WORLD TRADE
ORGANIZATIONG/SCM/N/74/DMA
7 January 2002
(02-0072)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the
Agreement on Subsidies and Countervailing Measures
Requests Pursuant to the Procedure in Document G/SCM/39
DOMINICA
The following communication, dated 24 December 2001, has been received from the Office
of the Ambassador for the Commonwealth of Dominica in London.
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I have the honour to submit the Statement of  the Commonwealth of Dominica requesting an
extension under SCM Article 27.4 pursuant to the procedures set forth in document G/SCM/39.G/SCM/N/74/DMA
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NEED FOR AN EXTENSION
Dominica is seeking an extension  of the transition period under Article 27.4 of the Subsidies
and Countervailing Measures (SCM) Agreement in accordance with the Ministerial Decision on
Implementation Issues and Concerns.
For decades, Dominica's economy had been entirely dependent on the agricultural sector and
in particular, the banana industry.  However, economic performance in the last decade reflected a
steady decline in the dependence on banana production for exports as the main foreign exchange
earner.  This therefore triggered a restructuring process.  The process must necessarily take on board
the impact of global developments and therefore incorporate policy initiatives geared towards the
development of a more diversified and resilient economic structure.
Consequently, from the early 1980s, programmes aimed at diversifying Dominica's economy
were implemented to increase the production and exports of non-banana agricultural crops as well as
to develop other sectors of the economy, particularly manufacturing and services.
The tourism and light manufacturing sectors have been targeted as growth areas and as such
tremendous efforts are being made to encourage investments in these sectors.  More recently the
Government of Dominica has spent considerable efforts and resources in developing its financial
services sector.  These export-oriented diversification programmes in the manufacturing, services and
tourism sectors are all geared to enhance sustainable growth and to stimulate job creation.
Dominica's investment promotion framework is currently structured around a system of
corporation tax holidays and duty free concessions administered by the Ministry of Finance and
facilitated by the National Development Corporation (NDC).
The framework is now under review to ensure greater effectiveness.1
Dominica's investment promotion policy will continue to focus on supporting developments
in agri-business, tourism plant expansion, information technology, light industry and small businesses.
There will be an expanded focus on facilitating eq uity mobilization through networking local sponsors
with potential financial partners and technical support services.
Dominica will need to obtain the necessary technical assistance to undertake the review and
reformulation of its investment promotion scheme.  This will form part of a broader programme of
developing an industrial development master pl an, an important component of which will be a
knowledge based industry strategy and action plan co vering the role of information technology in the
diversification programme and the full range of related regulatory, human resource and institutionaldevelopment issues.  This process will need to be a gradual one with enough time for transition.
A transition granted under Article 27.4 is necessary to allow Dominica to undertake this
exercise.
                                                     
1 See Government's Report of Dominica's Trade Policy Review - WT/TPR/G/85/DMA.G/SCM/N/74/DMA
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IDENTIFICATION OF PROGRAMME
Title of the subsidy programme
Dominica provides Fiscal Incentives to investors who invest in various sub-sectors of
industry.
Policy objective and/or purpose of the subsidy
The fiscal incentive programme is directed at encouraging investment in the industrial sector
in Dominica for the greater objective of economic growth and development of the country.
Background and authority for the subsidy (including identification of the legislation under which it is
granted)
The fiscal incentive programme finds its legal basis in the Fiscal Incentives Act No. 42 of
1973, which was amended by Act No. 11 of 1983.  The Fiscal Incentives Act was passed to giveeffect to an agreement on the harmonization of fiscal incentives to industry among CARICOM
countries.
The National Development Corporation (NDC) established in 1988 is responsible for
administering the incentives programme.
Form of the subsidy (i.e. grant, loan, tax concession, etc.)
The Fiscal Incentives Act provides for tax concessions by way of the following:
• Exemption from import duties on plant, equipment, machinery, spare parts, raw materials,
or components thereof
• Exemption from income tax;  and
• Exemptions from income tax on export profits by way of tax credits.
To whom and how the subsidy is provided
The fiscal incentives are provided to enterprises involved or to be involved in production in
agriculture, agro-processing, tourism, manufacturing and other service sectors.
Enterprises/individuals submit applications to the Minister responsible for industry for fiscal
incentives under the Act.  Cabinet considers the application if it is determined that the enterprise is of
benefit to the economy and is in need of the incentives, the application is approved.
Tax concessions2 are granted for a period called the "tax holiday period" depending on which
group of enterprises the applying enterprise falls.  There are five groups of enterprises and the taxholiday period are indicated as follows:
• Group 1 enterprises, in which local value added is 50 per cent or more of sales:  up to
15 years
• Group 2 enterprises, in which local value added is between 25 and 50 per cent of sales:
up to 12 years
• Group 3 enterprises, in which local value added is between 10 and 25 per cent of sales:
up to 10 years
                                                     
2 Exemptions from import duties and income taxes.G/SCM/N/74/DMA
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• Enclave enterprises, in which production is exclusively for export:  up to 15 years:
enclave enterprises are enterprises producing exclusively for export to countries outsidethe Caribbean Common Market
• Capital-intensive enterprises, in which there is investment of not less than US$10 million:
up to 15 years.
The Act also grants import duty exemptions for the importation of machinery, equipment,
spare parts, building materials, raw and packing materials, and others, as appropriate, to be used in
eligible enterprises.
The Aid to Development Enterprises Act also provides for the granting of relief from customs
duties on raw materials and inputs, materials, tools, plant, machinery, and building materials.  These
goods must be used in manufacturing processes, construction, erection and alteration of factories;
equipping of hotels;  and packaging of goods, among other manufacturing and processing activities.The Hotels Aid Act and the Income Tax Act No. 37 of 1982 allows for the granting of a tax holiday of
up to 20 years for approved hotel and resort developments.
Additionally, temporary exemptions from taxes on import duties and on the general
consumption tax are contained in the Customs (Con trol and Management Act) and the Consumption
Tax.  Under the Customs Act, Dominica being a member of CARICOM is allowed to reduce or
suspend the CET in cases where a good is not produced  in sufficient quantities within the CARICOM
area to meet demand.  The reduction or suspension is subject to the conditions contained in the list of
conditional duty exemption to the CET.
An extension of the transition period under Article 27.4 is critical to the reversal of the trend
of declining growth rates, worsening of Central Go vernment fiscal position and declines in foreign
exchange earnings of the Dominican economy in recent times.
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