VAT raises cost of dying!

On All Fools Day, Britain celebrated the 40th anniversary of VAT in that country. But for the Brits the tax regime is no laughing matter. Neither for Saint Lucians who last year started paying a 15 percent VAT from October 1!

Perhaps our prime, before determining when to launch his “anti-poor, anti-worker” missile had consulted with his foreign affairs advisor Vaughan Lewis. Some may remember that in 1994 Lewis had been slated to replace out-going prime minister John Compton on April 1 but on special advice had postponed his inauguration by another day.

Say what you like about Kenny Anthony, he is clearly nobody’s fool. What better time to launch a sneak attack on the nation’s pocket than when they were busy celebrating Thanksgiving!

Nevertheless VAT tax has failed miserably to deliver anything for which to give thanks. Daily the cries of the dying middle class can be heard over the radio stations, with more and more Saint Lucians talking about being too broke to shop for fake food not synonymous with obesity.

Of course our leaders were for the most part obese long before VAT, a consequence, some say, of living high on the hog at public expense.

In a recent article featured in the Telegraph, Rosie Murray-West describes the VAT regime as “byzantine.” A nice-sounding word that means deceitful, dishonest and underhand. Doubtless Saint Lucians who are reeling under the effects of rising inflation and un-employment (now at twenty four percent) will readily agree with Ms Murray-West’s description of the tax regime. Twenty-four percent unemployed means that  about a quarter of our employable work force is idle, while more than half of those employed must survive on one US dollar a day. So how does VAT help?

In 2010 an American Economist at the CATO Institute Daniel J. Mitchell, arguing against VAT, wrote: “Supposedly a value-added tax is a magic elixir for curing budget deficits and excessive debt. Quack remedy would be more like it. If it worked, you’d observe that countries with a VAT had budget surpluses and no debt problems. But almost every country that has a VAT is plagued with budget deficits and excessive debt.”

No surprise that the worst financial basket cases all have a VAT. Iceland has the highest VAT rates, but this didn’t prevent its financial crisis and the near bankruptcy of its government.

Italy’s VAT rates are almost as high, but its debt exceeds its GDP. Financial crises are looming in Spain and Portugal, regardless of their VAT. Greece has a VAT, too, and when politicians ran out of money to pay government employees for more than a year’s worth of work every year, they rioted in the streets.

As earlier noted, Great Britain has a VAT, but its government’s finances are in the worst shape since World War II—its budget deficit is expected to be bigger than that of Greece. Moreover, the OECD has acknowledged that “[VAT] tax and transfer wedges have discouraged firms from offering employment and individuals from taking it, reduced employment and increased inequality.”

According to West’s aforementioned Telegraph article, in Britain VAT is now a 20pc tax on a large number of products that many consider essential.

“That is double the rate we paid when it was introduced in 1973. Originally described as a ‘simple tax’ by Sir Anthony Barber, the chancellor who introduced it, it has become so complex that in 2001 Lord Justice Sedley said: ‘Beyond the everyday world . . . lies the world of VAT; a kind of fiscal theme park in which factual and legal realities are suspended and inverted.’ ’’

Sounds familiar to us here in Saint Lucia, led by our own Anthony. VAT has turned Saint Lucia into a fool’s paradise, where the solution to almost every problem is to impose “oppressive” taxes on the backs of residents.

The excuses: VAT was inevitable; the IMF made us do it, or was it the UN? Where are the brains of this country that produced not just one but two Nobel Laureates? Where are the great ideas that should be coming out of the highly touted UWI scholars? What are the answers to a dead banana industry, worsening customer service and low productivity in all sectors? Where are the answers for the incurable diseases inherited by successive Governments of a seemingly untouchable, unproductive public sector?

No sooner was VAT introduced here in Saint Lucia than business owners and the ordinary man were all caught up in a web of confusion, with more questions than answers. Was there VAT on computers, on bread, on medication? Would hotel employees’ service charge earnings be taxed?

It would seem even the imposers of the tax were without answers. Even this week, several amendments to the VAT Act were expected to be laid before parliament. And, with the period of review for the tax regime coming to an end later this month, there is little chance of the VAT rate going down. Say the experts, it is highly possible that the new ideal VAT will be seventeen percent.

VAT  was invented by the French in the Fifties and became a tax which all new members of the Common Market or European Union had to sign up to when they joined. The French gave us too our “Kweyol” which some consider lang mama nou—our mother tongue. Yet for quite some time Britain was our Mother Country and Africa our Motherland. No wonder we’re confused. By 1973, twenty countries worldwide had implemented VAT and it is expected that by the end of 2013 more than 160 countries will have such a system.
According to the Telegraph article marking Britain’s observance of 40 years of VAT, the tax now generates around 13.5pc of the Government’s total revenue.

Ian Young, tax expert at the Institute of Chartered Accountants, said: “Compared to a number of other taxes, VAT is one of the most successful. It has not been without its problems, but some of these have been the result of different rates of VAT being applied to goods and services which are quite difficult to distinguish.”

As in Saint Lucia, in Britain it has become almost impossible to guess whether an item on your shopping list will attract VAT or not. Some goods attract no VAT, some are exempt, some zero rated. In Britain caviar, for example, is considered a necessity in terms of VAT, while orange squash is a luxury item.

In Saint Lucia, canned tuna, Chicken backs and  salt-fish are considered essential food items, therefore no VAT. However donations to the poor and vulnerable can attract the VAT unless special arrangements are made. There is no VAT on flour, the main ingredient for bread, but some bakers argue that other inputs attract VAT therefore make it impossible to keep the price of bread, a basic commodity, down.

There are four different levels of the tax in Britain. Standard VAT is charged at 20pc, and products that attract it include alcoholic drinks, so-called luxury foods such as ice cream. Reduced-rated products attract VAT at 5pc while other products are zero rated.

The final category is VAT-exempt products, including postage stamps and cremation services. Here in Saint Lucia, the last we checked VAT was being charged on burial arrangements and coffins too, making not only life more expensive but also death.