St Kitts And Nevis Parliament Adopts VAT

by Phillip Morton, Investors Offshore.com

13 August 2010

Concluding three days of debate on the issue, Saint Kitts and Nevis Prime Minister Denzil Douglas has announced that the legislation necessary for the implementation of a value-added tax in the two-island federation has been passed.

Wrapping up a two and a half hour presentation prior to the vote, Douglas told parliament: “The global situation is harsh. It is still not settled in the way one expected it to settle. We do not have the luxury, therefore, of delaying anything. We have to move forward.”

The VAT was passed by a majority despite the opposition party’s absence at the final vote. VAT is to be set at 17%, lower than the rate of around 20% previously expected, and will enter into force on November 1, 2010.

Speaking to parliament, Douglas said the VAT was as part of the government’s plans to rein in the deficit, as part of “a comprehensive plan to stabilize the economy, and promote growth and development, in order to move our country forward.”

To achieve this, Douglas explained, there would continue to be a major shift in St Kitts and Nevis’ fiscal regime, including by enhancing the tax regime for resident businesses:

“We will do other things,” he promised “Mr. Speaker, we will, of course, have to look at a business tax, the new corporate tax – we will reduce it from what it is today. I gave a commitment to the business community. I will keep my word. We will reduce the corporate tax to ensure that the business community does not have pain and making sure that it is working with them.” Douglas said the government wants to ensure that the local business community has the opportunity to improve its competitiveness.

“[To achieve this] we’ve put in place the Competitiveness Council, which is working [to present] recommendations as to how we can stimulate the economy and make sure that we are more competitive as a jurisdiction in dealing with the rest of the world.”

“This is a comprehensive package and the introduction of the VAT is only one aspect of it,” he said.

The introduction of VAT will lead to the rescinding of twelve existing levies, the Consumption Tax, the Hotel Accommodation and Restaurant Tax, the Cable TV Tax, the Vehicle Rental Levy, the Insurance Premium Tax, the Export Duty, the Public Entertainment Tax, the Lotteries Tax, the Gaming Machine Tax, the Traders Tax, the Telecommunications Levy, the Island Enhancement Fund and the Parcel Tax.

The government said there would be exemptions for a range of basic goods and services including: interest and loan payments; some medicines for chronic diseases; bus fees; residential rent; local farmers’ produce; fuels such as gasoline, diesel, cooking gas and kerosene; articles specific to disabled persons; printed reading material; and some imported food.

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