BASSETERRE, St. Kitts – RUMOURS regarding the introduction of a Value Added Tax (VAT) have been confirmed by a top state official, leaving consumers uncertain if they should anticipate an increase in the prices of goods and services this November.
In delivering the Throne Speech at the opening of the new Parliament yesterday (Mar.10), Governor-General His Excellency Dr. Sir Cuthbert Sebastian focused for some time on the public debt and fiscal management of the country, noting that “rationalizing the tax system” is necessary moving forward.
“My Government will also rationalize our tax system by abolishing a wide range of indirect taxes and replacing them with a comprehensive Value Added Tax. Work has already commenced in respect to the implementation of the Value Added Tax and the Ministry of Finance will spearhead, over the next few months, a major public consultation and education exercise to clear the way for the introduction of the Value Added Tax by November of this year,” Sir Cuthbert noted.
According to the Governor-General, the introduction of Value Added Tax is part of the government’s effort to accelerate debt reduction. This, he explained, would give the government more fiscal space to respond appropriately to the challenges the nation faces.
Other measures of debt reduction include intensifying the Government’s collection of arrears, reducing public expenditure and commercializing or privatizing a number of public sector enterprises.
This is in keeping with the government’s aim toward “reducing the size of Government” and allowing central Government to focus on core activities.
Economist in the Fiscal and Regulatory Department Division in the Ministry of Finance Gary Thomas told SKNVibes that the introduction of VAT is an appropriate measure of tax reform that would lighten the individual tax burden.
“The VAT exercise, I believe, represents an attempt by the government to make the tax system more equitable and efficient. VAT will widen the tax base and allow the government to have a fairer, more balanced and equitable tax structure,” Thomas said.
Roughly eight taxes are expected to be replaced when VAT comes on stream. These include Consumption Tax, Trader’s Tax and Hotel Room Tax, according to the Ministry of Finance official. In his words, VAT would create a more effective tax structure.
“Everything has its positive and negative, but VAT gives us the best option. What we have is a services economy and large businesses are carrying a larger burden of the tax. So, if we can change the tax system in such a way that it gives businesses opportunities to provide the products and services at the most affordable cost for the consumers while purchasing these at a reasonable price, then it’s a win-win situation,” he further explained.
The specific tax rates to be imposed were not revealed, but Thomas stated that the objective of the government would be to ensure the tax’s introduction does not raise the overall tax burden to the population, but rather would widely spread it so that it is lower per individual.
While it is yet unknown what the 2010 Budget to be tabled on March 23 will feature, consumers are certain that VAT will lead the way in the government’s tax reform.
