As Effective As VAT May Be, It Remains Altogether ‘Oppressive!’ ~ Economy Needs Stimulation—Not Strangulation!

Last Thursday evening the nation’s prime minister took to the airwaves to explain his decision to take Saint Lucia into elections nearly a year ahead of time: “To ensure peace, stability and certainty in our country and its affairs.” He said Saint Lucia was “once again proud, resilient and on the move.” However, he warned that the country was also “delicately poised and all the gains and sacrifices we have made to get us here can be quickly undone and reversed by recklessness and irresponsible actions”—exemplified by “the opportunistic and bizarre” pledge by the leader of the United Workers Party, if elected to office, to reduce immediately and ultimately remove “the dreaded VAT” and replace it with “a more creative and less onerous way of raising revenues generated by VAT.”

By the prime minister’s measure Allen Chastanet had later contradicted himself when he said the “dreaded” Value Added Tax was also “the best and most effective tax in the world. No argument.”

Having underscored the UWP leader’s apparent “incredible about-turn and inconsistency,” the prime minister revealed the nation had in 2015-2016 “earned” from VAT $346 million that was used to pay nurses, doctors, teachers, police officers, civil servants and debt commitments. For every 1% reduction in VAT revenue, added the prime minister, “the country loses $7 million.” What then, he asked, are the new “creative” measures . . . that Chastanet plans to “impose on the people of Saint Lucia to make up for this staggering loss of $346.37 million in revenue?”

Left to right: Sir John Compton, Prime Minister Kenny Anthony, former PM Stephenson King and UWP leader Allen Chastanet: All agree VAT is an oppressive tax!

Left to right: Sir John Compton, Prime Minister Kenny Anthony, former PM Stephenson King and UWP leader Allen Chastanet: All agree VAT is an oppressive tax!

He recalled that during his 2007 Budget Address Sir John Compton had said: “Madam Speaker, I wish to draw to the attention of this honorable House that VAT is not a tax with which we are unfamiliar. We currently have on our books a number of transaction taxes such as the consumption tax, hotel accommodation tax and the travel tax.” As for Sir John’s successor Stephenson King, the prime minister said he had reiterated his deceased leader’s promise to “introduce VAT in April 2012 . . . He prepared draft legislation and engaged civil society on the merits of VAT . . .”

Finally: “Our government believes VAT has settled reasonably well. It is not perfect. Adjustments may well be necessary from time to time but our number one priority must remain the creation of new jobs and this will be the continuing focus of a new Labour government.”

This week Chastanet claimed the prime minister’s figures were incorrect. As significant as is the truth of the matter, I am more interested in the then Leader of the Opposition, now prime minister’s VAT-related comments back in 2007 when Sir John declared in the House his intention to introduce VAT in a year or so. The following is taken from the 23 April 2007 Hansard, pages 81-82:

“For the record I want to say as follows: the SLP government was never convinced that VAT was the right way to go. Never! We never took a decision on VAT . . . We never gave the Monetary Council any commitment to VAT. And the reason, among others, was simply this. We felt that the Monetary Council had no business in fiscal policy . . .”

Additionally: “We were never persuaded that VAT was the wisest choice because we believe it is potentially an oppressive tax; it is oppressive to the poor; it is oppressive to workers and wherever VAT has been introduced, yes, the contrary to what the Member for Micoud says, you may get a windfall in the first couple of years but one thing is certain: your retail prices jump—especially the price of food.” There is more, all of it underscoring the murderous consequences on both business and consumers.

In two separate interviews with HTS reporters prior to the 2011 elections the opposition’s Kenny Anthony hammered home the point that VAT should not be imposed on Saint Lucians, especially when the island’s economy was in the toilet. “The economy needs stimulation,” he thundered, “not further strangulation.”

By the returned prime minister and minister of finance’s account (via the governor general’s Throne Speech) the country’s economy remained in dire straits at the time of his 2012 Budget presentation. “The overall fiscal deficit widened to $254.4 million, equivalent to 7.6 of GDP.” This deficit was being financed “entirely by borrowing from domestic and external sources . . . Unsustainable.” Speaking for himself, the prime minister revealed that growth in 2011 had been “no more that 0.6%.” He said economic analysts had indicated small and open economies such as Saint Lucia’s “will take longer to recover.” In 2011 the government had borrowed some $33 million just to meet recurrent expenditure, said the new prime minister. “We are not generating enough revenue to meet our recurrent expenditure. This is a recipe for disaster.” For every dollar the government raised from taxes, 48 cents had to go toward paying public sector salaries and wages.

In short, the economy was in deep doo-doo, the country indebted up its eyeballs. But that had not deterred him from imposing the “oppressive” VAT on workers whether or not poor, and businesses big and small. “We simply have to cure the fiscal deficit, he said, “and do this quickly.” It was “vital and urgent” to reorient the tax system to encourage growth. “The introduction of VAT by 1 September 2012 is an important step in that direction.”

The vast majority of Saint Lucians—scores of whom have gone out of business and entered the ranks of the unemployed—would on the eve of another general election agree that the imposition of a 15% VAT with its attendant conditions has been largely responsible for the sorry state of the private sector.

Despite having more than once maintained that to introduce VAT when a country’s economy was in the tank was begging for unavoidable disastrous consequences; despite he acknowledged our country’s indebtedness, and successive governments unconscionably spending more than they took in; there are no visible signs that this prime minister ever cut back on government expenditure. Selfish considerations kept him from addressing public sector salaries and wages.

As for his contention that VAT was “inevitable,” he has never explained why in any way that made sense. After all, at the root of the particular evil was the wanton official spending and unconscionable wastage that had rendered our country vulnerable before the WTO and the Monetary Council. True, Sir John and his immediate successor had indicated their intention to introduce VAT but it was this prime minister who had actually done the dirty deed at the worst of times and at the murderous level of 15%.

Neither Compton nor King had hinted at details of the tax that clearly they were in no hurry to introduce. As for Chastanet’s contentious declaration that if elected he intends to reduce VAT to a level more tolerable, it reminds me of a TALK interview with Sir John Compton just before the 11 December 2006 general elections; his final TV appearance, at a time when, I daresay, the country entertained major concerns about his faculties.

My question: “Sir John, you’ve been in politics for most of your adult life and now you’re heading into another war. Is there anything you might’ve done better? Any regrets?”

Compton had always been famous (and targeted both by detractors and comedians) for avoiding other people’s eyes. It was not generally realized the famously no-nonsense leader was also quite diffident. On the recalled occasion he stared straight into the camera lens as he replied. “I have long regretted not having done more for the youth of this country.”

“Why didn’t you?”

“Well,” he said, “you come into office with all kinds of aspirations. You can hardly wait to get down to work. What confronted me in 1964 was a barely educated population, largely unskilled and unemployed. These people nevertheless had commitments. They had to eat, for one. And then there was the country itself that needed basic infrastructure . . . But this time around I plan to put the young people first, second and third.”

I all but sniffed: “But keeping in mind the current state of the economy where will the money come from?”

I thought the question took him off guard. I was wrong. He turned away from the camera and looked—yes, he actually did—and looked me straight in the eye before shooting off his answer that stunned not only me but, as I would later discover, the rest of the nation that secretly imagined him not nearly the man he once had been.

“Rick,” Sir John said. “I have no idea where the money will come from. But this I promise. The money will be found. I will find it . . . I must find it!”

Allen Chastanet, with his tendency to overspeak, sometimes forgets he’s a politician, and astute politicians are always careful to say only what is absolutely necessary. Not a word more. The prime minister and the UWP leader agree about VAT: it’s a killer tax and “dreaded.” What separates them is the prime minister’s determined dependence on the “oppressive” tax— regardless of its obvious widespread consequences, while Chastanet is determined to ease the related burdens, even if it means the public sector must live with the possible discomforts, at any rate for a while. In Chastanet’s mind VAT, however effective a tax, is also evil. A demon tool.

Like waterboarding!

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One Response to As Effective As VAT May Be, It Remains Altogether ‘Oppressive!’ ~ Economy Needs Stimulation—Not Strangulation!

  1. And what do they purpose instead of the VAT ??? More increase in landing fees ? More increase in departure tax ? An increase on petroleum up to this point which have been subsidized by the present government. What would dear old Allen resort to ? Considering he has been playing doge ball when it come to taxes in St Lucia for decades and have not been paying his fare share along with the other cliques he owes the county a huge check. You don’t to want farm but buy American pay for it. You want to smooth roads and new infrastructure pay for it. you still want to maintain your bragging rights of the lowest electricity rates then pay for it. It may be oppressive, but no matter who is in office they wont get rid of it because there is no more green gold.

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