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.
Allen M. Chastanet
Leader of the Opposition