Budget Speech 2011 - Government of Grenada

persons whose employment was involuntarily terminated by the employer
and to whom the employer makes a severance or redundancy payment.
The position of the Unions was that the severance or redundancy package
should not be subjected to income tax.
Mr. Speaker, while Government expressed its willingness to be responsive
to Labour’s request, we remained mindful of our corresponding
responsibility to be fair in the administration of the tax system and in
the granting of income tax relief. We therefore determined that it was
necessary to have the facts and carefully consider their implications before
reaching any decision on the request.
Our investigations pointed us to only one business where this was an
issue. In that case, approximately $5.2 million was paid out to 40 workers,
of which $1.7 million went to 16 workers who had no tax liability and
$3.5 million to 24 workers who had tax liability. From this $3.5 million,
Government collected the normal 30 percent - $1 million while $2.5
million was paid out to these 24 workers.
Our investigations also suggest that despite their best efforts to find work,
several of these persons remain unemployed.
In an effort to alleviate this situation, Government will immediately take
steps to secure an amendment to the Income Tax Act to waive personal
income taxes otherwise payable on income earned by an employee,
where that income is received by way of a severance payment to such an
employee whose relationship with the employer is brought to an end on
account of the current economic crisis.
The purpose of this measure is to minimize the risk of catastrophic loss by
a worker who, during this economic crisis, loses his or her job, is unable
to find suitable or comparable alternative employment and is forced to
deplete the severance payment received to meet daily living expenses.
The measure is not intended to provide an unexpected gain to an employee
merely because the relationship with the employer has ended. The purpose
of the measure is to put the employee, as far as is reasonably possible, in
the same position that he or she would have been in, had the relationship
with the employer not been severed on account of the crisis.
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2011 Budget Statement