The St Lucia Chamber of Commerce Industry and Agriculture has finally released a clear statement on the issue of Value Added Tax. The statement was sent of to the media this week. The Chamber stated that they had the opportunity to review the White Paper on VAT and listed their concerns.

Reads the statement in part: “It must be emphasized that the Chamber has long advocated the need for a broad based system of taxation that widens the tax base . . . The St Lucia Chamber of Commerce, Industry and Agriculture believes that government must collect sufficient taxes to allow for the delivery of quality services to the people of St Lucia. In fact, we believe that the nation expects and deserves quality services. The Chamber fully appreciates that there is a direct relationship between the level of taxes collected in a country and the quality and quantity of services provided in return by government.”

After the pleasantries it was down to the meat of the matter: “The Chamber is of the view that it is incorrect to say that VAT is good for business. The additional paper work, record keeping and increased administrative functions that needs to be introduced and carried out, add costs to; and makes the day to day operation of business more complex.

“This is particularly evident in managing the payment of this tax. This will lead to an overall increase in the cost of goods and services (an average of 3-7 percent was experienced by countries implementing similar systems).

“We are of the view that there is not sufficient balance in the manner in which the White Paper proposes and approaches VAT. For instance, the simulation presented (which is seriously flawed in its pricing methodology) suggests that of all the parties involved in the trading process, (Government [tax], consumer [purchaser] and private sector [vendor]), the private sector should be the only one that will not be in a better or even maintained position in the final analysis.

“This example and other erroneous statements may lead the public to develop false expectations from the introduction of VAT which cannot be met. The experience of our neighbouring islands, who have implemented a VAT, is that the cost of living increases after VAT introduction. The wider public needs to be made aware of this fact; rather than the current tagline that prices may stay the same or even decline. “The current approach of ambivalence to the implications of implementation of a VAT will lead to accusations by the wider public of both price gorging by the business community and oppressive tax measures by the Government.

“The Chamber believes that Government of Saint Lucia must indicate that VAT is intended to increase revenue to Government by implementing a system to tax persons who currently avoid or evade taxation. As such, it should not be said that VAT is revenue neutral.”

The Chamber wanted some straight talk from the government and said the state “should not be ashamed or bashful about trying to generate more revenue.”

“Hand in hand with Government making a credible, fair and balanced case for the need to generate greater tax revenue is the need to demonstrate a link between payment of taxes and delivery of services. Government has to be more accountable and transparent in its accounting for expenditure and reporting to the wider public.”

The Chamber further advised that government should publicize the level of revenue it expects to generate from this new taxation initiative. “Government should also inform the Nation of the level of revenue it will forego from the exemption and zero rated list, and exempt sectors.”

The Chamber also had concerns about the the treatment of the tourism sector also.

“The tourism industry as a whole is already the nation’s largest beneficiary of incentives and tax concessions, the total value of which has not been made public. We question whether the local economy should be asked to further subsidize the consumption of hotel services and tourism infrastructure, as it continues to expand, whilst reducing the quantum of both goods and services it sources through its linkages with the local economy.”

The Chamber also questioned whether the Environmental Levy should continue.

On the time frame for VAT the Chamber said “a full twelve month lead time should be provided to businesses to get VAT ready” as opposed to six months.

“The Chamber of Commerce, Industry and Agriculture believes that any tax system must be properly administered. These include issues of fairness, equity, consistency, predictability, inclusiveness, efficiency and enforceability. We are also of the view that a “good” tax should have low administrative costs, not just for the Government, but also for the taxpayer.”