ST. VINCENT (Jan. 17):- Prime Minister Dr. Ralph Gonsalves says Value-Added Tax (VAT) in St. Vincent and the Grenadines will remain at 15 per cent although the economy declined over the last two years and St. Kitts/Nevis and Barbados have both increased VAT to 17.5 per cent.
He made the announcement at a press conference on Monday, Jan. 17, as he spoke of the context in which his government is formulating the 2011 Estimates and Budget.
Gonsalves, who is also Minister of Finance, said that parliamentarians will receive the estimates Monday evening, three days before they are tabled in Parliament and ahead of the Budget debate next week.
Opposition leader Arnhim Eustace said Monday morning that the debates should be postponed to allow legislators to peruse the documents and prepare.
Gonsalves, whose Unity Labour Party won a third straight term in office last month, said the budget was being crafted within the context of the challenging economic situation internationally, regionally, and locally.
He spoke of the challenge of a resolution to the British American Insurance Company debacle, and rebuilding the country after the passage of Hurricane Tomas last Oct.
“All these provide a challenging context. But in the same manner in which we dealt with a difficult circumstance last year, we will do so again this year and I am quite confident that our successful navigation of the stormy economic waters last year, that will again happen this year. But, to mix our metaphors, we are not yet really out of the woods” Gonsalves said.
He further noted the economic situation among Europe’s PIGS — Portugal, Ireland, Greece and Spain — and mentioned the “political convulsions” that the world economic situation caused in Greece and Ireland.
Gonsalves said the Eurozone is under pressure and the recovery in the United States is “uneven and haltering despite the best efforts of Obama and his stimulus package”.
“And that’s a useful sign that we will see a slowing down of the unemployment rate as the economy picks up a little,” Gonsalves said.
He further noted that in the United Kingdom a further £1.5 billion has been allocated for unemployment benefits, given the cuts of the coalition government in London.
While this is happening, Gonsalves said, there is real expansive growth in Brazil, India, China, and Russia.
The Prime Minister however noted that while the price of oil has increased, these countries do not send tourists or remittances to St. Vincent; neither does St. Vincent export its goods to these nations.
“Before we have the effect of any recovery ourselves, because there is a time lag, we are seeing some challenges arising from increasing world demand for certain commodities, which would affect us,” Gonsalves said.
He said that last year’s budget had a deficit of $20 million on current account but his government did not run a deficit in the implementation of the budget but rather made saving.
In addition to responding to Hurricane Tomas, Gonsalves said, his government will this year have to spend more on social welfare benefits, such as the increase in public assistance payments, which began this month.
Gonsalves said the increase in public assistance payment to 5,800 Vincentians will cost the state an additional $4 million every year.