Above: St Lucia Prime Minister Dr Kenny Anthony

By the Caribbean Journal staff

St Lucia Prime Minister Dr Kenny Anthony explained the soon-to-be-implemented Value Added Tax in his budget address this week, clarifying a set of goods and services that will be exempt from the tax.

According to Anthony, these goods and services “include but are not limited to” fuel, fresh eggs, milk, butter, potatoes, chicken and educational and medical services.

The VAT is set for implementation in September.

“The VAT provides the opportunity to deal directly with social welfare and investment concerns by permitting exemptions for designated goods,” he said. “The VAT, as designed, will not place an excessive burden on capital investment goods, because it provides a full credit for the tax included in purchases of goods.”

With the implementation of VAT, Anthony said the prices of some goods and serves would increase, while others would be reduced, as the VAT will replace the country’s consumption tax, hotel accommodation tax, motor vehicle rental fee, mobile cellular phone tax and environmental protection levy.

“The poor and vulnerable will be protected with exemptions on a wide range of products,” Anthony said. “However, we have to be careful in managing the exemptions, as this could easily erode the gains made in terms of coverage. The model that we have developed is very capable of achieving this delicate balance.”

The VAT will levy a standard rate of 15 percent on some goods and services, while a reduced 8 percent rate will be applied to the hotel sector and related services until April 30, 2013, at which point a determination on a future rate will be made.

“The overall rationale for the introduction of a VAT as a general tax on consumption is to broaden the tax base and move towards a system which decreases the tax burden on income in favour of consumption,” he said.

Anthony also proposed the establishment of a Parliamentary Oversight Committee to monitor and guide the VAT’s implementation.