An Article on Allen Chastanet's Election Gimmick. It looks at the record of the UWP vs. SLP in spending and why VAT had to be introduced after the UWP dithered and delayed. It considers that Saint Lucia was on a ticking debt time bomb.

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DEBUNKING ALLEN’S “FIVE-POINT PLAN”
WAS THE UWP’S 10 POINT PLAN A MARKETING AFTERTHOUGHT?
Chastanet’s Five-to-Stay-Alive remains largely an unsolved mystery.
First, wehavenow come to know, and itshould be noted, that it appears that5-to-
stay-alive was almost an after-thought which was hastily added into the UWP
manifesto. It was as if it almost written hastily as the postscript at the bottom of a
page which originally probably had merely photos (pg. 2), so much so that it could
not even fit properly in the space.
While it speaks to five points, the real punch and mystery lies in point one: the
immediate reduction and eventual elimination of VAT. The matter of the promised

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amnesty of hospital bills, for instance, an initiative taken on by my Governmentin
2012, is found nowhere within the body of the 4-page section on Health.
Five-to-Stay-Aliveis first and foremost an election gimmick that hopes to deceive
the Saint Lucian population. Five-to-Thriveis of that same vein. In fact, ALL 5 points
in the 5-to-Thrivedo not even exist in the UWP Manifesto, therefore suggesting it
was an afterthought aimed at seduction of the young people towards the UWP.
PROMISED REDUCTION & ELIMINATION OF VAT
Out of the 72 page manifesto, the mention of the reduction and elimination
removal of VAT receives 1 line:
“Reduce the Value-Added-Tax (VAT) and outline a plan for its ultimate
elimination; and replace it with a restructured tax regime that will be less
burdensome but without compromising the revenue base.”
Now, what does this really mean?
The UWP would like you to believe that removing VAT is the solution to all of Saint
Lucia’s problems and in particular the cost of living. Yet still, Allen Chastanet has
admitted that: “VAT is the most effective tax worldwide. Period.”
That is truly a gimmick and nothing more. VAT raised about $346 million, out of
Government’s 985 million in tax revenue last financial year (2015/16). In fact, VAT
represents 35% of all of Government’s tax revenue.
If we might speak hypothetically for a moment, if your boss took off 35% of your
salary tomorrow, would you be able to survive? Five-to-Stay-Alive contains three
tax measures that will cost the Government in excess of $365 million is lost
revenue. But clearly, the UWP manifesto says thatthere will be NO compromiseof
the revenue base.
The way that Allen Chastanet expressed it on his election platform and at public
meetings, however, he drops off the important point: “without compromising the
tax revenue” disclaimer.
If implemented without any replacement tax, what it will do is send SAINTLUCIA
BANKRUPT in less than 5 years.

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Our debt-to-GDP ratio which currently stands at 75% would jump to at least 125%
of GDP in under 5 years.
That’s way beyond whatis manageable. We will not be able to serviceour debts as
we would have to borrow moreto keep afloat; that is assuming you would still be
able to borrow. The Government would eventually start defaulting on debt
payments and would have a hard time paying anything else (salaries, purchase of
goods and services, etc).
The Government would eventually have to retrench workers.
The ECCB, of which the Saint Lucia is the largestmember, will be forced to devalue
the EC Dollar, probably by at least 10-15%. You would then need EC$3.10 to get
US$1.00.
The $150 more in your pocket that the UWP claims you would get for every
$1000.00wouldbecomemeaningless by 2020becauseof increased taxation which
will be imposed by the IMF and the fact that your dollar is worth less than before.
This is the sad reality of what WILL HAPPEN IF you remove VAT.
VAT is not bringing in that much more new revenue as the UWP may want you to
believe. VATis a replacement tax which taxes consumption. Remember that in the
pastthere weretaxes on goodsand services:consumptiontax, environmentallevy,
telephone tax, hotel accommodation tax, cellular phone tax. In fact, sometimes
consumption tax was well over 30% on some goods. Those taxes before raised
about $200 million in pre-VAT 2011.
A summary of this is shown on the next page:

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Table 1 Revenue Collections for VAT & Taxes which it replaced
Revenue 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Cellular Tax 7.63 9.05 11.95 12.81 12.56 17.74 18.63 10.47 0.01 0.00 0.00
Consumption
Tax (Domestic)
8.32 8.05 9.85 6.38 6.35 5.67 6.11 4.22 0.11 0.01 0.02
Consumption
Tax (Imports)
104.67 111.54 112.24 136.28 140.17 113.70 111.93 48.30 0.64 0.10 0.27
Hotel
Accommodation
Tax
28.69 29.53 33.45 35.02 25.50 34.25 39.62 22.40 1.94 2.58 0.67
Environmental
Levy
17.45 21.56 18.03 15.97 14.35 16.18 16.19 8.17 0.17 0.01 0.00
Pre-VAT Taxes
TOTAL
166.76 179.73 185.52 206.46 198.93 187.54 192.48 93.56 2.87 2.70 0.96
VAT (Goods &
Services)
63.12 157.40 183.25 183.87
VAT (Int'l Trade
& Transactions)
75.30 141.49 151.14 162.50
Total VAT 138.42 298.89 334.39 346.37
Today, since the implementation of VAT, the difference between these taxes (at
the 2011/12 level) and VAT (2015/16) is about $153 million in revenue. Nearly all
of that has gone into paying for the 14.5% salary increase that King gave in 2007
and the increased debts and interest payments left by the last Government.
RUNAWAY EXPENDITURE UNDER THE UWP
You see, the hard reality was that the UWP Government of which Allen Chastanet
sat in as minister for Tourism, was spending more than the country could
reasonably afford.

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Table 2 Comparison of Government Spending Between 2 Regimes
UWP Administration (07-11) SLP Administration (12-15)
ITEM 2006/7 2011/12 2015/16 Diff % Change Avg
Annual
%
Change
Diff % Change Avg
Annual %
Change
Total Current
Revenue
655.98 835.96 984.79 179.98 27% 5.5% 148.83 18% 4.5%
Of which:
Tax Revenue
(Income)
620.31 764.59 933.73 144.28 23% 4.7% 169.14 22% 5.5%
Non-Tax Income
(Fines, Fees, Etc)
Total Current
Expenditure
554.91 776.63 910.95 221.72 40% 8.0% 134.32 17% 4.3%
Of which:
Wages & Salaries 255.65 349.52 381.68 93.87 37% 7.3% 32.16 9% 2.3%
Interest
Payments
78.72 105.82 162.29 27.1 34% 6.9% 56.47 53% 13.3%
Goods & Services 102.7 145.99 169.7 43.29 42% 8.4% 23.71 16% 4.1%
Current Transfers 117.84 175.3 197.29 57.46 49% 9.8% 21.99 13% 3.1%
Current Revenue
less Current
Expenditure
101.07 59.33 73.84 -41.74 -41% -8.3% 14.51 24% 6.1%
Total
Expenditure
(Spending)
845.9 1142.77 1177.02 296.87 35% 7.0% 34.25 3% 0.7%
To summarise, under the 5 years of the UWP Administration, the following
happened: overall spending went up by 35%, or on average by 7% per year.
Critically, current expenditure went up even faster by 40%, or by 8% per year on
average.
The main pressures were seen across all spending areas:
1. Wages & salaries up by 37%, a whopping $93.87 million;
2. Current Transfers up by 49%, or by $57.46 million;

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3. Interest Payments up by 34%; and
4. Goods & Services up by 42%.
The UWP left Governmentwith an economic time bomb ticking away. By 2012/13,
the Governmentwasnoteven making enough money to meet currentexpenditure.
In 2012/13, the year VAT became effective, Government ran a negative current
balance of over -$52 million. Labour had no choice but to correct these matters.
Otherwise, we would have faced the fate which I described, the dreaded IMF. In
contrast to the 40% increase in spending under the UWP, current spending under
Labour increased by 17%. In fact, total spending per annum only increased by 7%
under Labour’s tenure, compared to the 35% increase under the UWP’s term.
Revenue increased by 18%, and was just enough to eliminate the negative current
balance. Today, we are back to enjoying a positive current balance.
REMOVAL OF EXEMPTIONS
Today, however, we now understand that Allen Chastanet’s true intent is to
introduce changes that in fact not to the benefit of the ordinary Saint Lucian.
Allen himself, at a Town Hall Meeting in Gros Islet, admits that VAT is the best and
most effective tax system in the world. But, you see, his true intent lies in his very
own words again. He said the following at the UWP Economic forum this week:
“When VAT has zero exemptions, it also meansthat it allows you to reduce on the
tax rate….Themoreexemptionsthatyou putinto VAT, whatit then causesis for the
VATrate to go up and the administration of the VATbzecomeseven more difficult.”
Herein lies Allen’s trueintentions. Hemay promisea reduction of VAT,buthesubtly
implies his true butunstated intention to reducethe number of goodsthat are VAT
exempt. Currently, the number of items upon which people do not pay VAT is over
70.
THE TRINIDAD EXPERIENCE
We need only take the recent example of Trinidad & Tobago where the PNM
Government came in promising to reduce VAT from 15% to 12.5%.

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They did so while drastically reducing on the number of items that were exempted
or zero-rated. What does this mean in a Saint Lucian context. Most of the zero-
rated and exempted items are groceries, electricity, water and pharmaceuticals.
Allen’s suggestion of broad difficulty with administration of the VAT is misleading.
The supermarketmonopoly is the company that would havethe most value added
items. Removing theseitems fromthe zero-ratedlist would mean theprice of basic
food items increasing even more. This movedoes not benefit the poor. In fact, it is
anti-poor as persons with low incomes areknown to spend proportionally moreon
food.
Furthermore,Governmenttook a decision earlier on notto introduceVATon water
and electricity. This amount to foregone revenue in the region of $40 million.
Would Allen Chastanet remove these exemptions as well in the name of his
reduction? Any 1% reduction in the VAT rate would result in the loss of
approximately $23 million. Would Allen reduce VAT by 2.5% or about $60 million
and simply offset this by reducing exemptions? He needs to come clean with his
true intentions and stop deceiving the people of Saint Lucia, particularly the youth.
TRUE INTENTIONS
Saint Lucia, be smart! Don’t let gimmicks and sweet sounding promises fool you.
Demand plans that are well though out. That are calculated. The truth is, Allen
Chastanet will never remove VAT. He probably will never reduce VAT either. If
anything, he may well remove the many exemptions to VAT that he’s already
complained about in smaller private meetings and his economic forum.
VAT is a tax that nearly every country around the world has. The UWP always
intended onimplementing VAT, they justneverhad the courageto do so,butwould
have been forced to at some point. They had already promised the IMF this.
VATwas always meantto beset at 15%. They also planned on having VAT on water
and electricity. VATon thoseutilities wouldresultin another $40million in revenue
but the Kenny Anthony Government decided to protect the consumer from this.
STAY ALIVE. STAY AWAY FROM DELIBERATELY MURKY PLANS.
STAY CLEAR FROM SOMETHING THAT JUST DOESN’T ADD UP.