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Is The Environmental Levy Oppressive? - September 27, 2004

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IS THE ENVIRONMENTAL LEVY OPPRESSIVE?


INTRODUCTION


Good Day, St. Lucia,

Another Monday is here and it is time for another Conversation. As promised in the last Conversation, I shall respond to an e-mail from a listener who styled himself or herself as “Your Youth”. The term “Your Youth” sounds clumsy so I shall describe the writer as “My Youth”. Here is the text of the e-mail:

During the sod-turning event at the HUDC lands at Choc you stated that the Environmental Levy had been imposed as a means of deterring young persons from investing in automobiles and thus getting them to look into investment in property instead.

I would like to find out how exactly you intend to encourage young persons to build when your very administration/Cabinet has imposed so many levies and duties on any and every thing construction-related that only a select few young people can realistically look at the option of home building.

Now, back to the Environmental Levy.

Who exactly is exempt from this oppressive levy? Are you aware that many of the young persons whom you refer to as “travelling officers” have jobs in public, statutory and state entities? These positions require that we move between various locations. No longer are we confined to desks, pushing paper for eight hours; rather, our performance heavily depends on our travel to locations under our responsibility. Our pay increases depend on our performance. And our ability to build “a home to call our own” depends on our pay.

So you see, forcing the Environmental Levy on us – young people – does in fact affect our ability to achieve some of our dreams.

You always speak of the youth, but these levies and duties you continue to impose seem to favour the youth who (1) have inherited great sums, (2) have been lucky to land double-digit jobs, or (3) have turned to “other” sources of income.”

QUESTIONS TO ANSWER

This e-mail invites consideration of the following questions:

1. Is it true that I said at the sod-turning ceremony of the Choc Gardens Housing Development that the Environmental Levy was imposed to deter young persons from investing in automobiles?
2. Has this Government imposed so many levies and duties on any and everything construction-related?
3. Are young people being helped to realise their dreams to own a home and property?
4. Finally, is the Environmental Levy oppressive?

Let us now take each question in turn. We start with my comments at the sod-turning ceremony to mark the commencement of construction of the infrastructure at Choc Gardens.

The Choc Gardens Comments

This is what I actually said at the Choc Gardens ceremony – and by the way, the tape is available for verification:

“I want to say to our young people that you are not going to get mortgage rates like that (meaning, low mortgage rates) in a hurry. You have to make use of it. Like I have preached to you before and I know some of you did not like it when I had to take tough measures with used cars – leave the used cars alone and invest in land.”

This statement merely sought to emphasise that it is better for young people to invest in land rather than used cars. So, “My Youth”, what you have claimed I said is certainly not what I said. But I shall return to that later.

Duties and Levies on Construction Materials

“My Youth” says that the Government has imposed “so many levies and duties on any and everything construction related.” Unfortunately, I am not told what these duties and levies are. I wish “My Youth” had been more explicit. I suspect, however, that examples just cannot be found.

In actual fact, in the 1999/2000 Budget Presentation, I announced several initiatives to encourage investment in housing. These included:

1. The exemption of select power tools from duties and taxes;
2. Import Duty and Consumption Tax Rebates on materials used in construction on land and house costing no more than $90,000, provided that construction is done through the National Housing Corporation. Obviously, this was targeted at low income earners.
3. Exemption from Stamp Duties on mortgages or transfers of titles on such homes.

In effect, “My Youth” has it all wrong.

What can be said is this: Increases have been experienced in the cost of building materials, for example, lumber and steel, because of the high cost of fuel. So, while the duties and exemptions remain the same, St. Lucia pays more to suppliers because the transportation costs to St. Lucia have increased. Likewise, the price of steel has increased sharply because of a worldwide shortage of steel caused by heavy demand in China. St. Lucia cannot dictate to suppliers what the prices for their products should be.

HELP IN HOUSING FOR THE YOUNG

Then, “My Youth” implies that young people are not being helped to realise their dreams to own a home. That could not be true in housing. Two examples will suffice:

1. Government has enacted legislation to exempt from income tax up to $6,000 of income per year saved by a would-be first home buyer, subject to it being saved regularly in a bank for a five-year period. So, if “My Youth” saves $6,000 per year towards building a home, a deduction of $6,000 can be claimed from income tax per year.
2. Since April 01, 2003, a first-time owner of a house which the owner occupies enjoys exemption from property taxes for a period of three years. Different rates of exemption apply, but if the mortgage value is up to $200,000 the owner receives an exemption of 100% on the payment of Property Tax. These are initiatives of this Government.


OPPRESSIVE ENVIRONMENTAL LEVY?

We come now to the Environmental Levy. Is it oppressive?

Whenever people think of the Environmental Levy they think of used cars. That is unfortunate.

The Environmental Levy was introduced to pay the cost of Solid Waste disposal. The former government had agreed with the World Bank that the cost of paying for garbage disposal and the investment in solid waste disposal would be met by a tax on households, levied on one of their utility bills. Could you imagine each household being taxed to pay for garbage to be collected? This government rejected that approach because it would have been burdensome and inefficient. We decided instead, to introduce a levy on selected imports.

But what of the used cars?

Prior to 2000, the Government had banned the importation of used cars over the age limit of five years. Put differently, St. Lucians were not allowed to import cars over five years old. The Government reversed that policy in 2002 and then allowed persons to import such cars provided that they were prepared to meet the Environmental Levy. What do you prefer, “My Youth”, a complete ban on the importation of used cars over five years old or the right to import these used cars at a higher cost?

“My Youth” has also ignored another point. On two occasions, in 2002 and 2003, the Government reduced the Excise Tax on vehicles. In effect, the price of vehicles actually fell. Just ask the car dealers!

Finally, nearly every Caribbean country has had to introduce measures to control the importation of used cars. Barbados has banned the importation of cars over four years old. Others have introduced special levies, just like St. Lucia.

The e-mail from “My Youth” demonstrates two things: first there is a remarkable amount of misinformation in the public domain. Secondly, the government needs to do even more to explain its policies to the public. But let us leave that for another occasion.

CONCLUSION: A NOTE OF SADNESS…

I will conclude our Conversation on a note of sadness and regret.

The Government of St. Lucia joins the rest of the country in expressing sympathy and condolences to Mrs Flora Cenac and other members of the family of the late Prime Minister, Winston Cenac. An honest and decent man, he must be remembered for services rendered to the country and the legal fraternity throughout his working life, both at home and abroad.

Lest we forget, it was the late Mr Cenac, as Prime Minister, who signed, on behalf of St. Lucia, the Treaty of Basse Terre establishing the Organisation of Eastern Caribbean States (OECS). And most of all, the late Prime Minister saved St. Lucia from bloodshed by resigning his post when it was clear that the option was too ghastly to contemplate. Some saw this as weakness, but others understood it as “courage”.

The Government has already indicated that the late Prime Minister will be given a State Funeral with full honours and a statement on his death will be issued shortly. In the meantime, I urge all St. Lucians to pay their respects to the later Prime Minister in whatever way they can during the days leading to his funeral.

Until next Monday and our next Conversation, do have a nice day and enjoy the rest of the week.

 

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