entitled to a full pension on St Helena.
Mr Owen told Legislative Council: “It seems clear to me that the vulnerable and less well off need to be supported during this time more than ever before.
“If that means that taxes have to rise to pay for a better funded benefits system, improved services at the hospital and to support safeguarding of all people on the island, then this government believes this is the right approach to take.”
He quoted the mantra that “the broadest shoulders in society should be the ones that carry the heaviest loads.
“This equally applies to St Helena and only those with minds not broad enough to think beyond their own interests would disagree.”
Mr Owen said the island was entering “the most important year in St Helena’s history” with commercial flights from February 2016.
But the government faced massive spending pressures in order to meet the requirements for the airport, including accreditation. The police and fire service are being given extra money in readiness.
He said three councillors had served on a committee that considered “a raft of ideas for reforms” to tax.
The Financial Secretary said the island’s UK aid funding had been set for only a single year because of the path of its future economy, post-airport, “is difficult to forecast”.
He said: “We still have uncertainties around airport-related expenditure for airport certification and operational readiness.”
Rises in taxes on alcohol, tobacco and sweetened fizzy drinks are intended to improve health on the island – which has one of the highest levels of type-2 diabetes in the world.
Further duties and incentives could be introduced during the financial year to support the green agenda.
“More work is required to define what support can be provided to commercial farmers on the island,” said Mr Owen.
He said some people had urged waiting until 2016 to bring in the higher rate tax.
But he said: “St Helena can no longer put off change and delay decisions, especially ones which deep down we all know are right for the good of the nation and not just the individual. To say otherwise is to turn the other cheek and not address the issues we face on St Helena.”
Some changes “will not please everyone”, he said. “In fact, it has caused some disquiet in certain areas of our community.
“But I have been reminded by many people of late that the budget must not be for the benefit of the few but for the benefit of the majority of St Helena’s people.”