No VAT in near future says Harris…economist contradicts gov’t claims
By VonDez Phipps
Reporter-SKNVibes.com
BASSETERRE, St. Kitts – During an exclusive interview with SKNVibes, Minister of Finance and Commerce, Hon. Dr. Timothy Harris assured that “Value Added Tax (VAT) would not be implemented in the Federation in the near future”.
Many political and economic watchdogs had opined that the tax which has been implemented in almost every Organization of Eastern Caribbean States (OECS) territory would be levied in St. Kitts and Nevis shortly after the conclusion of general elections in 2009.
However the Finance Minister asserted that although there has been a lot of discussion about VAT, there is no move to introduce the percentage tax levied on products and services in 2009.
“VAT cannot just come like a thief in the night and so, since we have not reached the preliminary stages at as yet, for the unforeseeable future, there is no need to be worried about VAT in 2009. The discussions are still in the investigative stages and there have been no commitments made so far. Even so, introducing VAT may take months and maybe even years to first prepare the groundwork. If or when we get there, we have to let everyone know; no one would have doubts about its introduction,” Harris told this media house.
Dr. Harris explained that VAT discussions came as a part of a wider consultation in relation to the OECS Reform Commission which recognized that a number of preferential arrangements were being eroded. He also noted that such financial erosion would have a number of serious implications on federal revenue as 40-50 per cent comes of government income is derived from taxes.
“The new Cariforum/European Union Economic Partnership Agreement (EPA) would mean lowering duties on goods thus leading to decreased taxes earned by government. ~~Adz:Right~~
However, the effects would not be abrupt, because the EPA provides that over time, the taxes on such goods would be phased out until they are entirely eliminated by 2033.
VAT is an indirect percentage tax levied on products or services at various stages of production and distribution, levied at the product's ultimate destination. It is not charged on export sales. VAT is charged on all domestically sold products regardless of the country of origin, thus it is designed to provide an incentive to export and discourage import.”
Experienced economist Sylvine Henry contradicted the Finance Minister’s claims, telling SKNVibes that VAT may be introduced sooner than is expected.
“In 2003, the Federation received aid from Caribbean Regional Technical Assistance Centre (CARTAC) through a stabilization programme in which projections were made in relation to the best possible way to ensure the nation’s stability. The introduction of VAT was one of the major recommendations and stressed that it is inevitable.
“VAT has to be introduced in 2009. In fact, the government has no choice but to. The more open the economy is, with the movement toward free trade arrangements, the closer the government moves toward introducing VAT. It was expected to be introduced in 2007 but the recommendations seemed not to be done according to the CARTAC report which may have yielded undesired results.
Henry indicated that, from her knowledge, the rates of VAT were already calculated and the major prerequisites were in place. She opined that other motives may be influencing the timing of VAT implementation.
“It has become a political situation where the government is hesitant as it may cause political suicide if VAT is introduced in time of such financial and economic crises. It may very well be introduced after next year’s General Elections because the government may not want to be accused of making life harder.”
