IMF OFFICIAL REPORTS VAT WILL HELP OFFSET ECONOMIC CHALLENGE WHICH ST KITTS & NEVIS FACE
The November 1 introduction of a Value Added Tax (VAT) in St. Kitts and Nevis was essentially summed up as the “right move in the right time” by officials from the International Monetary Fund (IMF).
At a news conference at Government Headquarters on Monday (November 22), Alfred Schipke, Division Chief in the Caribbean 1 Division, Western Hemisphere Department, reminded that in 2005, an IMF study report recommended member countries of the Eastern Caribbean Currency Union (ECCU) modernize revenue systems. As a result, the Barbados-based Caribbean Regional Technical Assistance Center (CARTAC) – an IMF institution – conducted technical studies on the feasibility of a Value Added Tax in the Region as part of such.
“In our view, the authorities (in St. Kitts and Nevis) have done the right thing,” Mr. Schipke stressed, noting the wide ranging consultation that was done with local stakeholders on the VAT. “You now have a modern tax system, which you need to prepare yourself to be successful in this world, so we are very supportive of it.”
“The timing, I would argue is the right timing,” he pointed out to reporters. “What the government is doing right now [is] putting in place the systems [and] improving its fiscal management of which VAT is one of them, that as we come out of the economic downturn next year, we suddenly have the conditions in place to deal with the fundamentals. In our view the Government has gone the right route.”
The IMF official highlighted the global impact of the economic crisis that originated in the United States and explained that in most countries Governments have had to spend more in order to protect the less fortunate and stimulate the economy.
The renowned United States Stimulus Package as well as proposed increases in the VAT rate in Britain and Barbados reinforces this view. Britain’s Government has proposed a rise from 17.5 percent to 20 percent in 2011, while a hike in VAT from 15 percent to 17.5 percent takes place in Barbados on December 1, 2010.
Mr. Schipke stated that a VAT also broadens the tax base making the structure more equitable. He also credited the St. Kitts and Nevis Government for implementing other initiatives such as streamlining tax exemption controls that will promote greater fiscal management and reduce imbalances.
The bold policy moves coupled with the performance of the local and global economy as well as projected developments such as the reopening of the Four Seasons Resort on Nevis, prompted the IMF to update its projected economic growth figures for the twin-island Federation from 0.5 percent to 1.5 percent of GDP in 2011.
GDP or Gross Domestic Product measures the number of goods and services produced in a country in a year.
Mr. Schipke urged Government to continue its efforts to create an enabling environment to spur greater private investment, reduce the debt burden and increase consumer and investor confidence.