RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/DMA/5
29 April 2002
(02-2441)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies to Questions Posed by AUSTRALIA1, the EUROPEAN COMMUNITIES2,
JAPAN3 and the UNITED STATES4 Regarding the Notification of DOMINICA5
The following communication, dated 24 April 2002, has been received from the Office of the
Ambassador for the Commonwealth of Dominica.
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Replies to Questions Posed by Australia
Fiscal Incentives Programme
1. What are the criteria for qualifying for tax and import duty exemptions under the Fiscal
Incentives programme?  Are the exemptions contingent on export?
The general criteria for qualifying for tax and import duty exemptions is that the enterprise
should provide some benefit to the economy of Dominica through one or more of the following:
- The creation of employment
- The introduction of new capital
- The transfer of new technology
- The generation of foreign exchange earnings
- The provision of some benefit to the environment or at the very least the
preservation of the environment
                                                     
1 G/SCM/Q3/DMA/1.
2 G/SCM/Q3/DMA/2.
3 G/SCM/Q3/DMA/3.
4 G/SCM/Q3/DMA/4.
5 G/SCM/N/74/DMA.G/SCM/Q3/DMA/5
Page 2
2. What determines the different categories or groups of enterprises as listed in documents
G/SCM/N/74/DMA and G/SCM/N/71/DMA?
The different categories or groups of enterprises are determined by the percentage local value
added realised from sales.
3. Does this programme provide exemptions dependent on the use of domestic goods?
The Fiscal Incentives Programme does not provide exemptions, which require that enterprises
use domestic goods over imports.
First, import duty and consumption tax exemptions are granted on imports of raw materials
and other items into Dominica.  There is thus an expectation of imports under the programme.
Second, while there is a requirement for at least a 10 per cent local value added as indicated in
section 13, it should be noted that in the definition of local value added given in section 2, the value of
imported raw materials, content of component and parts thereof, fuels and services is only one of fiveelements which can take away from local value added.  Therefore while the Act may encourage
enterprises to have greater local value added (because of the longer tax holidays granted), this can be
achieved by reducing any of the other four elements.
Third and furthermore, section 3 of the Act weights the local value added percentage by
wages and salaries paid to nationals of CARICOM.  This indicates that greater emphasis is placed on
local and regional employment as opposed to the use of domestic over imported goods.
4. What is the level of income tax for which exemption is granted?
Enterprises can receive up to 100 per cent exemptions on Corporate Income tax the rate of
which is 30 per cent of net profit.
5. Could Dominica advise when and how it will phase out this programme?
The aspect of the programme, which Dominica views as in need of phasing out at some time,
is the export tax credit provision of the Fiscal Incentives Act.  One company benefits from thisincentive, which expires in 2005.  Hence consideration will be given to an amendment of the Act for
removal of this provision after 2005.
Hotels Aid Act
1. What are the criteria in order to qualify for a tax holiday under this programme?  What
goods are captured by this Act?
The Hotels Aid Act does not provide for granting of tax Holidays.  The Act provides for the
granting of exemption of import duties to persons and enterprises that expend money for theconstruction of hotels, the equipping of hotels and furnishing of hotels and other similar matters.
The only criteria for qualifying for import duty exemption that the hotel should have at least 5
guest rooms.  The period of the exemption depends on the anticipated period of construction of the
hotel.
The goods captured are building materials, hotel equipment and furniture and fittings.G/SCM/Q3/DMA/5
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Replies to Questions Posed by the European Communities
1. Please indicate when the programme came into operation.
The Fiscal Incentives Programme in its current form came into existence by Act No. 42 of
1973.
2. Please indicate whether the programme provides for other forms of subsidies than
exemption of import duties and internal taxes (e.g. grants, provision of goods or services).
The programme does not provide for subsidies other than exemption of import duties and
internal taxes.
3. Does the programme provide for a condition to use domestic goods? If yes, please
describe the relevant provision.
The Fiscal Incentives Programme does not provide exemptions, which require that enterprises
use domestic goods over imports.
First, import duty and consumption tax exemptions are granted on imports of raw materials
and other items into Dominica.  There is thus an expectation of imports under the programme.
Second, while there is a requirement for at least a 10 per cent local value added as indicated in
section 13, it should be noted that in the definition of local value added given in section 2, the value of
imported raw materials, content of component and parts thereof, fuels and services is only one of five
elements which can take away from local value added.  Therefore while the Act may encourage
enterprises to have greater local value added (because of the longer tax holidays granted), this can beachieved by reducing any of the other four elements.
Third and furthermore, section 3 of the Act weights the local value added percentage by
wages and salaries paid to nationals of CARICOM.  This indicates that greater emphasis is placed on
local and regional employment as opposed to the use of domestic over imported goods.
4. The programme appears to contain a condition for "local value addition".  Does this
constitute a requirement to use domestic over imported goods?  Please explain.
Please see reply to question 3 above.
5. Please indicate the rate of import duty or internal tax exemption as of
1 September 2001.
Beneficiaries can receive up to 100 per cent exemption on import duty and internal taxes.
6. Please describe changes to the programme since 1 September 2001, if any. In particular,
indicate any changes to the rate of exemption or the coverage of the programmes e.g. in terms of
products, location etc.
There have been no changes to the programme as of 1 September 2001.G/SCM/Q3/DMA/5
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7. Please indicate for each programme how many companies have benefited from the
programme as of 1 September 2001.
Since 1 September 2001, 11 companies have benefited under the Fiscal Incentives
Programme and 9 companies under the Hotels Aid Act.
8. Please elaborate on when and how Dominica intends to phase out the programme.
The aspect of the programme, which Dominica views as in need of phasing out at some time,
is the export tax credit provision of the Fiscal Incentives Act.  One company benefits from this
incentive, which expires in 2005.  Hence consideration will be given to an amendment to the Act to
remove that provision after 2005.
Replies to Questions Posed by Japan
Fiscal Incentives Programme
1. This Programme seems to include requirement for local value added.  Could Dominica
please explain its conformity with Article 3.1(b) of the ASCM?
The Fiscal Incentives Programme does not provide exemptions, which require that enterprises
use domestic goods over imports.
First, import duty and consumption tax exemptions are granted on imports of raw materials
and other items into Dominica.  There is thus an expectation of imports under the programme.
Second, while there is a requirement for at least a 10 per cent local value added as indicated in
section 13, it should be noted that in the definition of local value added given in section 2, the value of
imported raw materials, content of component and parts thereof, fuels and services is only one of five
elements which can take away from local value added.  Therefore while the Act may encourage
enterprises to have greater local value added (because of the longer tax holidays granted), this can be
achieved by reducing any of the other four elements.
Third and furthermore, section 3 of the Act weights the local value added percentage by
wages and salaries paid to nationals of CARICOM.  This indicates that greater emphasis is placed on
local and regional employment as opposed to the use of domestic over imported goods.
2. While the Fiscal Incentives Programme, which Dominica referred to in
G/SCM/N/71/DMA, seems to have already been effective in 2001, Dominica notified in
G/SCM/N/60/DMA on 8 February 2001 that ther e were no measures, which require notification
under Article 25.  Could Dominica please explain this contradiction?
The earlier notification in error did not conceive fiscal incentives to be notifiable under the
SCM Agreement.G/SCM/Q3/DMA/5
Page 5
Replies to Questions Posed by the United States
1. Could Dominica please explain whether this programme provides for any other
incentive apart from the full or partial exemption from import duties and internal taxes?
The programme does not provide for other forms of subsidies other than exemption of import
duties and internal taxes.
2. Please provide normal customs duty, consumption tax and income tax rate companies
would pay absent this programme.
The normal rate of consumption tax is 25 per cent.  The corporate income tax rate is 30 per
cent.  The customs duty ranges between 0 per cent and 20 per cent for industrial products and 40 per
cent for agricultural products.
3. Could Dominica explain whether any subsidy under this programme is contingent upon
the use of domestic goods?  In particular, please explain how the local value added informationthat must be provided in an application is taken into account when granting benefits.
Moreover, in light of the local component or local raw material requirements, please comment
on whether this aspect of the programme constitutes a prohibited subsidy under Article 3.1(b)
of the Agreement on Subsidies and Countervailing Measures.
The Fiscal Incentives Programme does not provide exemptions, which require that enterprises
use domestic goods over imports.
First, import duty and consumption tax exemptions are granted on imports of raw materials
and other items into Dominica.  There is thus an expectation of imports under the programme.
Second, while there is a requirement for at least a 10 per cent local value added as indicated in
section 13, it should be noted that in the definition of local value added given in section 2, the value of
imported raw materials, content of component and parts thereof, fuels and services is only one of five
elements which can take away from local value added.  Therefore while the Act may encourage
enterprises to have greater local value added (because of the longer tax holidays granted), this can be
achieved by reducing any of the other four elements.
Third and furthermore, section 3 of the Act weights the local value added percentage by
wages and salaries paid to nationals of CARICOM.  This indicates that greater emphasis is placed on
local and regional employment as opposed to the use of domestic over imported goods.
Local value added information is taken into account to help determine the extent of the
incentive/exemption to be granted.  Greater local value added may be a basis for longer tax holidays.
4. Because some eligible enterprises are entitled to benefits under this programme for up
to 15 years, please how Dominica would modify this programme so that subsidies so not extendbeyond any extension period provided.
The aspect of the programme, which Dominica views as in need of phasing out at some time,
is the export tax credit provision of the Fiscal Incentives Act.  One company benefits from this
incentive, which expires in 2005.  Hence consideration will be given to an amendment to the Act toremove that provision after 2005.
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