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| VAT Rate Still Undetermined |
| By Sheena Brooks |
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Although November 1st
has been announced as the implementation date for the
new Value Added Tax (VAT) system in the federation,
the populace is no closer to knowing the rate at which
it will be charged.
Prime Minister Hon. Dr. Denzil Douglas spoke on the
proposed tax system during his live radio program "Ask
the PM" on Tuesday but offered no insight as to
the VAT rate.
"Let me emphasize that exactly what rate shall
be put on the VAT is still to be determined," he
said. Dr. Douglas did say that consultation with the
general public would soon begin.
"Last Tuesday I was the beneficiary of a clear
update as to where we are on the agenda and the time
tabling for the introduction of VAT. What I think will
be happening very shortly is the preparation for engagement
of the general public is on its way."
He said public discussion would help determine what
items would attract VAT and at what rate. VAT is usually
levied in tiers- a standard rate, special rate, zero
rate and exempted items.
"We have three categories really of items and services.
We have those which will be given a VAT, those which
will have zero VAT and those which will have no VAT
at all. So very shortly we will be engaging the public
to ensure that we are at one in terms of how these items
are to be properly taxed by way of VAT."
It has been widely speculated that a VAT standard rate
of 15% will be introduced much like fellow OECS countries
including Antigua & Barbuda, St. Vincent and the
Grenadines, and Dominica. St. Lucia is currently at
the public education stage of implementing VAT and Chief
Economic Analyst of the VAT Implementation Project Unit,
Fleur Simmons has indicated a proposed VAT rate of 15
%.
Hotel stakeholders in St. Kitts-Nevis have expressed
concern that too high a VAT rate might be disastrous
for already flagging small hotels that would have to
increase their room rates to offset the tax. In Dominica,
St. Vincent and the Grenadines, and Antigua and Barbuda,
a special rate of 10% VAT is applied to the hotel industry.
PM Douglas has said that a VAT system would not mean
increased taxes for consumers as it would replace 10
or 12 existing taxes including , Consumption Tax, Hotel
and Restaurant Tax, Cable TV Tax, Traders Tax, Vehicle
Rental Levy, Export and Rum Duty, Telecommunications
Levy (IDD Calls) and Parcel Tax.
"It [VAT] is going to be better for us. We don't
expect people to be paying higher taxes but we believe
that more people who should be paying taxes but are
not paying taxes at the moment, they will be brought
into the tax net," he explained.
Dr. Douglas indicated in March that public consultation
and education on VAT would begin in April, accompanied
by the circulation of the White Paper, pamphlets, booklets
and posters along with radio and television program
and publications in the newspapers and on the internet.
"The Tax Reform Team will conduct workshops and
seminars targeted at specific interest groups, businesses
and individuals. The team will also be available to
meet with members of the general public to answer any
question and address any concern that they may have."
The local Chamber of Industry and Commerce, while seemingly
endorsing VAT, has expressed concern over the time-line
for introducing and implementing the new tax system.
"The Organization is firmly of the view that while
a VAT system of tax collection will be more broad-based
and efficient to administer over time, there is much
to be done and done correctly from the outset. As such,
while the Chamber realizes that VAT has been introduced
in other OECS territories from whose experience we can
learn, the Organization has serious reservations over
the time-lines put forward by the Minister of Finance
insofar as the execution of massive public education,
national consultation, passage of the requisite legislation,
and actual introduction of the tax are concerned,"
the Chamber said.
Another concern being raised in the business community
is the matter of tax returns, since personal end-consumers
of products and services cannot recover VAT on purchases,
but businesses are able to recover VAT on the products
and services that they buy in order to produce further
goods or services that will be sold to yet another business
in the supply chain or directly to a final consumer. |
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