PM Douglas says VAT rate is ‘reasonable’

St. Kitts and Nevis’ Prime Minister Hon. Dr. Denzil L. Douglas

BASSETERRE, ST. KITTS, JULY 19TH 2010 (CUOPM) – Prime Minister, Hon. Dr. Denzil L. Douglas has defended as ‘reasonable’ his government’s decision to introduce a 17 percent Value Added Tax (VAT) system before year end despite criticism of the rate.

Dr. Douglas, who is also the Minister of Finance, has warned that countries which have opted for a lower rate of 15 percent would be “severely challenged” as they grapple with the ongoing economic crisis.

The VAT is due to be implemented in November, replacing 13 existing taxes such as the five percent telecommunications tax, the three percent traders’ tax, the five percent vehicle rental levy, the five percent cable tax and the 10 percent lottery tax.

“We chose 17 percent after a period of consultation at the local level and also after paying attention to the advice that we have received from the technical teams that have been working with the Government of St. Kitts and Nevis” Dr. Douglas told journalists at a news conference in St. George’s, Grenada, following a meeting of the Monetary Council of the Eastern Caribbean Currency Union (ECCU).

“In fact, we have been told specifically that those countries which at the moment are at 15 percent are going to be severely challenged because they may not have the additional space that is required to meet the ongoing challenges in this crisis,” Dr. Douglas said in the CMC report.

The St. Kitts and Nevis leader announced the new tax rate on Wednesday, about two weeks after the VAT bill was given its first reading in the Federal Parliament.

Businesses earning less than EC$150,000 (US$55,970) a year would not be required to collect or report on VAT.

The government said items that people depend on every day such as milk infant formula and medicines for chronic diseases, as well as bus fares and local produce will not be affected.

Caribbean countries have been introducing VAT, including Grenada which implemented a 15 percent rate earlier this year.

“We have been advised that it might be a little foolhardy to go to 15 when in fact you may have to adjust later on” Dr. Douglas warned.

“And so having had that information we have taken the position that we shall start at 17 [percent]. At one time the government seriously considered 19 percent but after consultations we have settled in our mind that 17 [percent] is reasonable that is what we are going to recommend to the Parliament.”

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