St. Kitts and Nevis releases White Paper on Value Added Tax

St. Kitts and Nevis Prime Minister Hon. Dr. Denzil Douglas (photo by Erasmus Williams)

ST. KITTS, APRIL 22, 2010 (CUOPM) – The Federal Government of St. Kitts and Nevis has released a White Paper on the Value Added Tax (VAT) that it intends to introduce in November as part of a reform of the existing tax system.

Prime Minister and Minister of Finance, Hon. Dr. Denzil L. Douglas said that the White Paper, approved by the Cabinet on Monday and released during his monthly press conference on Wednesday, “is intended to give our people an overview of the VAT system and how it works in the hope that it will invoke meaningful discussion and consultation.

“It is imperative that all citizens and stakeholders acquaint themselves with the policy and administrative issues related to VAT as it will affect all of us,” he said in a message published in the document.

Dr. Douglas said that the Tax Reform Unit would be engaged in public consultation exercises throughout the Federation and that he was encouraging all citizens and stakeholders to participate and to contribute to the discussion “aimed at crafting a successful VAT for our Federation.”

He said that the local economy had made significant strides in transitioning from one heavily dependent on sugar production to a services based economy with Tourism and Financial Services as the leading sectors.

However, he noted that the present tax system has not kept pace with the development of the economy and continues to be based to a large extent on the levying of duties on imported goods.

“This results in distortion and inequity in the tax system which must be addressed. In addition to the transformation of the economy and the need to ensure harmony between the system of taxation and the economy we must also address the unfolding international pressures that favour free trade and the necessity for countries to open their borders,” said Dr. Douglas.

He said as his administration seeks to achieve macroeconomic stability and growth, the domestic tax system must be placed on a sound footing.

“We believe that this objective can be achieved by the introduction of the VAT which is a modern, broad based tax on consumption, charged at various stages of production with a mechanism which allows businesses to offset the taxes that they have paid against the taxes that they charge.

“The introduction of the Value Added Tax would therefore reform our tax system making it simpler and more efficient and create more equity by taxing all aspects of consumption including services.”

The Prime Minister said that the government would also need to examine the entire tax system to ensure that the system as a whole supports the smooth implementation of the VAT and that there are no disparities that arise as a result of this change.

“We will therefore be looking at other areas such as the existing Excise Tax and a Business Tax,” he added.

A number of countries within the Organisation of Eastern Caribbean States (OECS) have either introduced or are contemplating introducing the VAT system as a sub-regional initiative. St. Kitts and Nevis is a member of the OECS.