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“VAT cut will weaken St. Lucia’s finances” – IMF

By Horace Cunningham, SNO Staff Writer

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The St. Lucian Government including Prime Minister Allen Chastanet in a meeting with an IMF team in St. Lucia on October 13, 2016.

The St. Lucian Government including Prime Minister Allen Chastanet in a meeting with an IMF team in St. Lucia on October 13, 2016.

The latest VAT cuts will put pressure on the fiscal position of St. Lucia according to the IMF.

The view was stated in a report after an IMF team visited the island late last month.

“In the meantime, the fiscal package announced by the government under the “Five to Stay Alive” initiative, which includes a reduction of the VAT rate from 15 percent to 12.5 percent, will weaken the fiscal position unless measures are taken to mitigate its impact,” the IMF said in a statement on their website.

The VAT cut was one of the major promises by the UWP in the lead up to the 2016 general elections.

The cut in VAT, a part of the “Five to Stay Alive” innitiative, is seen by the St. Lucian Government as a major stimulus towards increasing the spending capital of St. Lucians which, it was hoped, would spur growth in the short to mid term.

The IMF also believes that shifting the tax burden on the tourism sector will negatively impact competitiveness and undermine growth.

The IMF also focused on St. Lucia’s debt burden, stating that a “multi-year fiscal consolidation plan” was needed in order to start the process of debt to GDP reduction from the current 82% to the target of 60% by 2030.

St. Lucia’s debt to GDP ratio has been in rapid increase over the last 2 years, moving from 77.8% in 2015 to 82.9% in 2016. Debt to GDP is expected to hit a high of 85.4% in 2017.

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27 comments

  1. Able? What are you talking about? For a student that only did just one course in economics? Able? Nobody in the SLP cabinet then had any handle in economics. Yet, they went tinkering with a national taxation system in helter-skelter fashion. The resulting confusion is more than verifiable testimony that the tinkerers had no idea about what they were dealing with at that time. Defend convincingly that this is contrary to what happened.
    We keep on sending to parliament, just too many wet-behind-the-ears economic babies, who are clueless about executing even a road project, and far less an entire economy. We always get the government that we deserve, which is a set of clueless nom-san-gwenn rah-rah "yes-men'.

    (22)(0)
  2. John Compton did not make any adjustments for the change in fortunes with approach of a moribund banana economy. Short of freight too, his successors, with an ever-growing young population are just as clueless about how to make an about-turn regarding growth since then and even now.
    If graphically the growth curve for Saint Lucia were to be drawn, using a moving average, we would see that by and large the economy is set to continue to remain bouncing on horizontal part of the L-curve. Maybe, DSH might change the growth curve from an L-curve to a U-curve.

    (16)(1)
  3. Mary Asset you need to realize our tax structure has changed replaced by VAT. Kenny did not change it he executed it the UWP started the ground work. What I think we are not appreciating is that St Lucia was the last to implement it so Dr Anthony was able to study all the other islands.

    (3)(0)
  4. I am still holding my breath. Lots of the tax exempt goods and services will be taxed.
    We were warned but we did not listen. John i agree that creative ways to generate income for government is in order. But sad to say no government in the world has found it. Let us pray that we are the first but i doubt it very much.

    Things will get ROUGH

    (4)(0)
  5. Onething I know for sure is st Lucian's Dont love st lucia like they say .because if they did , all of them wouldn't want to go to the U.S. LOL Uwp came and say they will move visa to the US people go and vote for them all because they want to go to the U.S LMAO USA they want to go like that , they Dont mind taking st lucia down by voting for a set of liars .the fellas were boldface liars it was clear.The pm came and promise so many things that he has no control over but the voters couldn't have seen it.how can he bring down gas? Look they win the election , has the gas gone down? NO!! It hasn't !! he said be would stop crime. Has he?smh. He won with lies.but I hope those that voted for them Dont regret bcus USA they want to go. So I want to ask them to hold tight and have faith there is still four and a half years .wait that they get to go to the U.S.A without visa.pm will take it out.also I hope they Dont blame anybody because the pm father warned st Lucian's.he told them d pm can't manage he acts like a child that didn't have toys. But awa they go n vote for him.smh

    (1)(1)
  6. When the developed countries needed to reduce debt and bring their budget closer to an equilibrium, they put austerity measures in place to achieve that. They laid off, and drastically cut on spending on everything, including education. Over here we refuse to take such measures simply because of partisanship. Any given government in power is afraid to reduce government for fear they might lose votes. They continually put self before country. VAT which is a significant source of revenue has been cut leaving us with a fight to stay alive as a country. This was done simply to garner votes. Is there anyone willing to die for country ?

    (4)(0)
  7. Everyone knows the VAT reduction will reduce Gov. Revenues. I guess the next move is to remove items on the VAT exempted list to cover the shortfall.

    To person crying "tax too high" or "doe tax us to death" yall need to hush up. Most people on this island pay 5-15% tax on their income which is well below the Global Average. I mean, people in the US , Canada, UK pay 40% tax for the same income bracket at parity.

    St. Lucians living above and beyond their means is the understatement of the year. Go by any Cabawey and you will see my point, or just watch the Brewery or Distillery's Financial Statements. They eh go complain about VAT on a shot ah rum but they go run their mouth at the grocery store. Lucians.

    You want a solid Fiscal Plan? Tax the living daylights out of alcohol and ban its use after 11PM. Sit back and watch the $$ roll in, The Crime rate fall, Productivity Rise, Road Fatalities fall and Violence against women plummet. Feel is shate i talking, kindly refer to Brazil and Argentina.

    Lucians need to stop pretending that politicians are their big problem and not their mass drug addiction that have them like violence and sex crazed fiends during the night and zombies during the day.

    (3)(0)
  8. What we are paying for now, and will continue for a while yet, is the waste of valuable revenue paid
    to Lawyers supposedly to defend our case against investors, suing us for breach of Contract. secondly
    we have too many Embassies and Consulate offices abroad. While we need more Police to patrol crime
    infested areas, we can safely seek to find areas within the civil service to reduce numbers which should
    not adversely affect the production in certain ministries.

    (1)(0)
  9. I dnt no y the can't get people who are living in the country to work at the embassy instead of paying expensive house and staff they not doing nothing for the country and not good enough to get nothing for st lucia

    (4)(0)
  10. For those who still have hope in their bunch of clowns which is led by the first class clown Chastanet what more do you want hear and or see to admit that your faith was wrongly placed. The likes of me just cannot believe that Chastanet truly thought this was a economically sound move. I rather think he was making good his election promises. This simply means he is a simplistic dunce. This means he and with him his bunch of clowns have to go before they turn the country to ashes!

    (9)(23)
    • Does "weaken" mean "destroy" and IRREVOCABLY? Or, is such language way above your puny brain?

      Then, tell us why governments are able to reverse steps previously taken. We still have to see the budgetary proposals handed down from a failed SLP government.

      (10)(1)
    • The country wasnt operating in 2011 with 0% VAT?...All of sudden VAT become life and death since kenny introduce what did SLP do with the rest of our money???

      (6)(2)
      • It was done vye-ky-vye to appease the IMF. Those who get their economic instructions from A-level textbooks have no guidance or basis to understand anything as complex as the ramifications of changing a country's tax structure. It did not happen then and not anytime soon. Politics and political propaganda are not the same thing as public finance and advanced macro economics and economic development. Ignorant greenhorns are just greenhorns. They create messes that others have to clean up or live with, if and after they leave office. The country was not experiencing a spurt of rapid pre-election growth. The turnaround will not be easy either whoever came to power afterwards.

        (9)(0)
  11. If they recommended it in the first place you except them to say differently

    (0)(1)
  12. Lucians Can't think for themselves.....The Politicians come and talk their crap and we all sit with mouth open wide and we swallow. Our biggest problem in St. Lucia is Jealousy .....No 5 to stay alive will change anything! We need to learn to live within our means and work hard for the things we want.There is no quick fix to the dismal state of affairs in this country and it is not going to get better any time soon. We need some solid brains to help us out of this hell hole!

    (13)(0)
  13. This was obvious to anyone with a secondary school knowledge of economics!

    (14)(1)
  14. As I look from cyber space all I can say is: " St.Lucia you are a total disaster" ! Didn't this PM went to school to study economics? You'd think the guy has an idea of what he's doing. He has no clue. Wow, spread some good news for once. GOSH MAN !!

    (22)(5)
  15. Our Present PM doesn't listen. There's no way he will not increase other taxes or put something else in place for St Lucia to generate revenue. We no longer have cents so what difference does it make to cut VAT? Same St Lucians travel to Barbados US and other countries and pay all the taxes without complaining. We need to make things work in our country St Lucia is suffering and we all are contributing to its death.

    (21)(6)
    • yea but not all lucians can travel to those same places u mention. so nothing for us?? we must stay and suffer all the days of our lives?? hmmm

      (2)(3)
  16. I agree that getting rid of some of the overseas embassy positions, especially for staff who are not generating any fiscal growth to the island. Millions of dollars are being paid {really, wasted} in salaries, boarding and expenses, and other perks for Political Branding of the island, but in reality, there can be other ways to facilitate the needs of St. Lucia and St. Lucians who live abroad.

    (16)(1)
    • You are a real simple-minded clown. Closing embassies will increase GDP? Why not close all? We will get the greatest growth in GDP ever!

      (0)(0)
  17. I told y'all more will be exposed. Look it! Still more to come.

    (11)(7)
  18. Because everyone getting too gready. Everyone wants, wants wants; and they want it now. Everyone wants what they can't afford, people doing crims for what they want, killing each other for what they want and killing themselves because they can not get what they want. We need to think of what we needs and slow down on the wants.

    (9)(1)
  19. Phillip j Pierre had a great point when he said VAT reduction would have a financial burden on government. Luciana were quick to chastise him . Now IMF is saying the very same . Well hope that's not the case , we're looking forward to more investment to boost our economy, despite cost of living is very high.

    (20)(5)
    • I have said before, you can't tax the people to death and expect the country to flourish. While the country would be receiving less 'income" from the vat reduction, there needs to be more creative ways to generate income. Taxing is as old as time itself. We need to look for other ways, other systems, change how we do things and stop the WASTAGE !!

      Regards,

      (15)(5)
      • This is the same UWP spin that Ubaldus has plied. The question is, what are the creative ways that would generate income? And how do we implement them?

        (1)(6)

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