Will VAT wipe out nuisance taxes?

Here we go again, more evidence of our obsession with the singer, never the song. This week the prime minister announced what was hardly a surprise, bearing in mind all that had been said about it going back close to eight years: “Saint Lucia will introduce the Value Added Tax, commonly known as VAT, on September 1, 2012.”
No sooner had the announcement been made on Thursday morning than the prime minister appeared to pass the buck.
In introducing VAT, he said, “the government will fulfill undertakings given to the international institutions by the former government that VAT would be introduced during this financial year.” Not that the prime minister was speaking anything but the truth. The King administration may well have committed itself to introducing the tax “during this financial year” but who undertook the commitment and why? Was it Stephenson King?
The prime minister’s reminder that his party had indicated in its election manifesto “that Saint Lucia had no choice but to introduce VAT” left the impression that the newly elected government might’ve taken a different course of action with regard to VAT, had the King government not committed Saint Lucia to introducing it during this financial year. Was that the prime minister’s intention?
Consider the following: “Fellow Saint Lucians, recall all the taxes and levies imposed on us in recent years. Recall the prime minister’s denial at first, and then his admission of his imposition of a set of consumption taxes on so many things that you have to buy every day without giving us any warning. Can we now believe the denial about VAT—another tax which, like the consumption taxes, every single Saint Lucian will have to pay on goods that he or she buys, regardless of their income? We demand that you come clean, Dr Anthony. Justify the VAT now, not after you have imposed it on us.”
The above was taken from his New Year’s address in 2004, when Vaughan Lewis was still the United Workers Party’s political leader and automatically distrusting of the day’s prime minister.
Then there is this, from Sir John Compton’s 2007 Budget address, at pages 41-42: “Madam Speaker, I wish to highlight at this point that Saint Lucia is confronted with major issues related to rising fiscal deficits and a burgeoning debt stock. If not addressed immediately this could stymie the very growth and development that we are embarking on. A comprehensive fiscal stabilization and reform program is required to correct these growing imbalances and to place Saint Lucia on a more sustainable path towards growth and development. In this regard, this government will undertake a comprehensive review of our tax system in order to improve our fiscal situation, reduce debt
and the onerous debt
service burden. This
proposed tax reform will seek to ensure a simpler, fairer and more equitable tax system. In these days of globalization with the impact of the WTO rules and the CSME, the economy must change and so too must the tax systems that regulate it.
“The leader of the opposition is no stranger to this regulation. In his 2003/2004 Budget he reported to this honorable House that he had received a copy of the OECS Tax Reform prepared by Sir Alistair McIntyre, which was commissioned by the Monetary Council in 2002. This report advised that in light of the shrinking tax base on imported goods and services from WTO arrangements to which they have subscribed, the governments of the OECS should move to a value added tax or VAT.”
Compton observed that his predecessor had returned to the subject in his 2006 Budget presentation, where he indicated that the government had commissioned a review of the report by a group of citizens and that their report would be soon released for public scrutiny.
According to Compton: “To date the report has not been released. The then Minister of Finance drew attention to the need for tax reform which he indicated should have been undertaken three years previously but, as usual, he procrastinated and said the matter of tax reform ‘will be considered after the election.’
“Although the people of Saint Lucia did not give him the opportunity, Madam Speaker, the then Minister of Finance indicated that he would analyze the decision of the OECS on this matter but they certainly did not wait for him. Dominica introduced the VAT in March 2006; Antigua/Barbuda in January 2007; St Vincent and the Grenadines will act in May and both Grenada and St Kitts/Nevis will be introducing this system later this year. We must get in step with our neighbors and stop playing the political game with so important an initiative. The National Economic Council appointed to advise the government on this matter in April 2005 advised government to adopt a broad-based consumption or value added tax, possibly including taxes on services.”
As for the often heard line about Saint Lucia being stuck between a rock and a harder place: “We have two choices: to keep our tax system unchanged and suffer the consequences of a dwindling tax base or to reform the tax structure to make it move appropriately to the new global and domestic environment. This government has made the latter choice. This government will seek external advice on the implementation of the VAT and at the same time to remove a host of nuisance taxes which add little to the revenue but are serious impediments to the transaction of business in these modern times.”
Although Compton neglected to mention it, there was also the demand from the World Bank and the International Monetary Fund—however subtly—that if the governments didn’t help themselves by doing a better job of bleeding their taxpayers, the lending institutions would adopt a less charitable attitude toward them.
Doubtless the nation awaits with bated breath the announcement of “nuisance taxes” to be removed in the best interests of local business, how the government arrived at its conclusions in that regard, and the expected impact of VAT on the all-important malaway!

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