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Friday, September 30, 2022
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ULP’S UNFAIR TAXATION – NDP WILL FIX IT

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The Unity Labour Party (ULP) government has consistently failed to set fair tax rates during its years in power.

 The government has taken people and business for granted. It does not care whether or not Vincentians are paying too much tax from the proceeds of their hard work. The failure of the ULP government to implement fair tax rates has created severe hardship for the poor and working class, and prevented our economy from growing and jobs being created.

For instance, ever since the  implementation of the Value Added Tax (VAT), there have been cries throughout St. Vincent and the Grenadines for the reduction in the VAT rate from its initial 15%, and an increase in the list of zero-rated basic items. This would have at least allowed consumers to maintain reasonable consumption levels. Instead of responding to the wailing of the poor and working class, by extension the general citizenry, in a manner that is expected of a ‘Labour government’, the ULP increased the VAT to 16%, creating more hardship for the people. From the initial stage of the VAT, members of the New Democratic Party (NDP) are on record inside and outside of Parliament, stating repeatedly that the VAT should have started at a lower rate, and that the zero-rated lists should have been longer. We recall the Honourable Arhnim Eustace presenting a list of basic items to the public that should have been zero-rated.

The VAT is, by its very nature and application, a regressive tax. This means that consumers in the lowest income bracket bear a proportionately higher tax burden as a percentage of their income when they purchase goods and services. Reducing the VAT as a fiscal measure, will transfer some revenue from government coffers to the pockets of consumers, which they in turn will spend in the local economy. This creates increased business activity and profits for the private firms from whom government gets increased tax revenues. Private sector investment is also stimulated as firms seek to expand while creating more jobs. 

Further, we have seen where the ULP government increased the Customs Service Charge (CSC) in 2021. The CSC was increased from 5% to 6% i.e. a 20% hike in the CSC. The Customs service charge is a tax paid on all goods imported into the country. St. Vincent and the Grenadines is a small open economy. We import most of what we consume.  Therefore, the CSC is included in the price of most of the things that we buy and use in St. Vincent and the Grenadines.  So, its effect is very broad. Furthermore, the CSC increase will affect the VAT as well.  That is to say, the amount of money the government will collect on each VAT item will increase.  This is because VAT is charged on the goods after the value of those goods has been raised by the higher customs service charge. 

Reflect on what the president of the NDP, Dr. Godwin Friday, said in a press conference in March last year: “By raising the CSC from 5% to 6%, the price of most goods we buy in the store or bring into the country for ourselves will go up. In fact, some prices have already gone up. People have noticed it. We will pay more for almost everything we use, including foodstuff:  e.g.  cooking oil, corned beef, chicken and other meats, salt, rice, sugar, macaroni, juices, ketchup, seasonings, detergents, soap, shampoo, school supplies, clothing and shoes, and everything else that we get at the grocery stores and clothing stores. 

We will pay more for hardware goods:  lumber, cement, galvanize, bathroom fittings, nails, screws, paint, etc. We will pay more for other household goods: pots and pans, cloth, linoleum for your floor, light bulbs, plates, spoons, and heavy appliances such as stoves, fridges and microwave ovens will cost more. And we will pay more for motor vehicles of all kinds will cost more to import. The bigger the purchase, the more money the government will collect and the more you the consumer/taxpayer will notice the increase.”  

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Today, Vincentians are feeling the effects of VAT and the increased Custom Service Charge at the supermarkets and hardware stores.

The NDP has a better way

Our plan is to set reasonable and effective tax rates. Lower tax rates will make St. Vincent and the Grenadines more attractive for tourism and other investments, and reduce the need for investors to negotiate major tax holidays which negatively impact our economy and reduce potential investors. Having low tax rates and compliant businesses will be better for government revenue streams.  

We will reduce VAT and remove it from essential items to put money back into consumers’ pockets. As stated in our manifesto of 2020, we will reduce VAT from 16 to 13 percent because the ULP’s tax system unfairly targets poor people, for whom VAT takes up more of their income. To ensure those with the lowest incomes can access essential like fresh food and medicines, we will also remove VAT on these items. This will put more money in the pockets of the consumers, who by spending it, will stimulate the economy.

We have also indicated that we will ease the tax burden on Vincentians by broadening the tax base so as to more evenly distribute this shared responsibility of taxation. The NDP will find alternative sources of revenue to supplement those which currently exist. The Citizenship by Investment is one such programme. Once properly administered however, it can generate the revenues necessary for economic transformation through targeted interventions and implementation of projects, programmes and strategies for economic growth.

The NDP is committed to set firm but fair rates of taxation to deliver the necessary revenue to fund public services, but also to allow individuals and businesses to keep their hard earned money and choose where they invest and spend.

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