Value Added Tax reduction: A cruel trick on the people of St Lucia

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Dear Sir:

Recently, the prime minister of Saint Lucia, Allen Chastanet, superfan in Canada boasted about so called successes of the present United Workers Party (UWP) administration. As an example of this success, he touted the 2.5 percent reduction in the Value Added Tax (VAT) rate. He suggested that consumers benefited from lower prices and less taxes and according to the superfan, this was a very big achievement.

If we recall tax reduction was a key element of the so called Five to Stay Alive platform. In fact, the claim was made that taxes were too high and that the VAT rate would be initially reduced with a view towards the eventual elimination.

So, did the prime minister really keep his promise to lower taxes? What is clear at this point in time is that while the VAT rate was lowered from 15 percent to 12.5 percent, this was quickly followed by a $1.50 increase in the gas tax. The government pulled a slight of hand on Saint Lucians. In effect, Saint Lucians did not get the tax relief which is central to the Five to Stay Alive platform. The data clearly shows that much of the shortfall in the VAT revenue was made up through an increase in the gas tax.

Let us not forget the airport redevelopment tax, which was levied, and which is also being borne by Saint Lucians who purchase airline tickets. Not even our infants and children between the ages 2 – 12 years old have been spared. Are we so quick to forget the hardships imposed on us working class, struggling people, only for foreigners to enjoy the spoils?

Despite all the anecdotal evidence to the contrary, the superfan in Canada asserted that Saint Lucians benefitted from lower prices. However, data derived from the 2018 Eastern Caribbean Central Bank (ECCB) annual review, consumer prices rose by 1.98 percent and 1.94 percent for 2017 and 2018 respectively. This is not surprising since the perceived benefit of the VAT reduction was based on flawed economics. In the Caribbean type (political economy) prices are not flexible downwards. In the absence of price control, it was naive to think that the 2.5 percent reduction in the VAT rate would have led to lower prices.

Year: 2016 – 2017 – 2018

VAT: 345.4 – 312.83 – 326.21

Excise Tax: 80.9 – 100.1 – 103.9

VAT+ Excise 426.4 – 412.9 – 430.2

Source: Table 36, 2018 ECCB Annual Review. All figures in millions of EC dollars.

https://cld.bz/VEtS8Mi/40/

We have to remember that the prime minister of Saint Lucia was the very person who as leader of the UWP, who railed against high taxes. In particular, he misled unsuspecting Saint Lucians to follow him in an Orange March to protest against a false hidden $6.80 gas tax. To date, the prime minister is yet to produce the $6.80 profit that he called for under the Saint Lucia Labour Party (SLP) administration.

Could it be that he played Saint Lucians for fools?

One would expect that he would be more forthcoming and honest when it comes to taxes. To add insult to injury, while parliament approved a $1.50 per gallon, increase in the gas tax, at one time the government collected $1.57 per gallon. With this gas tax, if a fisherman buys about 1, 000 gallons per year, it means that with the increase in the gas tax, he now has $1,500 less to spend on food and school-books.

Didn’t the prime minister promise that people would have more money in their pockets, (chin-chin) – or was this a hoax that caught Saint Lucians hook, line and sinker?

Carlton Augustine

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