CASTRIES: The Government of St. Lucia has announced it does not favour increasing the 15 per cent Value Added Tax (VAT) on electricity and water as it seeks to reduce its multi-million dollar financial deficit.
Prime Minister Dr. Kenny Anthony, who met with public sector trade union leaders last week, said that imposing a higher VAT on essential services would place undue burden on the nation’s poor and vulnerable.
He said although his administration could raise additional revenue by implementing VAT on utilities, the present economic conditions do not encourage such a move. The government has said that the deficit stands at EC$57.2 million (one EC dollar=US$0.37 cents).
“There are a lot people who argue that the problem could be resolved by introducing VAT on the consumption of water and electricity. Let’s face it, there are countries in the region where citizens pay VAT on water and electricity but there are some realities we have to contend with.
“If the government had to introduce VAT on utilities, we would raise about EC$31.5 million annually, easily, on electricity alone. If you were to add VAT on water then it would be much higher. Clearly, if you can collect $36 million in one year, then you would go a long way to resolving your problem,” said Dr. Anthony.
However, Anthony stressed that in its manifesto, the ruling St. Lucia Labour Party (SLP) had indicated that it would consider VAT on utilities only when proper regulatory mechanisms were put in place.
“There is no proper regulatory mechanism in place at this time,” he said. “Further, the impact of such a move on the poor and vulnerable will be very significant.”
Anthony said introducing VAT on electricity and water to increase revenue would have negative consequences.
“It is an option that some persons have put on the table,” he said. “My response is simple. I think this economy is too fragile and as I have said before, I really do believe we need to make a strong effort to protect the poor and vulnerable as much as possible. I would like to think that it will only be in the very, very, last resort that we would turn to such an option.”
Anthony said such a move would dampen demand for goods and services and reduce disposable income even further.
“I do not think right now this is the way to go,” he said. “We have to make other sacrifices to deal with this problem.”