On December 14th the Prime Minister of St Kitts and Nevis Denzil Douglas presented the government budget for 2012, saying that no new taxes will be introduced in the new fiscal year despite numerous requests from the opposition parties to introduce extra tax measures.

The Prime Minister explained that the government will not look at instating new taxes before reducing public spending and removing any inefficient tax exemptions. As an example, Denzil Douglas pointed to the currently available subsidy on liquid petroleum gas (LPG), which will be phased out over the course of 2012, as it currently costs the government XCD 4 million per year. During 2012 the government will assess the viability and appropriateness of each tax exemption and subsidy that is currently offered to taxpayers. According to estimates in the new budget, the government currently spends XCD 110 million per year on tax subsidies.

The government will also look into means of improving the levels of compliance and payment of value added tax, with particular attention paid to operators in the tourism sector, which is currently rampant with tax evasion and unreported incomes.

The new budget outlines a series of significant cuts to government expenditure. Although, the Prime Minister maintained that funding priority will still be given to education, health care, and national security. Denzil Douglas said that the new budget has been carefully balanced to ensure that the scope or quality of government services does not fall.

Photo by J. Stephen Conn

On April 21st the Government of St. Kitts and Nevis released a detailed white paper outlining its full intention to replace a number of existing national taxes with a single unified VAT. The paper, which received Cabinet approval on April 19th, is intended to familiarize national taxpayers with the proposed rules. The white paper also signals the beginning of a 30 day consultation process on the suggested VAT system. Pending submissions for changes to the proposed VAT rules, two more readings of the paper will be held with corresponding consultations, followed by a final publication and passage into law. The St. Kitts and Nevis Government has made clear its intentions to ratify the VAT system in November 2010.

The paper revealed that the VAT system will replace the current Consumption Tax, Hotel and Restaurant Tax, Cable TV Tax, Vehicle and Rental Levy, Insurance Premium Tax, Export Duty, Public Entertainment Tax, Lotteries Tax, Gaming Machine Tax, Traders Tax, Parcel Tax and the Telecommunications Levy. The new VAT system will charge a standard rate across all imports, business-to-business and business-to-consumer transactions, along with Government transactions. Although, the Government has proposed that exemptions be made for certain foods, goods and services for export, fuel, commercial property sales, improvement of land services, selected medicines, along with a number of other imports and services considered imperative by the Government.

It was stated that the Government sees the VAT system as an opportunity to carry out a positive tax reform for improved efficiency and simplicity. The paper carried on to say that the Government actively welcomes the support and suggestions of national tax payers, in order to successfully carry out the reforms.

Photo by J. Stephen Conn