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St Kitts And Nevis VAT Confirmed

by Phillip Morton, Investors

07 April 2010

Denzil Douglas, the Prime Minister of St Kitts and Nevis, confirmed in his recent budget announcement that a value-added tax will be introduced in the twin-island federation from November 2010.

The introduction of excise taxes on alcoholic beverages, tobacco products, petroleum products, motor vehicles and aerated beverages, was also proposed by the Prime Minister in his March 23 budget address.

According to Douglas, these measures, which were approved by the National Assembly on March 29, are "designed to implement an aggressive debt reduction strategy."

The US Central Intelligence Agency's World Factbook has placed St Kitts and Nevis 3rd among the most indebted countries in the world and Mark Brantley, leader of the opposition party in St Kitts and Nevis, has warned that the Caribbean territory is "perhaps one hurricane away from bankruptcy."

The Federation’s public debt was estimated to have reached XCD3bn (USD1.18bn) at the end of 2009, equal to 185% of the territory’s gross domestic product (GDP), placing it behind only Zimbabwe (304% of GDP) and Japan (192% of GDP), in terms of debt.

Douglas sought to assuage concerns over the debt in his budget statement, saying that the territory, through his government’s 'Debt Management Strategy,' could gradually return public debt to sustainable levels, although he admitted this would take many years. He stated: “The road to acceptable levels of debt is still long and arduous, and filled with many obstacles and risk. We must, therefore, in this budget, and in future budgets, give due prominence and priority to debt reduction as a critical objective.”

However, opposition leader Brantley has observed that the government’s lack of fiscal space will prevent the government from dealing with economic shocks, such as a hurricane, were one to hit the territory in coming years.

"Our debt is out of control. It cannot now be seriously doubted that the debt of our nation is a very real threat to our continued viability,” he said in comments following the budget.

TAGS: tax | economics | value added tax (VAT) | fiscal policy | gross domestic product (GDP) | budget | excise duty | offshore | Saint Kitts and Nevis

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