Evaders of tax and customs duty will be prosecuted says Governor General
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Photo: St. Kitts and Nevis Governor General His Excellency Dr. Sir Cuthbert Sebastian delivering the Speech from the Throne in the National Assembly (Photo by Erasmus Williams). |
BASSETERRE, ST. KITTS, DECEMBER 20TH 2004 (CUOPM) The people of St. Kitts and Nevis have been told that the issue of the national debt must be addressed in a comprehensive and definitive manner.
Delivering the Speech from the Throne, Governor General His Excellency Dr. Sir Cuthbert Sebastian said while it was clear that the accumulation of debt is attributable to circumstances beyond the control of any person or entity in St. Kitts and Nevis, the harsh reality is that the public debt is at a level that could slow down the progress of the Nation if it is not addressed expeditiously.
Sir Cuthbert said the strategy of his St. Kitts-Nevis Labour Government for debt reduction has four important components.
Fiscal Consolidation aimed at generating an annual surplus on the current account of at least 1.5% of GDP and reducing the overall fiscal deficit to under 3.5% of GDP over the medium term; Active Liability Management, aimed at reducing the cost of debt and minimizing financial risk by adjusting the maturity of debt through refinancing where this is feasible and Active Asset Management, including the implementation of a comprehensive privatization and commercialization programme aimed at mobilizing considerable resources through more effective utilization of Government assets and enterprises and the sale of selected assets and enterprises where this is deemed appropriate and consistent with the interest of our Nation and the aspirations of our people and the continuation and strengthening of the policies aimed at spurring economic activity and enhancing growth, said Sir Cuthbert, adding that the acceleration of the pace of growth of the GDP would directly reduce the debt to GDP ratio, and would indirectly reduce it by enhancing the revenue intake of the Government, thereby facilitating the commitment of more resources to the repayment of debt.
The Governor General said Government has already made considerable progress in implementing a programme of fiscal consolidation.
Our efforts at improving the tax administration have yielded substantial resources. These efforts will continue and will not only focus on raising revenues but also on achieving greater equity in the tax system, said Sir Cuthbert.
He said that the evasion of tax by a number of enterprises could result in a shift of the tax burden from the rich to the poor if it is not combated. Hence, we will be even more vigilant in combating tax and customs duty evasion and in prosecuting offenders be they large or small, rich or poor. We urge all persons and entities with outstanding tax and customs issues to move with haste in resolving these issues because we will apply the law fairly but definitively in dealing with criminal offences under our tax laws and in collecting that which properly belongs to the people of this country, the Governor General stated.
He said there is no better summary of the results of the fiscal consolidation programme to date than that provided by the IMF.
According to the Report of the IMF on their Article IV Consultations with St. Kitts and Nevis: The fiscal position improved markedly in 2003-04, with the primary deficit of the central government expected to record a small deficit of ½of one percent of GDP. The primary deficit of the central government was cut by 10% of GDP in 2003, reflecting major reductions in capital outlays, as well as improved revenue collections (largely due to strengthened tax administration) and enhanced control over non-interest expenditures.
Sir Cuthbert said the Government has been exerting every effort to actively manage its debt portfolio with a view to reducing cost and minimizing risk.
For instance the IMF reports that the Authorities have extended the maturity of the existing debt stock and lowered the cost largely by refinancing domestic debt with external commercial debt &
Unfortunately, notwithstanding these improvements in the fiscal position of the Government, the IMF reports that the public debt to GDP ratio continues to rise and interest costs are also rising and this clearly indicates that efforts must be intensified aimed at fiscal consolidation through even tighter expenditure controls and further improvements in revenue management.
The Governor General also quoted from a detailed analysis of the impact of economic shocks on St. Kitts and Nevis by the International Monetary Fund (IMF), which he said is included in their report on the 2004 Article IV consultations.
Economic Developments in St. Kitts and Nevis have in the past decade been shaped by a series of large shocks. A protracted decline in the sugar industry has sharply reduced agricultures contribution to the economy. In addition, three major hurricanes in the second half of the 1990s caused widespread damage. Finally, the September 11 terrorist attacks in 2001 had a negative impact on the important tourism sector. As a result economic growth slowed and fiscal balance worsened, with the policy response focused on rebuilding infrastructure and maintaining social well-being. This led to a rapid build-up of public debt to 169% of GDP in 2003, Sir Cuthbert told the Parliament and the Nation.
