Opposition leader Allen Chastanet has written to Prime Minister Philip J. Pierre urging him to suspend introducing a new 2.5% Tax, warning that the measure would be hazardous for the country.
“Frighteningly, we are days away from the implementation of this 2.5% levy, yet you have been unwilling or unable to advise the public as to how this will work,” Chastanet’s June 28, 2023 letter observed.
The former Prime Minister declared that the ‘unconscionable levy’ would inevitably increase the cost of doing business and the cost of living and negatively impact already reduced household income.
Chastanet’s letter to the Prime Minister appears below:
Dear Prime Minister,
Letter to Prime Minister Philip J Pierre calling for the Suspension of the Introduction of the new 2.5% Tax .
As the Leader of the Opposition and as the former Minister of Finance I feel it incumbent upon me to warn you of the hazards which our country will face as a direct result of the proposed 2.5% levy that you and your Government are intending to implement this week.
Whilst there are many macroeconomic indicators that show we have made significant strides since the devastation wreaked upon our economy by Covid-19, our current tax revenue has exceeded pre-Covid levels, our GDP is only slightly below the high of 2018, and our debt to GDP, as expected, has levelled off at 69%.
Specifically, tourism and manufacturing have made significant recoveries aided by the quick opening of our tourism sector during Covid and along with fast-tracking construction and the growth in BPOs (call centres), all collectively have contributed to Saint Lucia achieving the fastest and strongest recovery in the Caribbean and one of the best performances in the world.
Whilst you seem to continue to misunderstand the critical role of construction and the need to expand the physical and human capacity to forge stronger growth, it is clear to me and development agencies like the World Bank and the IMF that economic growth and prudent fiscal management are the best strategies to increase government revenue.
Without this, Government cannot continue to invest in improving health care, education, security, housing and strengthening household income. History has shown with an export-led economy like ours, poorly targeted and ill-timed taxes such as this levy, will negatively impact the competitiveness of our exports (tourism and manufacturing) and will inevitably result in a contraction of our economy.
One would have thought you might have observed this from when the Labour Party implemented the 15% VAT in 2012 resulting in many businesses struggling, staff layoffs and many having to close down entirely.
At the micro level, it is clear that our economy still has not recovered from the Covid shock and that businesses and households are grappling with the after effects. Despite the loan moratoriums and other Government interventions, everyone’s balance sheets were severely impacted during 2020/21 and now, with the added burden of supply chain constraints, inflation, increase in energy costs and higher interest rates the challenges have been compounded.
Prime Minister, it is unfathomable to me, that someone with an accounting background cannot grasp the implications of this situation and its negative effect on a company’s balance sheet and on household savings. It is only through the commitment to growth and the return of some normalcy that St. Lucian companies and businesses might be encouraged to hold off from staff layoffs and I dare say, even consider expansion.
Frighteningly we are days away from the implementation of this 2.5% levy yet you have been unwilling or unable to advise the public as to how this will work. It is inevitable however, that it will cause an increase in the cost of living and the cost of doing business which will negatively impact already reduced household income and the country’s global competitiveness.
There is no question that this unconscionable levy will exacerbate the plights of our more vulnerable households and small businesses which are already struggling to make ends meet. As Winston
Churchill famously said “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”.
Prime Minister, I urge you to reconsider this ill-conceived decision and instead embark on a winning strategy of growth and prudent fiscal management. We must invest in our infrastructure and support exports by decreasing input costs. Increasing taxes at this time may increase Government revenue initially, but it is not sustainable, and it will more than likely cause irreparable harm to our economy, our industries and ultimately, to all households.
The Opposition strongly objects to the typical Labour Party strategy of taxing the St. Lucian public instead of coming up with innovative and workable solutions to earn revenue. The United Workers Party stands ready to offer assistance and share its recent experience in crafting policies to grow the economy, to strengthen our social services and to build resilience. Anything less means that we would be failing our citizens.
Yours sincerely,
Allen M. Chastanet
Leader of the Opposition
I SECOND THR MOTION….GOOD JOB CHAS ..THIS WILL ONLY ADD MORE STRESS ON THE POOR PEOPLE…
Heaviest taxed in the OECS. Where is the money going? Look at the state of the roads causing more damage to our vehicles. Look at the state of the hospitals. Look at the state of the schools. Yet more taxes. Where is this money going? Can’t wait to see the back of this moron Pierre.
what i tell you didnt i say once these guys in power just be on the lookout for more taxes and harder things? well look a new tax.
Chas! Hold your $#$# from there! When you were there, all you were saying was “let the donkeys bray”. Move from there man! You, after your scheme (removal of 2% VAT) failed, what did you do? You placed a tax on fuel! You forget that! Chas, ay shiay tann!
@Crow most of these clowns who are complaining not feeling the pinch of Chastanet MISMANAGEMENT we are now paying for it…….we the people demand USD$ 7miliion you took for Covid vaccine and NEVER gave it back that could have gone along way. I rather we pay a little more than to borrow borrow brorrow beggy beggy….that’s so UWP always panhandling from people and stick us with the bill. Chu !
@Ma Malay … this 2.5% tax increase will BRING BACK THE 15% tax which was first levied on ST LUCIA – when we were all crying!! Do the math, it is not hard. Check your grocery bill on what is taxed at 12.5% and what is not. Also check ALL your bills on what you are being taxed. You will cry more!!
To go back to 15% will not be good for the country, Unfortunately, the Labour Party are becoming infamous for imposing taxes when it is not convenient to do so. If you were “minding your business” you would see and know about salary, house, land, commodity, utility taxes which SLP insists on hiking up whenever they “govern”, and they have no regard for who is who in the tax brackets. I know, because I’ve been caught up in their over taxing of St Lucians …. over and over!
I am NOT looking forward to this 2.5% tax levy – uh-uh!
@ Experimental Lab Rat…..if the VAT return to where The Most Honorable KDA had placed it ( instead of selling our souls to The iMF Loan Sharks) we would have endured even more stress due to Your White God mismanagement…….case and point July first USD$ 5 million INTEREST ONLY is due to the Bank of Taiwan on that USD$ 100 million (EC 3.5 Billion) your White God borrowed on our heads DID YOU KNOW THAT…DO YOU EVEN CARE ?? That’s a killer for a small economy as ours, that’s not even what’s due to the Caribbean Development Bank and the IMF. If our GNP is ECD$ 3 Billion Annually (roughly) and out debt is ECD$_ 7.5 Billion currently how are we surviving ?? We are just slaves to our debtors at this point thank God we missed the storm last week. It’s either we furlough our foreign minds and lifestyle and tighten our belts or go to court like Grenada in the future and hand over our departure taxes and landing fees that’s when St Lucians would really bawl. I trust a trained economist insight over a shady business man mismanagement any day in every way.
Tax is the name of the game everywhere ! Without it government can’t function. Besides, everything is not free. Make a contribution and stop complaining. Chastnet will do and say anything to score political points. That’s his only ambition. We are not for sale to the highest bidder . The Pearl of the Caribbean my foot. Don’t be deceived! Bim agreed to pay 3.4 million US dollars per one hundred thousand doses of vaccines upon receipt but the complainant here in SLU paid 7.3 million upfront for the same hundred thousand doses from the same source which was never delivered. Blatant corruption!
Chastanet is once again showing his limited understanding of economics and finance. He has not said anything factual or convincing in his exposition. His claim that the economy will contract after a 2.5% increase is a myth and he doesn’t have any empirical data to support his position. His willingness and ability to talk glibly on the issues show his profound ignorance and lack of basic understanding of economics, government, and finance.
Chastanet has cited history without showing or referencing any example—the usual demagogic method of authoritarians. When Sir John Compton imposed a levy on banana farmers in the 1970s there was an outcry but the farmers later had agricultural roads constructed to their farms, boosting production. St. Lucia during this period didn’t experience a contraction in the economy. So, I can safely conclude that history has shown us that the imposition of a levy will not result in a contraction of the economy of St. Lucia.
Chastanet, most of the inflation surge that began in 2021 was the result of prices given wages, including sharp increases in commodity prices and sectoral shortages in a number of markets. In addition, there was a too strong aggregate demand largely due in turn to commodity shortages. Tell the people the truth, Chastanet!
Just talk with no justification.
You are supposedly a Tourism yet you have not brought one new hotel on island, not one.
But I suspect that’s intentional.
Some of you don’t even read the article before you let out your venom on the messenger. The comments there are so xenophobic and anti Chas that I had to read the article a second time before I comment. Chas is simply asking to suspend, that is delay or defer the tax and he based that on the government’s pronouncements that the economy is in excellent shape, doing among the best in the world not the region, at present. This tax will indeed place an additional burden on the citizenry as would any tax implemented by any leader, Compton, Anthony, Lewis, Chas. He understands economics perfectly, hence the points he made. St Lucians need to read and listen to understand and stop being racist and backwards like Highgrade, a hundred million US dollars is three point five billion EC dollars. What a moron! Then the EC dollar has the lowest value in the world.
@lab but what are you saying ? because what i said was just the same thing you said but just made simpler, once these guys in power there will be implementation of new taxes and things will be harder on us. I never said I was in agreement with the new tax uh
@Rest Your Case so what is your assessment in dollar and cents maestro do tell ?? Your case and point that refuse to acknowledge is the taxes increase is emminent ……even your God has done the math on his fiscal mismanagement and see the need but asking for a delay of implementation…..I will NEVER understand you modern day Massa Lover, even when you have seen the wicked of your master ways you are still in love with him.
Finally you jack Highgrade can understand that Chas has no issues with the tax but would prefer that it not be implemented now considering the healthy state of the economy. We are among the best performing countries in the world according to the PM.
For the records MORON I do not have a Master or white God. If you wish to continue to be KDA and PJP SEPTIC TANK then do so. If they are your Masters and God continue to bow before and worship them. Please don’t put me in your category.
Lastly regardless of inflation, loan payment, fiscal management, your Math just not Mathing at all. One hundred million USD is not equivalent to 3.5 billion ECD. Use the exchange rate of 2.67 or 2.7169 and the end result will never be what you quoted.
Man go and brush your teeth