I’m not sure if this decision was bad planning or ‘good ‘ planning. It was announced to the public only on 15th December, and businesses were given until yesterday to register if they wanted to be in on it.
Was it a desperate, last-minute effort to gain some goodwill, or was it instead deliberately kept back to the very last minute so as to limit the amount of businesses that would be involved, and, in the process, limit the benefits that consumers might enjoy? I leave that to you.
When a business imports an item, it typically will pay Port Charges, Trucking, Duty, Customs Service Charge (6%), and VAT (17%).
Let’s consider a refrigerator. If the Duty is, say, 30%(I’m not sure what the actual percentage is), then that 30% will be calculated against its CIF(cost, insurance and freight) value.
The Customs Service Charge is 6% of the CIF. And the VAT is 17%, but not of the CIF. Instead, it’s 17% of the accumulated cost which includes the CIF, the Duty, and the Customs Service Charge.
Here’s the breakdown:
- CIF cost of the refrigerator……………………………………………………………….1,000.00
- Duty(30% of CIF)………………………………………………………………………………… 300.00
- Customs Service Charge(6% of CIF)……………………………………………………….60.00
- TOTAL BEFORE VAT…………………………………………………………………………$1,360.00
- VAT( 17% of 1,2 and 3 above=17% of $1,360.00)…………………………..…….231.20
- TOTAL COST OF REFRIGERATOR(less Port Charges and Trucking)…..$1, 591.20
Now as far as I’m concerned, if the VAT was truly 17%, it would be calculated on the $1,000.00, but instead it’s being applied, not just to the CIF value of the item, but also to Duty and Customs Service Charge, both of which are taxes. So we’re paying taxes to the Government on goods which we purchase, then we’re paying the Government taxes on those taxes. That’s harsh, maybe even obscene.
What this also means is that the effective VAT rate on the refrigerator in this particular case is not 17%, but about 23%. If it was 17%, then the price would be $1,530.00 instead of $1,591.20, a difference of $61.20. That’s significant.
So the truth is that the VAT in St. Kitts & Nevis is not 17%. Instead, it’s a function of the rate of duty applied to a specific item. So, for example, if the item is a $70,000.00 car which is dutiable at, say, 60%( again, I’m not sure of the actual percentage), the Duty will be $42,000.00 and the Customs Service Charge will be $4,200.00 .These three figures add up to $116,200.00 and the VAT will be 17% of that amount, or $19,754.00, which is about 28% of the landed cost of the car. And I’m not even including the Environmental Levy.
Now if TDC, Horsfords, Courts or Nicholls were to reduce the VAT on this refrigerator on Thursday, 22nd December, the actual VAT payable would be $95.20, and the price of the item would be $1,454.70, not $1,591.20.
That’s a great saving for the consumer. However, there will be additional costs for businesses as they try to adjust their computer or other systems for the one day, then revert to the norm quickly in time for the very next day, and also in terms of security and other outlays in terms of managing the extra customer traffic, and possibly having to pay workers more money for a longer work day.
These additional costs will have to be carried to the consumers, which means that the actual price on the day will be higher than $1,454.70.
Further, there’s some potential for drama in the rules set out for the day. And not just on the day, but after. However, I won’t go into details. We’ll see how it goes.
That’s one big event.
The next one is, of course Christmas Day.
Sorry, let me correct myself. Christmas day should be a big event. But it isn’t any more. Not for enough n St. Kitts anyway. The lights, the ambience and the spirit have all but gone, replaced by ribaldry, crudeness and confusion. It’s a burning shame and disgrace upon us all that church services on Christmas Eve proceed under the steady bombardment of sound systems pounding out bacchanal music, in what appears to be battle between God and Satan, with the latter having the upper hand.
For too many of us, Christmas is nothing more than the day before the big event known as J’ouvert.
And, of course, after J’ouvert, there’ll be other big Carnival events, such as the Miss St. Kitts, the Caribbean Talented Teen and Calypso Finals shows, and, of course, the street parades.
Then come ‘January Morning’, besides the bills that we’ll all have to face, there’ll be more big events, all of a very, very serious nature.
Firstly, the Government will tell us how it has restructured its debt, giving details as to who gets the 600 acres of land in the land-for-debt swap that it has agreed to( without the slightest nod of approval from the people of this land), and then as to the new bonds that it will issue to bond holders and other creditors.
Based on current information, creditors can expect the following: (i) to take a 60% reduction in the face value of their bonds and other securities; (ii) to have the dates of maturity pushed far, far into the future (between 25 and 50 years); and (iii) to have their interest rates dropped by two or more percentage points, with interest, of course, to be calculated on their new, 60%-reduced principals.
So, for example, if you presently have $100,000.00 invested in bonds, $60,000.00 will disappear, and $40,000.00 will become your new investment. And instead of getting, say, 7.5% interest on your $100,000.00, you will now get, say, 5% interest on $40,000.00. And your maturity date will be deferred for 20 or more years.
Now this is a burdensome and sensitive matter, and the Minister of Finance, and the Government, will be very concerned with its conduct and consequences.
A big event, indeed.
Secondly, the trial of the Nevis Election matter begins on January 16th. This extremely serious case for democracy, good governance and integrity in public life will grab the attention of the country, the region, and interests beyond the region, and its outcome could prove to be a millstone around the neck, not only of the Nevis Island Administration, but also of the Minister of Elections and the Federal Government.
A big event.
Thirdly, when February rolls around, Treasury bills will mature. What happens with the new bonds and the Nevis election case could have an impact on this event.
If Treasury bill holders are unhappy, they might want to cash out and move on. But they may not be able to do so, because by that point, the added pressure might cause the Government to convert these bills to bonds. I hope not.
However it unravels, these events will themselves cause another possible event, and that would be a further erosion of confidence in the Government.
At that point, or in any case, we might see the Sugar Industry Diversification Fund (SIDF), which the Minister of Finance keeps erroneously referring to as a “private fund”, ploughing tens, or even hundreds, of millions of dollars into Treasury bills, in an effort to shore up short-term financing for the Government.
If that happens, the Minister of Finance will not want the SIDF money to be tied up in bonds, so he will do all that he can to ensure that the Treasury bills portfolio, or at least the SIDF’s investment in it, isn’t converted to bonds. But for this, there’ll be no guaranty of success.
I say this because he will want to have cash that he can inject into projects and other ‘feel-good’ situations as he tries to butter up voters for the next general elections, which he’s already eyeing.
But by the time the maturity date of these bills comes around in February, the body blows might be so intense and unrelenting that the Minister of Finance might well be looking for Jesus, or for the next plane to Dubai which, over the years, has become one of his preferred destinations
Fourthly, if he’s still up to the task after all of the above-mentioned events occur, he’ll want to re-align the constituency boundaries in an effort to secure another election victory, notwithstanding the rising disaffection and suffering in the land.
And finally, as more people begin to learn that some of these projects that are being talked about might be located on lands which friends have bought from the Government and have flipped, or are in the process of flipping, to make a quick and big profit, and as the nation increasingly learns of the insider trading, the tax evasions and the deals that have been made with individuals who are fronting for powerful people, then I’m guessing that there will be even more big events in 2012.