A top Ministry of Finance official has slammed the 15-minute video that purports to show Value-Added Tax’s (VAT) disastrous impact on the St Kitts & Nevis economy, arguing that its introduction instead helped return that economy to growth.
John Rolle, the Ministry of Finance’s financial secretary, slammed Bahamian opponents of VAT for circulating what he implied was a misleading video, suggesting the tax’s arrival had played a major role in St Kitts’ rebound.
“The economic issues facing St Kitts were there before the implementation of VAT,” Mr Rolle said. “As a matter of fact, that country’s economy is now recovering because of the establishment of this new tax regime.”
Mr Rolle said the International Monetary Fund (IMF), after it concluded a visit to St Kitts on January 31, said the country’s fiscal position has substantially improved from a deficit of 7.8 per cent of GDP in 2010 to a projected surplus of 8.6 per cent in 2013.
The IMF credited the stronger fiscal performance to policy efforts to contain spending and strengthen revenues, which included the introduction of VAT.
“So as you can see, the IMF believes that the implementation of VAT in St Kitts and Nevis was part of the solution to its economic woes, not the reason for it,” Mr Rolle said.
“St Kitts suffered drastically from the external shock of the global economic crisis, as well bad economic policy and mismanagement. None of this was caused by VAT.”
Praising St Kitts, the IMF assessment did not explicitly link VAT to the economic rebound, although the new tax was credited with the fiscal turnaround.
“After a four-year contraction of economic activity there were firm signs of a recovery in 2013. Real Gross Domestic Product (GDP) is estimated to have grown by 1.7 per cent, with a pickup in tourism and construction, notwithstanding declines in the manufacturing and communications sectors,” the IMF said.
“Employment also picked up, with number of total employees up by 10.2 per cent and wages up by 5.1 per cent in the first half of 2013. Inflation has remained low at 0.6 per cent through end-October (year-over-year).”
Looking forward, the IMF said of St Kitts: “Growth in 2014 is expected to accelerate to 2.5-3 per cent, with the continued recovery in tourism supported by an increase in airlift capacity, and ongoing construction activity.”
A potential medium-term growth rate of about 3-3.5 per cent is projected for St Kitts.
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