Necessity of VAT in St.Lucia - Part 1

First of all, what is Value Added Tax (VAT)? 

'VAT  is a general consumption tax assessed on the value added to goods and services.It is a general tax that applies, in principle, to all commercial activities involving the production and distribution of goods and the provision of services. It is a consumption tax because it is borne ultimately by the final consumer.It is not a charge on companies. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain.'

The government of St.Lucia has announced that VAT will take effect 1st of September 2012. What does this means to the government of St.Lucia and the People as a whole? 


Let us explore the advantages of VAT in St.Lucia:


1. Revenue Security - VAT helps create a stable source and increase of revenue for the country.This helps the government to fund  more expenditures and decrease budget deficits.


2.Improve indirect tax compliance rate.


3. A more efficient tax system - VAT helps widen the tax base by bringing all transactions in the tax net. Specifically,it gives the government the opportunity to bring back into the tax system all those persons and entities who were given tax exemption from the previous government administrations.


4. There will be a Zero rated policy on certain goods and services. This means that we, as consumers will not be paying any taxes on certain goods. According to Dr. Kenny Anthony(Prime Minister),'......a basket of goods will escape the VAT tax....... and that the government will not impose VAT on water and electricity at this time.'

Dr. Kenny Anthony further added that 'the big issue for government is to protect the poor and vulnerable, particularly at this time, as we are going through a period of economic difficulty, economic crisis and economic adjustment.'


5. Certainly, a more transparent and accurate system of taxation.