Now that the authorities have had a full year of implementation, they have been better able to access whether the estimated revenue collection has met set targets to generate much needed funds to help manage the country’s regular expenses, while also servicing the public debt.
However, as recently revealed by the country’s Finance Minister and Prime Minister, Dr. Denzil Douglas, the new tax initiative has indeed exceeded expectations.
According to Douglas some 133 Million dollars were collected in 2011 in St. Kitts and Nevis. From this amount, EC$104 came from businesses in St. Kitts and EC$29 million from Nevis.
The Finance Minister however indicated that only 24 million dollars in VAT payments were anticipated from Nevis, thus an additional 5 million was collected. In the case of St. Kitts, while 79 million was projected, they surpassed that target by 25 million dollars.
Though some have called for a lower VAT tax system, in order to encourage greater sales figures, government seemed rather pleased that it had met and exceeded its estimates for the past year, with a VAT rate of 17%.
However, the argument that a lower rate might indeed deliver better returns also appears to have been strengthened by the results of the Special VAT Day in December, 2011, when government reduced the rate, from 17% to only 7%. This was designed as a pre-Christmas stimulus to urge greater consumer spending but at the same time reducing the prices on most items.
“Some 12.8 million dollars in sales took place at 7% VAT that particular day, saving consumers approximately 1 million dollars.
As to the future of the VAT programme, the Finance Minister said that the Government will continue to examine the logistics of the programme through consultations with traders and consumers.
He underscored however, that the VAT revenue was critically important to “keep the engine and machinery of government turning over” and will be used to ensure the continuity of services provided by the government like paying teachers, keeping hospitals open, feeding children hot meals, providing school books and uniforms and paying student examination fees.
Businesses also came in for high praise from the Inland Revenue Department for their cooperation in the initiative.