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PRESS RELEASE – Prime Minister and Minister for Finance Dr. Kenny D. Anthony said the option to cure the deficit by raising more revenue by imposing VAT on electricity and water would place undue burden on the poor and vulnerable at this time.
In an Interview with HTS News Force on Thursday, May 8, 2014, the prime minister said the government can raise additional revenue by implementing VAT on utilities. However, Dr. Anthony insists the economic conditions do not encourage such a move.
“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 $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,” Anthony said.
Notwithstanding, Prime Minister Anthony stressed that in its manifesto, the SLP indicated that it will consider VAT on utilities only when proper regulatory mechanisms are in place. There is no proper regulatory mechanism in place at this time.
Further, Dr. Anthony said the impact of such a move on the poor and vulnerable will be very significant. While the commercial sector is a heavy consumer of electricity, if VAT is imposed on electricity, they will be entitled to claim the input VAT thereby lessening the impact. This is not the same for the domestic consumers.
“It is an option that some persons have put on the table. They have said, “Instead of reducing salaries of public officers to deal with the problem of excessive expenditure, why don’t you introduce VAT on electricity and water to increase revenue?” 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.
Such a move would dampen demand for goods and services and reduce even further, disposable income. I do not think right now this is the way to go. We have to make other sacrifices to deal with this problem,” he explained.