BET­TER DAYS?

As Ef­fec­tive As VAT May Be, It Re­mains Al­to­gether ‘Op­pres­sive!’

The Star (St. Lucia) - - FRONT PAGE -

By Rick Wayne L ast Thurs­day evening the na­tion’s prime min­is­ter took to the air­waves to ex­plain his de­ci­sion to take Saint Lu­cia into elec­tions nearly a year ahead of time: “To en­sure peace, sta­bil­ity and cer­tainty in our coun­try and its af­fairs.” He said Saint Lu­cia was “once again proud, re­silient and on the move.” How­ever, he warned that the coun­try was also “del­i­cately poised and all the gains and sac­ri­fices we have made to get us here can be quickly un­done and re­versed by reck­less­ness and ir­re­spon­si­ble ac­tions”—ex­em­pli­fied by “the op­por­tunis­tic and bizarre” pledge by the leader of the United Work­ers Party, if elected to of­fice, to re­duce im­me­di­ately and ul­ti­mately re­move “the dreaded VAT” and re­place it with “a more cre­ative and less oner­ous way of rais­ing rev­enues gen­er­ated by VAT.”

By the prime min­is­ter’s mea­sure Allen Chas­tanet had later con­tra­dicted him­self when he said the “dreaded” Value Added Tax was also “the best and most ef­fec­tive tax in the world. No ar­gu­ment.”

Hav­ing un­der­scored the UWP leader’s ap­par­ent “in­cred­i­ble about-turn and in­con­sis­tency,” the prime min­is­ter re­vealed the na­tion had in 2015-2016 “earned” from VAT $346 mil­lion that was used to pay nurses, doc­tors, teach­ers, po­lice of­fi­cers, civil ser­vants and debt com­mit­ments. For ev­ery 1% re­duc­tion in VAT rev­enue, added the prime min­is­ter, “the coun­try loses $7 mil­lion.” What then, he asked, are the new “cre­ative” mea­sures . . . that Chas­tanet plans to “im­pose on the peo­ple of Saint Lu­cia to make up for this stag­ger­ing loss of $346.37 mil­lion in rev­enue?”

He re­called that dur­ing his 2007 Bud­get Ad­dress Sir John Comp­ton had said: “Madam Speaker, I wish to draw to the at­ten­tion of this honor­able House that VAT is not a tax with which we are un­fa­mil­iar. We cur­rently have on our books a num­ber of trans­ac­tion taxes such as the con­sump­tion tax, ho­tel ac­com­mo­da­tion tax and the travel tax.” As for Sir John’s suc­ces­sor Stephen­son King, the prime min­is­ter said he had re­it­er­ated his de­ceased leader’s prom­ise to “in­tro­duce VAT in April 2012 . . . He pre­pared draft leg­is­la­tion and en­gaged civil so­ci­ety on the mer­its of VAT . . .”

Fi­nally: “Our gov­ern­ment be­lieves VAT has set­tled rea­son­ably well. It is not per­fect. Ad­just­ments may well be nec­es­sary from time to time but our num­ber one pri­or­ity must re­main the cre­ation of new jobs and this will be the con­tin­u­ing fo­cus of a new Labour gov­ern­ment.”

This week Chas­tanet claimed the prime min­is­ter’s fig­ures were in­cor­rect. As sig­nif­i­cant as is the truth of the mat­ter, I am more in­ter­ested in the then Leader of the Op­po­si­tion, now prime min­is­ter’s VAT-re­lated com­ments back in 2007 when Sir John de­clared in the House his in­ten­tion to in­tro­duce VAT in a year or so. The fol­low­ing is taken from the 23 April 2007 Hansard, pages 81-82:

“For the record I want to say as fol­lows: the SLP gov­ern­ment was never con­vinced that VAT was the right way to go. Never! We never took a de­ci­sion on VAT . . . We never gave the Mone­tary Coun­cil any com­mit­ment to VAT. And the rea­son, among oth­ers, was sim­ply this. We felt that the Mone­tary Coun­cil had no business in fis­cal pol­icy . . .”

Ad­di­tion­ally: “We were never per­suaded that VAT was the wis­est choice be­cause we be­lieve it is po­ten­tially an op­pres­sive tax; it is op­pres­sive to the poor; it is op­pres­sive to work­ers and wher­ever VAT has been in­tro­duced, yes, the con­trary to what the Mem­ber for Mi­coud says, you may get a wind­fall in the first cou­ple of years but one thing is cer­tain: your re­tail prices jump—es­pe­cially the price of food.” There is more, all of it un­der­scor­ing the mur­der­ous con­se­quences on both business and con­sumers.

In two sep­a­rate in­ter­views with HTS re­porters prior to the 2011 elec­tions the op­po­si­tion’s Kenny An­thony ham­mered home the point that VAT should not be im­posed on Saint Lu­cians, es­pe­cially when the is­land’s econ­omy was in the toi­let. “The econ­omy needs stim­u­la­tion,” he thun­dered, “not fur­ther stran­gu­la­tion.”

By the re­turned prime min­is­ter and min­is­ter of fi­nance’s ac­count (via the gov­er­nor gen­eral’s Throne Speech) the coun­try’s econ­omy re­mained in dire straits at the time of his 2012 Bud­get pre­sen­ta­tion. “The over­all fis­cal deficit widened to $254.4 mil­lion, equiv­a­lent to 7.6 of GDP.” This deficit was be­ing fi­nanced “en­tirely by bor­row­ing from do­mes­tic and ex­ter­nal sources . . . Un­sus­tain­able.” Speak­ing for him­self, the prime min­is­ter re­vealed that growth in 2011 had been “no more that 0.6%.” He said eco­nomic an­a­lysts had in­di­cated small and open economies such as Saint Lu­cia’s “will take longer to re­cover.” In 2011 the gov­ern­ment had bor­rowed some $33 mil­lion just to meet re­cur­rent ex­pen­di­ture, said the new prime min­is­ter. “We are not gen­er­at­ing enough rev­enue to meet our re­cur­rent ex­pen­di­ture. This is a recipe for dis­as­ter.” For ev­ery dol­lar the gov­ern­ment raised from taxes, 48 cents had to go to­ward pay­ing public sec­tor salaries and wages.

In short, the econ­omy was in deep doo-doo, the coun­try in­debted up its eye­balls. But that had not de­terred him from im­pos­ing the “op­pres­sive” VAT on work­ers whether or not poor, and busi­nesses big and small. “We sim­ply have to cure the fis­cal deficit, he said, “and do this quickly.” It was “vi­tal and ur­gent” to re­ori­ent the tax sys­tem to en­cour­age growth. “The in­tro­duc­tion of VAT by 1 Septem­ber 2012 is an im­por­tant step in that di­rec­tion.”

The vast ma­jor­ity of Saint Lu­cians—scores of whom have gone out of business and en­tered the ranks of the un­em­ployed—would on the eve of an­other gen­eral elec­tion agree that the im­po­si­tion of a 15% VAT with its at­ten­dant con­di­tions has been largely re­spon­si­ble for the sorry state of the pri­vate sec­tor.

De­spite hav­ing more than once main­tained that to in­tro­duce VAT when a coun­try’s econ­omy was in the tank was beg­ging for un­avoid­able dis­as­trous con­se­quences; de­spite he ac­knowl­edged our coun­try’s in­debt­ed­ness, and suc­ces­sive gov­ern­ments un­con­scionably spend­ing more than they took in; there are no vis­i­ble signs that this prime min­is­ter ever cut back on gov­ern­ment ex­pen­di­ture. Selfish con­sid­er­a­tions kept him from ad­dress­ing public sec­tor salaries and wages.

As for his con­tention that VAT was “in­evitable,” he has never ex­plained why in any way that made sense. After all, at the root of the par­tic­u­lar evil was the wan­ton of­fi­cial spend­ing and un­con­scionable wastage that had ren­dered our coun­try vul­ner­a­ble be­fore the WTO and the Mone­tary Coun­cil. True, Sir John and his im­me­di­ate suc­ces­sor had in­di­cated their in­ten­tion to in­tro­duce VAT but it was this prime min­is­ter who had ac­tu­ally done the dirty deed at the worst of times and at the mur­der­ous level of 15%.

Nei­ther Comp­ton nor King had hinted at de­tails of the tax that clearly they were in no hurry to in­tro­duce. As for Chas­tanet’s con­tentious dec­la­ra­tion that if elected he in­tends to re­duce VAT to a level more tol­er­a­ble, it re­minds me of a TALK in­ter­view with Sir John Comp­ton just be­fore the 11 De­cem­ber 2006 gen­eral elec­tions; his fi­nal TV ap­pear­ance, at a time when, I dare­say, the coun­try en­ter­tained ma­jor con­cerns about his fac­ul­ties.

My ques­tion: “Sir John, you’ve been in pol­i­tics for most of your adult life and now you’re head­ing into an­other war. Is there any­thing you might’ve done bet­ter? Any re­grets?”

Comp­ton had al­ways been fa­mous (and tar­geted both by de­trac­tors and co­me­di­ans) for avoid­ing other peo­ple’s eyes. It was not gen­er­ally re­al­ized the fa­mously no-non­sense leader was also quite dif­fi­dent. On the re­called oc­ca­sion he stared straight into the cam­era lens as he replied. “I have long re­gret­ted not hav­ing done more for the youth of this coun­try.” “Why didn’t you?” “Well,” he said, “you come into of­fice with all kinds of as­pi­ra­tions. You can hardly wait to get down to work. What con­fronted me in 1964 was a barely ed­u­cated pop­u­la­tion, largely un­skilled and un­em­ployed. Th­ese peo­ple nev­er­the­less had com­mit­ments. They had to eat, for one. And then there was the coun­try it­self that needed ba­sic in­fra­struc­ture . . . But this time around I plan to put the young peo­ple first, sec­ond and third.”

I all but sniffed: “But keep­ing in mind the cur­rent state of the econ­omy where will the money come from?”

I thought the ques­tion took him off guard. I was wrong. He turned away from the cam­era and looked—yes, he ac­tu­ally did—and looked me straight in the eye be­fore shoot­ing off his an­swer that stunned not only me but, as I would later dis­cover, the rest of the na­tion that se­cretly imag­ined him not nearly the man he once had been.

“Rick,” Sir John said. “I have no idea where the money will come from. But this I prom­ise. The money will be found. I will find it . . . I must find it!”

Allen Chas­tanet, with his ten­dency to over­s­peak, some­times for­gets he’s a politi­cian, and as­tute politi­cians are al­ways care­ful to say only what is ab­so­lutely nec­es­sary. Not a word more. The prime min­is­ter and the UWP leader agree about VAT: it’s a killer tax and “dreaded.” What sep­a­rates them is the prime min­is­ter’s de­ter­mined de­pen­dence on the “op­pres­sive” tax— re­gard­less of its ob­vi­ous wide­spread con­se­quences, while Chas­tanet is de­ter­mined to ease the re­lated bur­dens, even if it means the public sec­tor must live with the pos­si­ble dis­com­forts, at any rate for a while. In Chas­tanet’s mind VAT, how­ever ef­fec­tive a tax, is also evil. A de­mon tool.

Like wa­ter­board­ing!

Left to right: Sir John Comp­ton, Prime Min­is­ter Kenny An­thony, for­mer PM Stephen­son King and UWP leader Allen Chas­tanet: All agree VAT is an op­pres­sive tax!

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