7 December 2009
Ladies and Gentlemen, I am pleased to announce that the Cabinet of Ministers,
at its meeting on 18th November 2009, approved a number of policies related to
the implementation of the Value Added Tax in St. Lucia.
Before I give details on the approved policies, let me provide you with some
brief background information to the introduction of VAT in St. Lucia. You will
recall that discussions on the introduction of VAT within the OECS started as
early as 2003. This policy was reiterated in the 2007/08 budget address by the
former Prime Minister and Minister for Finance the Honourable Sir John Compton.
In fact, by introducing the VAT, the Government of St. Lucia is abiding by the
decision taken in July 2003 by the Monetary Council, the highest decision making
body of the Eastern Caribbean Central Bank, to approve the implementation of the
VAT in the ECCU as recommended by the OECS Tax Commissioners.
Since the decision of the Monetary Council, Antigua, Dominica and St. Vincent
and Grenadines have already implemented VAT, while St. Kitts and Nevis, like St.
Lucia, is preparing to do so soon. Grenada has already committed to implementing
the VAT in February 2010.
As stated by the then Prime Minister in the 2007 Budget, and as has been
repeatedly emphasized by the VAT Implementation Team, the VAT will not be an
additional tax but will replace a number of other indirect taxes.
Cabinet by Conclusion No 1074 of 29th November 2007 approved the establishment
of the Value Added Tax Implementation Project Office with the mandate to prepare
St Lucia for the implementation of a VAT system in the most effective manner.
The staff of the project office has done a tremendous amount of work in
educating the public on VAT and how the new system works. However, specific
information on how the new system will affect individual taxpayers have not been
disclosed as the VAT policies were only recently approved by the VAT Steering
Committee and Cabinet. With the approval of the VAT policies, the project office
staff will now be in a position to meet the various stakeholders including the
business community, trade unions, churches, sports and social clubs and other
community organizations to explain in precise terms how the VAT works and the
likely impact on the membership of these organizations.
As part of the public sensitization Cabinet has mandated that the staff of the
project office demonstrate the impact of the VAT on the prices of a typical
basket of goods and services so that the public will be better informed of how
VAT is likely to impact on them. A White Paper has been prepared for public
consultation and will be used in disseminating information on the VAT policies
during the consultations.
I take this occasion to ask members of the public to avail themselves of the
opportunity to be educated about VAT and to ask the pertinent questions at the
various presentations.
Ladies and Gentlemen, Government views the introduction of VAT as part of its
strategic policy response in modernizing the tax system and thereby building the
resilience of the economy to vulnerability and external shocks. The need for
this strategic approach has become even greater in light of the impact of the
global recession which calls for greater resilience in the structure of our
economy and to build the fiscal space necessary for Government to provide the
kind of policy response required.
The VAT has been proposed as the preferred option as this tax is considered a
more efficient, simplified and modern form of indirect taxation. The VAT, which
is a tax on consumption, is a broad base tax resulting in increased revenue, and
reductions in relatively high tax rates.
The policies that have been approved by Cabinet are as follows:
1.A standard VAT rate of 15 percent and a rate of zero percent for goods and
services in the zero-rated list. These goods and services include goods produced
for exports and agricultural inputs.
2.A VAT registration threshold for companies transacting business to the
value of EC$120,000.00 per annum.
3.The replacement of the following taxes/fees with VAT:
a.Consumption Tax
b.Motor Vehicle Rental Fee
c.Mobile Cellular Telephone Tax
d.Environmental Protection Levy
4.Exemption from the payment of VAT on a list of supplies including basic food
items, financial services, medical services, prescription drugs or medicines,
education services, day care services and local transportation with a driver,
among others.
5.Specific rates of hotel accommodation tax based on a grading system for
hotels.
6.Adjustment of excise tax rates on motor vehicles and other products with
ad-valorem rates to keep the effective rates of tax on these products unchanged
after the introduction of VAT.
7.Strengthening social safety nets to better target assistance to the poor and
vulnerable in our society.
8.The provision of options to importers during the transition phase just prior
to implementation of VAT to avoid businesses falsely claiming input tax credit
during the early stage of implementation. Details of the options will be
disclosed at a later date after further consultations on the issue.
9.The location of the VAT Unit within the Inland Revenue Department.
10.The establishment of a special VAT Refund Account in accordance with the
provisions of the Financial Administration Act.
Let me therefore re-affirm Government’s commitment to implementing the VAT.
However, the date of the commencement of VAT in St. Lucia will be determined and
announced once Cabinet has considered the report on the outcome of discussions
of the draft White Paper.
I thank you.
