Local manufacturers, hoteliers and the restaurant sector continue to punch holes in the Value Added Tax (VAT) introduced here on October 1, a Thanksgiving Holiday here. However, if what they are saying is anything to go by, then the only thing we may be still thankful for is our ability to still have chicken backs and breadfruit for dinner.
The STAR has been reliably informed that at a meeting of restaurateurs this week, some members were threatening to shut down doors in protest against VAT on service charge. The sectors say also expect adverse impact on the island’s economy, the people’s livelihood, their health and productivity as a consequence of VAT on computers, medicines, donations and of course service charge.
During an interview on DBS’s Newsmaker “Live” with Clinton Reynolds, Paula Calderon, the president of the Saint Lucia Manufacturers Association, said she had written to the Prime Minister and Minister of Finance Kenny Anthony about her concerns and requesting a meeting, so far to no avail. Calderon is particularly concerned about the sweeping authority the act gives the Minister.
“There are a number of issues I would like to discuss with the Prime Minister but he has been off island quite a lot and we have not had a chance to meet on these issues,” Calderon said Wednesday.
Another of her concerns was that the documentation in the Inland Revenue Income Tax Act was taken and put inside the VAT act.
“The fines they have now introduced are astronomical. You are talking about EC$50,000, EC$100,000, or prison or both,” said Calderon. “I think they must be careful about the amount of fines that are being put on people, the pressure that you are putting on people. It might not always be a positive thing, making people pay their dues on time. What if the business cannot pay their dues on time, for reasons related to late-paying patrons what happens?”
The other area which is affecting manufacturers is the area of donations.
“If I understand the act properly,” she said, “donations are VATable. Now that affects the deepest fabric of our society, where the majority of people come for donations, whether it is for their child to go to hospital or for an aunty, uncle, whatever the circumstances, the elderly, the indigent the sick.
“I happen to run a registered institution. What will happen is the business will not donate or persons donated to will have to pay VAT,” Calderon said.
Calderon spoke of the Christmas season, which was one such time companies went out of their way to assist. She pondered on how this would reflect on them if they don’t or if they do. Who would absorb the VAT?
This was also an issue raised by the SLHTA during a press conference last week, the question of donations and offering complimentary rooms, banquet halls, food and other services which would now attract VAT. One leading manufacturer here, WLBL, has had to impose the 15 percent VAT on products donated to groups and individuals as of October 1.
Another concern from the manufacturers is the three-month holding period of funds by the VAT office. “My money is being held up for three months before I can get it back from the VAT office. Why the hold up when I can use money to buy material or advertise to get more markets?” Calderon asked.
“I have written to the Prime Minister and Minister of Health about the Universal Health Care issue. The fact that UHC, which was started by this administration, has not been implemented. I expected that funds within the 15 percent would be allocated to UHC. We would also like VAT removed specifically on prescription medicines,” Calderon emphasized. “If not we are going to have a sick and unproductive society that’s going nowhere.”
The President of the SMA on Wednesday shared the concerns of the tourism sector on VAT on service charge and how the whole implantation of VAT can affect the nation. She felt with rising food prices people would eat out less and would not even be able to afford salt-fish, but more backs and breadfruit.
“We have to look at how VAT can be implemented to the best interest and for the betterment of the country. There is no point implementing VAT on everything and stifling everyone. No point implementing and forcing us, once you don’t pay to become criminals. We have to look at what Saint Lucia can do, what is viable to attract foreign investment and visiters. Not stifling it for the people, because if the people are unhappy our tourist are not going to be happy.”
A distress call was also sounded last week by SLHTA president Karolin Troubetzkoy who painted a bleak picture if the present VAT regime was not adjusted. She said while the sector appreciated the lower VAT rate of 8 percent until April 2013, the last minute confirmation that VAT was now applicable on service charge took them right back to square one.
“It should be stated clearly that the SLHTA sector was not aware of this interpretation of the VAT application on service charge until September 18, 2012 and therefore could not have calculated its impact earlier,” Troubetzkoy wrote.
“To have VAT applied on service charge will have very serious implications with regards to price increases, competitiveness, cost of operations for all of our tourism businesses and for hotels in particular,” she said.
Troubetzkoy went on to state that at the eleventh hour hotels could not simply impose the additional fee on consumers given the fact that bookings and reservations were made in advance.
The SLHTA president went on to say that “the argument that VAT is not affecting service charge is misleading, because hotels now have to absorb this VAT amount on service charge in the existing room rate. Further rate reductions will have to be implemented, thereby reducing the room rate on which service charge is based.”
The SLHTA is calling for the removal of VAT on service charge reiterating that if not some hotels and restaurants may resort to reducing staff to cushion the impact on their operations.