VAT may fall short of mark
Minister of Finance Chris Sinckler may not achieve what he was hoping for in temporarily increasing Value Added Tax (VAT) from 15 per cent to 17.5 per cent.
This is according to accountant Douglas Skeete who spoke to the DAILY NATION yesterday just minutes after Sinckler delivered his first Financial Statement and Budgetary Proposals in the House of Assembly.
Sinckler proposed that VAT be increased from December 1 and last for an 18-month period.
“I further propose to review this at the end of one year with a view to providing relief subject to progress in reducing the fiscal deficit,” he said.
While Skeete noted that he needed more time to examine the proposals, he identified three areas which he said amounted to a “hard blow”.
He said the increase in VAT meant consumers would have less disposable income and this would impact on their spending.
Skeete noted that people would not be able to spend as much and the measure might therefore not lead to the goal of more revenue for Government.
He added that the elimination of tax-free travel and entertainment allowances would hurt people at the lower end of the salary scale – those making $2 500 per month.
Skeete said this was a “harsh imposition”.
He noted that individuals would also be significantly affected by the removal of the income tax allowance for investing in credit unions.
In his presentation Sinckler said credit unions now controlled significant assets and the larger ones were bigger than some banks.
As a result, he said there was no need for an allowance to encourage people to save with credit unions and the allowance would be removed effective income year 2011. (NB)