Thousands of Vincentian households consuming VINLEC’s electricity stand to benefit from the new government’s VAT restructuring which could see the removal of the tax on domestic consumption, along with other proposed measures aimed at easing the financial burden on the most vulnerable.
Delivering the 2026 Budget Address to Parliament Prime Minister Godwin Friday said the Ministry of Finance, the Inland Revenue Department and key stakeholders, were actively undertaking a comprehensive assessment of options to reduce the VAT burden on households, with particular focus on essential goods and domestic electricity.
He said this assessment is “to ensure that any reform delivers real relief to consumers while remaining fiscally responsible and sustainable”.
Currently, the vast majority of domestic consumers do not reach the monthly 250 kwh and are therefore not required to pay VAT.
If they consume more than 250 kwh, then they will be required to pay 16% VAT on their bill.
The Ralph Gonsalves administration introduced VAT at 15% in May 2007 but increased it by a percentage point 10 years later.
The one percentage point was added as a contribution to the Contingency Fund to aid with recovery after a natural disaster or similar eventualities.
Friday said his government “is acutely conscious of the pressure that the cost-of-living places on households” across this country.
High prices for food, electricity, and essential goods erode wages, strain family budgets, and undermine social stability.
Addressing these pressures, the prime minister said, is therefore not optional; it is a core responsibility of governance.
During the campaign for the November 2025 general election, the NDP promised to cut the VAT rate from 16% to 13% to lower prices across the economy and increase disposable income.
The party also said the removal of VAT from essential items, including fresh food and medicines, will protect the most vulnerable from the rising cost of basic necessities.
“In parallel, we are reviewing the design and timing of VAT‑free shopping initiatives, particularly around back‑to‑school and the Christmas period, to provide targeted, time‑bound relief to families at moments of peak financial pressure,” the prime minister said in his Budget Address on Monday.
Friday said tax relief must be well‑targeted, administratively feasible, and consistent with our wider fiscal consolidation objectives, including the reduction of public debt and the achievement of a sustainable Primary Balance.
“For that reason, we will not act on impulse; we will act on evidence,” the prime minister said.
He said his government intends to return to the public and Parliament with the findings of this assessment, prior to an implementation target date in October 2026.
“At that point, Vincentians will be able to see — not promises — but practical, costed measures designed to put more money back into household budgets while safeguarding fiscal stability,” Friday said.
“This is how responsible governments lower the cost of living: not through rhetoric, not through recklessness, but through careful reform that delivers lasting relief,” he further stated.