An informative and highly interactive engagement, organized by the St. Lucia Chamber of Commerce, Industry and Agriculture between the Ministry of Finance and the members of the Chamber took place on June 6, 2023, on the 5th Floor of the Financial Center Point Seraphine. The objective of the engagement was to discuss key elements of the recently announced Budget Measures (Prime Minister’s Budget Statement 2023), including the Health and Security Tax, the Tobacco Levy, VAT Relief on selected construction material and incentivization of installation of Photo Voltic systems.
Ledby the Permanent Secretary in the Ministry of Finance, Economic Development and Youth Economy, Francis Fontenelle, along with the Head of Research and Policy, Jemma Lafaille, the Ministry presented and overview of the country’s economic performance and forecasts, that laid the basis for the 2023/2024 Estimates of Revenue and Expenditure and the accompanying Budget Statement by the Honorable Philip J Pierre, where key policy pronouncements were enunciated.
Some of the key points articulated included, the Budget Deficits, the recent and projected growth rates (GDP) (12% in 2021, 22% in 2022, 5.3% for 2023 and 6.3%for 2024). Debt to GDP Ratio moving from 95% in 2020, down to almost 68% in2022 and forecasted to approach the target of 60% set by the ECCB.
The 2.5% Health and Security Levy, expected to recoup some EC$35million, will be placed upon the CIF value of imports at the domestic level on most items that already attract VAT, with the others being exempt i.e., food stuff, pharmaceutical items, selected construction material and all services. Firms who fall below the VAT registration threshold will not be expected to pay the Levy. The Levy will be collected at the port by the Customs & Excise Department, while domestic trade will make that payment to the Inland Revenue Department, when making their monthly VAT filings. The increased TobaccoTax will be paid at the usual source, while the Ministry of Commerce will be charged to monitor the application of the construction material waiver.
The Business Community remained fully engrossed and attentive throughout, asking many questions, offering suggestions and making some inciteful contributions on the approach that could be pursued in application of the measures.
The Chamber highlighted concerns over the added administrative and financial burden this measure would introduce, the direct impact on firm's bottom line, the dampening effect on consumption, the inflationary impact in an already high inflation environment, as well as the impact on the IT Sector as an enabling support sector. The Chamber also strongly called for Government to conduct public education and public relations endeavors to inform and prepare the public for the consequent prices increases some of the measures would cause. Chamber Executive Director Brian Louisy, specifically spoke to the public backlash that businesses are likely to face with price escalation whichthey had no control over and being unfairly accused of price gauging.
Another point of caution raised by Louisy was that appropriate monitoring and measuring methods need to be utilized to determine pass through of reduced taxes, as the inflationary environment may cause a situation where the prices of goods increase due to cost of goods rising even when taxes are reduced or removed.
Individual members were able to raise concerns and ask pointed questions, which the Ministry of Finance was able to adequately respond to, and where unable, agreed to follow up with responses in due course.
The meeting highlighted the need for more dialogue and engagement between the public and private sectors, with P.S. Fontenelle confirming the Prime Ministers’ intention to join the next forum, and the Ministry’s agreement to meet with the Chamber on economic matters, on a regular basis moving forward.
The Chamber urged the Ministry of Finance and Economic Development, to utilize a broader based development approach, that would allow national objectives to dictate other micro and fiscal policy, rather than the piece meal response to sector opportunities and challenges. The Chamber also reiterated its commitment to work with the Public Sector, be frank and open with sharing its concerns ,and being prepared to grasp opportunities for joint action.
The meeting concluded with the Ministry promising to share their presentation, providing ample notice of the start date for the implementation of new measures, and to continue to dialogue with the Chamber and the wider, on the way forward with the implementation of the Budget Measures.