In addition, the IMF is again suggesting to the government that it should seek to reduce the current levels of exemption that are provided to various stakeholder groups in the corporate community, and even those in the social sector, as well as exemptions granted to individuals.
This recommendation has come from the Executive Board of the financial institution, after it wrapped up its Fifth and Sixth Reviews Under Stand-by Arrangement with St. Kitts and Nevis.
The Executive Board stated that while steps are being taken to improve revenue administration, “action will also be needed to broaden the tax base, in particular to streamline tax exemptions.”
This would not necessarily be welcome news for residents who are constantly complaining about being over-burdened with the current high levels of taxes especially for electricity services and almost all consumable items, via the Value Added Tax, fixed at a 17% rate.
It is the position of the IMF that broadening the tax base is necessary even though while steps are being taken to improve revenue administration.
In a press release issued on Thursday 25th July, 2013, the International Monetary Fund, (IMF), said that it approved the disbursement of US$6.45 Million to the country’s government as part of its funding for an austerity program that was introduced shortly after the 2010 general elections.
The IMF also stated that “The St. Kitts and Nevis authorities have continued the successful implementation of their Fund-supported program, in particular making progress toward achieving fiscal objectives and debt restructuring.”
It added that following a four-year contraction in economic activity, signs of an economic recovery are emerging but it also cautioned that sustained commitment to prudent macroeconomic policies and reforms will be necessary to address remaining risks and vulnerabilities and to support stronger and inclusive growth.
Though the land for debt swap from last year remains a hot political topic and though elections in the country are fast approaching, the IMF is urging the Denzil Douglas led Labour Administration to urgently begin the sale of the 12,000 acres of land that were the center of the deal with the country’s National Bank.
“The restructuring of public debt has continued, notably with establishing the legal framework for incremental debt/land swaps. To help buttress banks’ income, it is necessary to proceed with launching the land asset management company, according to best practices, and with land sales. Continued collaboration with the Eastern Caribbean Central Bank will be needed to monitor and address financial sector developments and implement reforms,” said the IMF.
The high cost of food, medical services and supplies and other social services have also been a bone of contention in the country, but yet, the IMF is once again suggesting to the government that it is time to “streamline” the safety nets that have benefited the people for many years, especially the very poor.
“Accelerating the pace of structural reforms is important to secure lasting gains in fiscal sustainability, neutralize pressures on current outlays, and promote stronger and inclusive growth. Priority should be given to pension and civil service reform and to streamline the social safety net. Implementing programs to upgrade education and training skills of job seekers to enhance their employment prospects will also be important.”
The Board completed its meetings on Wednesday 24th July, 2013 when they completed the fifth and sixth reviews of St. Kitts and Nevis’ economic performance under a program supported by a 36-month Stand-by Arrangement (SBA). The completion of the reviews allows the immediate disbursement of an amount equivalent to SDR 4.266 million (about US$6.45 million), bringing total disbursements under the arrangement to SDR 47.37 million (about US$71.58 million).
The SBA was originally approved on July 27, 2011 for an amount equivalent to SDR 52.51 million (about US$79.35 million), or 590 percent of St. Kitts and Nevis’ IMF quota.