Global Daily Tax News, IMF Recommends Belize Rein In VAT Breaks, (Feb 29, 2024)

The International Monetary Fund has recommended that authorities in Belize look to broaden the tax base, in its annual report for the country.

The report highlights that Belize has "space to increase revenue by broadening the tax base, raising excise taxes, rebalancing taxes on manufacturing to level the playing field, and strengthening revenue administration."

The IMF said tax policy measures could boost the nation's tax-to-GDP ratio by two percent by the 2025 fiscal year.

The report notes: "The General Sales Tax (GST) has several items taxed at a zero rate, including non-prescription drugs, processed foods, utilities, appliances, household items, business inputs, and government purchases. Taxing some non-first necessity items at the 12.5 percent GST rate could raise 1.6 percent of GDP in revenue, while the expansion of targeted transfers would mitigate the impact on food insecurity."

Further, it recommends that standardizing personal income tax exemption thresholds could raise 0.2 percent of GDP, while raising excise taxes on fuel and fees on vehicle registrations and driver licenses could also raise 0.2 percent of GDP.

Strengthening revenue administration could raise another 0.2 percent of GDP in revenue, it says. Measures could include creating a unified tax department to enhance efficiency and reduce costs; incorporating the collection of stamp duties and land taxes in the Belize Tax Service Department (BTSD); increasing tax arrears collection by improving the accuracy of tax accounts and developing enhanced standard operating procedures for arrears collection; implementing a risk-based audit case selection process; and enacting the draft customs law.

The IMF concluded that if further measures are needed – if public debt does not fall as expected – the Government should look to raise the GST rate or further expand the list of zero-rated items liable to the standard rate.