Owen Arthur Unclear About The Affect Of The VAT Issue

Basseterre, St. Kitts – Nevis
People’s Action Movement
August 15, 2010

Former Barbados Prime Minister Owen Arthur, on a brief visit to St. Kitts and Nevis as a consultant on matters pertaining to the UNDP’s Millennium Development Goals, was very positive in his assessment of the St. Kitts-Nevis Governments decision to implement a value-added-tax (VAT), during an August 7th interview with Press Secretary Erasmus Williams.

Barbados established a VAT back in 1997, during Arthur’s tenure as prime minister.  The rate was set at 15% for most products and services, and 7.5% for hotel accommodations.  Exempt, or “˜zero-rated’ items, include exports and prescription drugs, among others.  The VAT replaced 11 domestic levies, including the Consumption Tax, Stamp Duty, Surcharge, Excise Tax, and an Environmental Levy.  Since introducing VAT the people of Barbados have showed their appreciation by voting him out of office.  Mainly as a result of the failure of VAT to generate the kind of revenue that results in a much lowered National Debt.  Instead the Barbados debt to gdp ratio increased from 75 percent at the time Owen introduced VAT in 1997 to 111 percent in 2006  according to the Barbados Central Bank .  The record 111% debt to gdp ratio was recorded long before the current global downturn.

The introduction of VAT also brought year after year of massive deficits. The first year of the VAT brought a deficit of $128 million.  By the time Arthur was voted out of office in 2008 the deficit had grew to a whopping $307 million.

A closer look at the VAT in Barbados will show differences to the proposed VAT introduction in St. Kitts – Nevis.

The VAT rate in Barbados is 15% as compared to the proposed 17% here in St. Kitts-Nevis.  There is a concessionary rate of 7.5% on holiday or vacation accommodation  and some goods carry a rate of 0% or zero-rated .

In 2006 the Barbados government rejected the recommendation by the IMF to increase the VAT rate to 17.5%.  According to then Prime Minister Owen Arthur the increase would cause undue hardship for Barbadians.  It would be interesting to know what his feelings are on the proposed 17% VAT that is to be implemented come November 1st. 17.5% , according to Arthur , would cause undue hardships on Barbadians so Press Secretary Williams should have inquired of the esteemed former leader if the 17% VAT in St. Kitts – Nevis will cause similar hardships

“I wonder if former Prime Minister Arthur advised the Denzil Douglas government that a 17% VAT rate will cause undue burden on citizens of St. Kitts – Nevis as he told the IMF back in 2006,” said People’s Action Movement MP Hon. Shawn K. Richards

“A recommended 17.5% VAT was rejected by Owen Arthur in 2006 citing the undue hardships it would cause on Barbadian citizens.  However that was never mentioned or highlighted in his interview.  It should have also been highlighted that the hotel and accommodation concessionary tax in Barbados is 7.5% compared to 10% here in S t.Kitts – Nevis,” Richards continued.

Barbados first began discussion on the possible implementation of a VAT tax in 1978 almost 20 years before it’s implementation.  The St. Kitts – Nevis government made the announcement of a November 1st VAT implementation date in March of this year.

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