I recently asked a friend in St. Lucia how the implementation of their VAT went, and if the tax has been successful in raising government revenue and reducing their debt.
Here's the gist of his reply:
"Thank you for your email this morning and the bad news that you are anticipating the implementation of VAT.
"VAT was implemented in St. Lucia on 1st October, 2012 and the results of this is as follows:
- The preceding August and September 2012 was two of the best months of sales which we have had in about 5 years due to the anticipation that prices would go up.
- The implementation of a 15% VAT was preceded by a reduction in Excise Tax on the basis that the Government had promised it would be zero rated as far as increases were concerned.
- In reality, VAT has been a nightmare, the Government was ill prepared for its introduction and everything in this economy became more expensive over night. VAT came in on top of an economic recession and it has further deepened that recession. Food items, medicine and other essentials have all gone up in price. Motor vehicles went up approximately EC $3,000 to $7,000 in cost.
- VAT is now applicable on all service charges and services. Knowing you are in the auto business i.e. Auto/Garage Service, this was not previously taxed and the result has been that customers have discovered that by going to the small garages or shade tree mechanics, that they will not have to pay VAT on the services.
"All in all VAT has been a complicated and unmitigated disaster which we did not need in these difficult times.
"The government had been convinced by the IMF and others that VAT would be a bonanza of Revenue for Government and in reality it has been the opposite and in fact the Government is making less revenue than pre-VAT and is now having to borrow money from the Commercial Banks just to pay Civil Servants salaries.
"I strongly suggest that if you can persuade the Bahamian Government to not institute VAT during these difficult times that you and they will be much better off."
Enough said.
Hat tip to one of our regular commenters (Tradewinds) for the Very Awful Tax designation.
With reports like this why would any government even consider this VAT? Seems to me to be absolutely insane. It confirms to me that something is wrong here big time. I spoke to an Englishman yesterday who told me that when he needs a plumber, he gets a quote with the VAT and one with cash which of course the plumber does not declare so revenue goes down. Does the government think this will not happen here?
If I want to borrow a friends tool, or seek a favor from an acquaintance, I don’t sneak up on him (and lift it) or slap him first, I ask politely!
And I don’t get mad when he says no.
(with or without a reason given, I am not owed one)
Herein lies their failure.
That they “need” a bailout from the Citizens and residents is bad enough, but because they have frittered away their revenue, promised more than they could ever deliver.
Gotten themselves in hock, and pillaged the treasury in general, they want to Steal from Peter to pay Paul!
Added to the Belligerent, secretive, dishonest approach.
They are nothing short of a disgrace.
Yet they ride high and mighty.
Shameless.
Absolutely Oracle.
It’s as if the folks that have to pay for the profligacy did something wrong.
Where’s their humility?
Did I hear someone say “taxation without representation”?
Shameless indeed.
To add to that, have you seen Nassau lately? Garbage piling up, weeds growing everywhere, total lack of grooming etc. etc. etc. Disgraceful.
it all seems pretty clear that we are headed down the same righteous path as others….mindless sheep headed to the slaughter, our brothers and sisters at the Chamber are doing the cause no good with their leaders’ pronouncement and obvious bias support towards his former colleagues, we as a people are so afraid to stand up and be heard, what a shame, always lots of noise in the market, but for the most part only idle chatter.
As to point 2. in your comment, does this imply that the government renaged on their promise to zero rate excise taxes?
I don’t trust government and fear that a similar situation could occur in the Bahamas.
Our across the board prices must increase by at least 20%.
There is absolutely no way our economy will survive such an onslaught.
Hi Dr. Cove.
I’m not sure if St. Lucia reneged sorry. I think the point he was making was even though it was supposed to be zero rated on goods, the impact was still price increases.
I note that Mr. James Smith indicated our Excise Taxes would be reduced over 5 to 25 years or the like.
There are just too many conflicting stories here to date between Mr. Lightbourne and Mr. Smith and others.
You would think they would have their own study(ies) to release???
Maybe they do have them and their results are similar to what Mr. Godsell found in the Nassau Institute report http://www.nassauinstitute.org/articles/article1173.php so they won’t release them?
The whole exercise is driven by the need to reduce Duty rates to WTO acceptable levels.
This, coupled with the pressure from the IMF to increase revenue, with VAT starting July 2014.
The duty rates however have until 2025 to drop.
In the whole EU-EPA trade agreement commitment, itself a “super WTO” trade agreement, The Bahamas has a “Basket offer” of goods and market services we have scheduled to either reduce the duty rate on, or open up for foreign direct investment.
In the face of it, one could say “Sold down river”
All of these legislative amendments and all new legislation in general is all driven by the WTO status and the EU EPA requirements.
Conquest by appeasement and collaboration.
You are absolutely correct on the tariff issues Oracle.
On the VAT issue, that is our own fault. Put simply, it’s as a result of political mismanagement.
One example. Between 2002 and 2007 The Bahamas had the highest revenue of any similar five year period if I remember correctly, yet the government still ran huge deficits. See here… http://www.nassauinstitute.org/articles/article1013.php
Why should we trust they will reduce spending and growth of the leviathan we call government?
A failed Tax for failing Nation to support a failing Government.. Just like our failing Schools, the nation’s failing grade is of our own doing and incompetence, and we can’t even read the writing on the wall that VAT is a doomsday outcome.. We are a broken nation as our family structure is broken, our churches are broken and our schools are broken; no wonder our government is broken heading towards the trash heap of failing nations..
Must this be our economic downfall; the answer is NO, absolutely not.. But as long as we foolishly accept failing solutions like VAT, our national destiny is heading to failure.. Is our government so stupid or blind as to not being able to understand that VAT has been a failure wherever it has foolishly been introduced?? VAT is a failure where ever it has been implemented resulting in economic decline and/or failure.. In other words it is an economic cancer that will take its toll and will be the death of our country.. It just won’t work..
Time for our Prime Minister to stop being tired, to do the right thing and to prevent the shower of economic damnation from falling upon our country.. This is his legacy in the making.. Please stop taking our precious country and it people down the road of economic failure and serfdom.. The ball is in your court and the Bahamas’s destiny is in your hands.. Please show the necessary courage do the right thing for our Bahamas.. Explore other more prudent alternatives, as VAT will only compound the growth of our massive deficit and NOT cure or even reduce it.. It is hard to do the right thing as it will be painful for all, but you might just save the nation from the failure of VAT and our nation’s pending economic collapse and eventual failure.. Use your own good sense and avoid the destructive, socialist influence of the IMF and the new “Washington Consensus” for it has become the consensus of economic failure..
Forgive me. I don’t know how to create ‘links’, however, if you google ‘St Lucia VAT’ a wealth of info is available, including one in which their equivalent of the BC of C pleads for a reduction to 10%, because of the dramatic contraction of private business and in the same article their Trade Union, is complaining of lay offs and reduced pay checks.
Despite assurances their drug costs are very high.
All in all it is very frightening.
Is this what you are referring to? http://www.tcibc.org/
Just copy the address bar from your web browser and paste it in the comment box to post a link.
TOTO so well stated but I must remind you there is nothing RIGHTEOUS about VAT.. Wisdom must overcome ignorance and we are pleased to know you are spreading the word about our self-inflicted, economic destruction..
http://www.caribbean360.com/index.php/business/1023307.html#axzz2gktMZdUu
I believe this is the link, makes for interesting reading
Financially-speaking, the size of government and its waste and inefficiency—along with bad education—are the most profound enemies of the Bahamas and all its people. (Our social diseases are even worse, but that’s a discussion for another day.) To reduce our bloated government and its spending, a completely new “culture” and thinking are needed. Each government employee’s work habits and each department’s processes need to be scrutinized and then overhauled.
Almost in any department, apathy and “don’t care” attitudes are the order of the day. True, while there are many good people trying hard and deserve credit, their good work is frustrated by archaic processes and unmotivated people around them. You see it everyday: sheer laziness, standing round talking and doing nothing, preserving the status quote, passing the buck, fear of accountability, lack of efficiency goals, lack of leadership and wasting our taxes. These are the diseases that are crippling this country’s finances.
VAT is like putting a sheet of paper over a hole or using a Bandaid on a dying body. This country will never thrive like Singapore, Hong Kong, or even Cayman, until the government is forced to stop wasting our tax money through the inefficient processes and staff in each department (and in education).
We see bad grades year-over-year, graduating unemployable school leavers, delays in the law courts, an archaic, paper-bound police force, and unmodernized processes in every government department. We see problems taking forever to get solved: delays getting a building permit, not being able to pay and register a company online, missing documents and long paper trails because departments are not properly computerized.
The leaders are to blame—because they can fix things but they don’t or are doing it too slowly. Politicians spend their limited valuable time speaking in public instead of eliminating waste and improving efficiency in their departments. The public needs to wake up and focus on government waste like a laser beam. The feet of Ministers’ and Permanent Secretaries’ need to be held to the fire.
Urgent reform of each government department is the only way to cut the deficit, improve business efficiency and profits, attract foreign investment and enable the country to grow. The need for taxing the public more would vanish. Alas, it’s too late before the VAT train wreck arrives. Anyone with half a brain can see this will be a disaster. The pols are just fooling themselves introducing VAT without making a huge effort in tackling government waste.
Sadly, it’s doubtful that any political party has the courage to solve this critical problem quickly because, as with any unprofitable business, a sharp reform would mean losing votes from mass firings or furloughing thousands of government employees. A longer-term alternative plan could be to reorganize departments and retrain staff in new and computerized processes. Everything should be online. Imagination and good planning could move these inefficient government staffers to more pro-active tasks on projects that could help build the country.
A mass, popular “in your face” crusade against government waste is the ONLY solution. Let’s focus on that.
Any thoughts?
Absolutely Anti Waste.
At minimum they should be holding the line on spending at last years budget levels for three to five years, come hell or high water.
Obviously I think the government needs dramatic downsizing, but it has to be done systematically as it did not grow where it is over night.
Education is also key to any future economic growth.
Thanks for stopping by and commenting.