VAT is the best option for region says Caribbean Statesman Owen Arthur

BASSETERRE, ST. KITTS, AUGUST 10TH 2010 (CUOPM) – Barbados’ former Prime Minister and eminent Caribbean Statesman, the Right Honourable Owen Arthur, has described Value Added Tax (VAT) as the best option for the region in the age of trade liberalisation.

In an interview over the weekend, Mr. Arthur said he was surprised that it has taken St. Kitts and Nevis so long as the twin-island Federation “is subjected to the same forces in St. Kitts and Nevis as we are in Barbados that warranted the introduction on Value Added TAX (VAT).”

Mr. Arthur said he supported the introduction of VAT in Barbados before he became Prime Minister and when he was the Opposition Spokesman on Finance.

“We are living in an age of trade liberalization. What it means specifically, if you take that concept and break it down, is that to be part of a Caribbean Single Market and Economy (CSME) we have had to remove import duties on goods coming from the rest of the Caribbean and also all Caribbean countries that are part of the CSME have had also to reduce their top rate of import duties from 45 percent to 20 percent to implement what is called the Common External Tariff (CET). We had to do that in 1998,” Arthur said.

He explained that “in order to compensate for the loss of that revenue” Barbados introduced the VAT in 1997.

“But subsequent to that the region has become more and more deeply involved in relationships that require the removal of import duties,” the former prime minister said.

“Recently we entered an Economic Partnership Agreement with Europe which is about now to take full effect because it had a three-year grace period. What that EPA involves is removal by the region and economies like St. Kitts and Nevis of import duties of good coming from Europe that historically have carried an import duty.

“The region is also negotiating similar arrangements with Canada and I would imagine that other countries would sooner or later ask the region to put in place new trade arrangements with them; so in the age of trade liberalization, countries that have historically depended on import duties for a large part of their revenue now have to remove those import duties and you have to replace them with something,” he added.

The former Barbados leader said the Value Added Tax (VAT) is one of the options and the best option.

Arthur, who was adamant that he was not trying to get involved in the domestic politics of this country, said that he was “surprised that it has taken you so long because you are subject to the same forces in St. Kitts and Nevis as we are in Barbados that warranted the introduction of the Value Added Tax”.

He said one positive of the VAT is that countries could target the implementation to free exports to make their economies more competitive.

“You can also target it to allow the sectors that you feel are areas of activities that are worthy of exemption from taxes to be exempted from taxes,” he said.

“But more to the point, it brings an assuredness to the collection of government revenues to enable you to have a sound fiscal position. The Value Added Tax allows you to broaden the base of taxes to include things that historically have not been subject to tax,” said Mr. Arthur, pointing out that with a broader base of tax, the rate can be lowered.

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