Prime Minister Details VAT Policies
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Prime Minister Details VAT Policies
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Contact: Shannon Lebourne
Tuesday, 08 May 2012 – In a strategic and deliberate attempt to protect the most vulnerable the Government of St Lucia has confirmed a group of essential good and services which will not attract the Value Added Tax (VAT) when it is implemented here on September 1,this year.
These good and services include but are not limited to fuel, fresh eggs, milk, butter, potatoes, chicken and educational and medical services.
In presenting the 2012/2013 Appropriation Bill commonly known as the Budget Address on Tuesday May 8th , 2012 Prime Minister and Minister for Finance Honourable Dr Kenny Anthony explained that government took this policy decision in recognition that low income earners can be adversely impacted by the introduction of VAT. “The VAT provides the opportunity to deal directly with social welfare and investment concerns by permitting exemptions for designated goods. The VAT as designed will not place an excessive burden on capital investment goods because it provides a full credit for the tax included in purchases of capital goods. The credit does not subsidize the purchase of capital goods; it simply eliminates the tax that has been imposed on them. At the same time the poor and vulnerable will be protected with exemptions on a wide range of products. However, we have to be careful in managing the exemptions as this could easily erode the gains made in terms of coverage. The model that we have developed is very capable of achieving this delicate balance”.
With the implementation of VAT the prices of some goods and services will increase while some will go down since the tax will replace consumption tax, hotel accommodation tax, motor vehicle rental fee, mobile cellular phone tax and the environmental protection levy.
A standard rate of 15% will be imposed on some goods and services while a reduced rate of 8% will be applied to the hotel sector and related services until April 30th 2013 at which time a determination will be made on the future rate to be applied.
The Prime Minister says the introduction of VAT will aid in reducing the country`s worrying fiscal deficit and debt ratios. “The overall rationale for the introduction of a VAT as a general tax on consumption is to broaden the tax base and move towards a system which decreases the tax burden on income in favor of consumption. This would allow for a removal of a number of other duties and direct taxes, which have distorting effects on the productive sectors and on the welfare and behavior of the consumers. In total, this should result in a simplification of the tax system. In summary, a VAT increases the share of the tax revenues in composition of the government revenues, by using new and reliable sources of revenues on a consumption basis. VAT would also: 1. Decrease tax pressure on the production sector and productive economic investment by adjusting the income tax rates; 2. Increase the efficiency of the taxation system by decreasing the costs and time of collecting tax revenues; and 3. Increase the co-operation and participation of people in collecting tax revenues and encouraging self-assessment”.
The Prime Minister also proposed the establishment of a Parliamentary Oversight Committee to monitor and guide the implementation of the Value Added Tax on September 1st. |
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