17 percent VAT rate announced, measures taken to protect the vulnerable

St. Kitts and Nevis Prime Minister Hon. Dr. Denzil Douglas at Wednesday’s Press Conference (photo by Erasmus Williams)

BASSETERRE, ST. KITTS, JULY 15TH 2010 (CUOPM) – The rate of the Value Added Tax (VAT) to be introduced in November will be 17 percent for services and goods and 10 percent accommodation tax for the tourism industry.

This was disclosed Wednesday by St. Kitts and Nevis Prime Minister Hon. Dr. Denzil L. Douglas at his monthly Press Conference.

He said the experts had recommended 19 percent rate for those goods and services that are not exempt.

“We look at what is operating in the region and what has been recommended and the government has accepted a 10 percent VAT rate for accommodation tax,” said Prime Minister Douglas, who is also Minister of Finance.

Dr. Douglas told the Nation that the St. Kitts and Nevis economy has changed with the shift from sugar agriculture to services, and so the taxation system must change accordingly.

He said that St. Kitts and Nevis is not embarking into unknown territory with the introduction of the VAT as it is already operational in some 150 other countries.

“It will replace some twelve other taxes,” said Dr. Douglas, pointing out that the St. Kitts-Nevis Labour Party that was recently re-elected to protect the interests of this country, has a reputation that is unsurpassed where the protection of the ordinary man and woman is concerned.

“We are not about to change that with the introduction of VAT. Small shop-keepers and others with revenues of less than $150,000 will not be required to collect, or report on, VAT. The items on which people depend in their everyday lives – milk, infant formula, medicines for chronic diseases, and so on, will not be affected by VAT. Neither will bus fares, local produce, etc. etc. Our public outreach efforts have already made all of these things clear. This, you in the media already know,” said Prime Minister Douglas.

He said the Government has put in place, and will continue to put in place buffers to ensure that VAT will not fall disproportionately on those who can least afford to pay this tax – both in the form of direct transfer payments, as well as in other ways.

“This Government will ensure that VAT will not fall disproportionately on those for whom we established social security….for whom we established free secondary education….for whom we established all of the other social services that have been essential to our people’s upward mobility. This simply would not be in keeping with who and what the Labour Party has stood for throughout our entire history,” said the Prime Minister.

He said while the price of many goods will fall as a result of VAT, the price of some will rise and others will stay about the same.

“My Government, however, will also exercise its prerogative to adjust those price changes which we deem not to be in the public good. As a result of the VAT, for example, the price of alcohol and cigarettes, left to themselves, would fall. We do not think that this would be responsible Government policy, however. And we have no intention of making it easier for the public to consume alcohol and cigarettes. We will therefore intervene by applying apply an excise tax to alcohol and cigarettes in order to push these prices upward. This, we think, is the socially responsible thing to do, and this we shall do,” said Dr. Douglas.

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