Prime Minister Stephenson King. *Photo credit: www.stlucianewsonline.com

CASTRIES, St Lucia, CMC – Prime Minister Stephenson King says his administration has approved a number of policies regarding the implementation of the Value Added Tax (VAT) next year.

In a nationwide-radio and television broadcast on Monday, King said that the tax would be introduced here at a standard rate of 15 per cent, while certain goods and services, including those produced for exports and agricultural inputs will attract a zero per cent rating.

The prime minister said the VAT is intended to replace a number of taxes, including consumption tax, motor vehicle rental fee, mobile cellular telephone tax and an environmental protection levy.

He said the government also intends adjusting the excise tax rates on motor vehicles and products with ad-valorem rates to keep the effective rates of tax on these products unchanged after the introduction of VAT.

“The provision of options to importers during the transition phase just prior to implementation of VAT to avoid businesses falsely claiming input tax credit during the early stage of implementation, have also been considered,” he said.

King said that details of the options would be disclosed after further consultations are held with stakeholders on the issue.

The prime minister said that the date for implementing the VAT will be announced after Cabinet has considered the report on the outcome of discussions of the just released draft White Paper.

King said the introduction of the VAT is in keeping with a decision taken the Monetary Council of the Eastern Caribbean Central Bank (ECCB) in 2003 following a recommendation by the Tax Commissioners from the nine-member Organisation of Eastern Caribbean States (OECS).

Since the decision of the Council, Antigua, Dominica and St. Vincent and Grenadines have already implemented VAT, while St. Kitts and Nevis, like St. Lucia, is preparing to do so soon.  Grenada has already committed to implementing the VAT in February 2010.

The Prime Minister said his administration views the introduction of the VAT as part of its strategic policy response to modernising the tax system.

“The need for this strategic approach has become even greater in light of the impact of the global recession which calls for greater resilience in the structure of our economy and to build the fiscal space necessary for Government to provide the kind of policy response required,” he said.

“The VAT, which is a tax on consumption, is a broad base tax resulting in increased revenue, and reductions in relatively high tax rates,” he added.