Prime Minister called on to reduce VAT

Tuesday October 1, 2013 marked one year since Saint Lucians started paying Value Added Tax (VAT) on several goods and services. In the first few months of the implementation of the tax there was much public debate on the process which experienced a number of “teething” problems. A number of issues arose in the initial stages including the rate at which the hospitality industry would charge VAT as well as VAT on medicines. A number of persons have also questioned the reasoning behind employees still having to pay NIS and PAYE on their earnings in addition to VAT.

Today, the tax system still raises a number of questions including its effectiveness to increase Government’s revenue while allowing businesses to stay afloat amidst a serious down turn in the economy. There has also been an increase in the last twelve months in both the number of job losses and businesses closing down. And while VAT alone is not to be blamed, a number of employers, particularly in the retail sector are reporting the negative adverse effects of VAT on business today.

Last week, the employers federation here called for a review of the tax regime. However there has been no statement forthcoming from either the SLHTA or the Saint Lucia chamber of commerce on VAT, one year later. The Star understands however that the Chamber has sought an audience with the prime minister ahead of the PM addressing the chamber’s luncheon meeting later this month. (The meeting was postponed from Thursday to a later date due to the passing of the Prime Minister’s mother.)

In a press release this week the Opposition United  Workers Party called on the Government to “provide the nation with a report card” on the implementation of VAT.

“During the delivery of his 2012-2013 budget, prime minister Anthony outlined a number of policy measures, promises and claims related to the imminent implementation of VAT,” the UWP statement says.  It continued; “according to Dr.Anthony a macro-economic effect is that VAT can have a positive impact on investment”. In designing the VAT, he added, “we (the Government) have taken the deliberate decision to exempt capital goods used in the production process.”

He further stated that “in respect of the hotel sector and related services, a reduced rate of 8% would apply until March 31st, 2013. Between September 1, 2012 and March 31, 2013 the impact on the sector would be assessed and a final determination will be made on the rate to be applied beyond March, 2013.”

“As we mark one year after the implementation of VAT, it is a timely and critical juncture for the prime minister and minister with responsibility for finance to report to the nation on revenue generated from VAT over the past year, how revenue is being utilized to benefit the citizenry and the effects of the 1.5% increase on the hospitality sector,” the UWP says.

Mindful of the persistent calls from key sectors such as the Saint Lucia Medical and Dental Association and cries of despair from a population reeling under the impact of the Value Added Tax, the United Workers Party reiterated its the call for the removal of VAT on medication and called on the Government to give serious consideration to a reduction of the VAT rate from the existing 15 percent.