IMF to criticize the new tax charge in St.Lucia

The International Monetary Fund said that the new tax, which was introduced at the airport of St. Lucia, could damage tourism revenues and reduce the expected economic growth. The IMF believes that a sharp increase in airport charges can have "negative consequences for tourism, which can suppress any positive effect on growth from other measures."

The IMF said that reforms in Saint Lucia should be based on expanding the tax base, reducing numerous tax breaks and increasing tax discipline. The ministry noted that the country should also consider reducing high import taxes and duties to increase its competitiveness.

 "The planned tax increase should be revised if its negative effects on growth materialize," the IMF said in its report.

Despite the fact that the government of Saint Lucia agrees with the need to expand the tax base, the leaders of the island are too slowly making a reduction in the VAT rate, which complicates business processes and simplifying the payment of basic taxes. Despite the fact that since February 1, 2017, it (the VAT rate) is equal to 12.5%, the presence of the airport tax does not solve the issue of replenishing the country's budget.

The IMF believes that Saint Lucia is relatively high tax rates, and its tax burden is equal to a quarter of gross domestic product. Therefore, the introduction of a more flexible tax system (with the availability of compensation) and a reduction in the airport tax will solve the problems with the load on the country's treasury.

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