Letters & Opinion

A Rationale For Pragmatic Taxation and Incentives

By: Ulric W. Price

TAXATION, by nature, has its ups and downs. But like any prescription in life, it depends how pragmatically taxes are implemented.

The discussion on taxes has been at the forefront of several countries and financial institutions like the IMF and others, but one common denominator that has always taken precedence over the advice of international agencies is the fact that sitting administrations always calculate the end results from a favourable position.

The great USA, with all its advantages versus third world nations, decided to address its tax structure in an unprecedented manner to create employment, but has also addressed the rate of import duties to stave off unfair competition. On the other hand, we in this part of the world are instructed by more influential nations on how to structure our incentives to attract foreign investment.

Reverting to the first part of our article, we witnessed — for the first time in our history in 2012 — a 15% Value Added Tax which hit the business community (and by extension the ordinary man) with the greatest shockwaves ever, resulting in two serious aftershocks: (a) The dramatic effect on the cashflow of business houses and (b) the dramatic indirect increase in the cost of doing business.

We shall not endeavour to discuss the matter any further, other than reflect on how government addressed this sudden rush of revenue of $80 million annually — or $320 million in their four-year term of office.

Living in a democratic society, the nation made its decision at the polls in 2016 and the die was cast. The present administration has now concluded that the approach of the former administration was flawed and has made changes to stimulate the economy and reduce unemployment.

Change is not easily embraced, but change is necessary at the appropriate time.

Within our small states, the implementation of taxation strategies is important, as taxes are usually structured to achieve maximum results. Consequently, opposition parties have both the moral and economic responsibility to appreciate the fact that if they continue to oppose for opposing sake, the nation will never benefit from change.

In a recent television debate regarding the privatization of our health care system, a point was made by one of the contributors suggesting that the 2.5% VAT reduction should have been placed towards a health sector insurance fund, instead of an outright reduction. Our rebuttal is simple: the former administration collected that 2.5% for 4 years and our health sector actually deteriorated.

Such results only emphasize the manner in which taxes are implemented and disbursed.

Efficiency in managing our various ministries is paramount and the time has come when both government and opposition understand that the mistakes of the past cannot and must not be duplicated.

Today, nearly every project proposed and commenced by the current administration has been criticized and obstructed. This approach has a negative impact on investors who can invest elsewhere — and therein lies the base of this senseless approach.

The Sandals project, for instance, which will bring-in foreign exchange, construction employment, massive sales of raw materials and other local purchases together with 900 permanent jobs on completion, has endured all sorts of behind-the-scenes and malevolent maneuvers to frustrate the investor. Yet we question why the Ease of Doing Business in St. Lucia declines.

Attracting foreign investment, in itself, is a challenge. Therefore, ensuring investors are treated in a respectful and conciliatory manner requires the discipline and cooperation of all stakeholders — and the sooner we grasp these simple rules of life, the sooner the road to success becomes less arduous.

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