ST. LUCIA yesterday cut the Value Added Tax (VAT) from 15 to 12.5 per cent with Prime Minister Allen Chastanet saying his administration is keeping a key campaign promise to the electorate.
“We have always believed that taxation should be a product of increased economic activity and not an entitlement of government,” Chastanet said, as his United Workers Party (UWP) government introduced the campaign pledge made ahead of the June 6 general election last year.
He added: “My administration will continue to undertake a full restructuring of the tax system with the aim of increasing overall national consumption, reducing the cost of living and easing the burden on households and businesses.”
Chastanet said it was necessary to be able to encourage people to invest here. “We have to be more competitive” and that taxation should not be used to address economic inequality.
He said the private sector also needs relief.
“To continue trying to use taxes to be able to re-distribute wealth or to protect people who are more vulnerable in our society has not worked anywhere in the world. In fact what it does it skews the taxes and makes them less effective.
“We will be making announcements later this year on the continuation of reviewing personal income tax, corporate tax, the VAT itself with the idea of having a rate which is much more effective, a rate we believe will cause the economy to grow and so while the rate may go down it is anticipated with the growth of the economy that the total amount of money we collecting will remain the same or in fact even grow.”
He said pro-growth measures are also important for the revival of the ailing economy.