How will the NDP make up the $60 million shortfall from reducing VAT?

Value Added Tax (VAT) makes up roughly one third of the Government’s yearly overall tax revenue, Prime Minister Dr Ralph Gonsalves says, questioning where the New Democratic Party (NDP) will find the millions of dollars to run the Government after reducing it, as they have promised.

“If you take out 60 something million dollars from the VAT a year, at Customs, and at Inland Revenue – it means that the NDP will have to put on a foot tax, a hand tax, a mouth tax, an eye tax, an ear tax,” the Prime Minister stated, while speaking on NBC radio’s Morning Cup program on Wednesday, October 7.

“…Because if you take it off there, you got to put it somewhere else,” he continued.

“I don’t know which of the taxes, that’s why I call it a foot tax, a hand tax, a mouth tax, an eye tax and an ear tax…coming out of your nose and your eye and your mouth and your toe and your hand dem,” Gonsalves said.

The NDP has indicated that they will reduce VAT, should they form Government, and the Prime Minister noted that in some cases they have said they will reduce it to 10 per cent, down from 16 per cent.

“The first question you have to ask yourself, how much money do we collect from VAT? Because, if you drop the VAT by one third, as the Opposition is saying, where you going to make up the revenue from?” he questioned.

The tax revenue this year is estimated to be $585.6 million, he informed, rounding this figure off to $600 million for ease of calculations.

There are two sources from which VAT is collected. From the Customs and Excise Department, it is projected that $98.5 million will be collected for VAT this year, while from the taxes on goods and services, it is estimated that $93 million will be collected.

The Prime Minister rounded off these figures to $100 million, and pointed out that together, the total would amount to $200 million.

“That’s $200 million out of $600 million. That is to say, VAT is one third of the overall tax revenue in the country,” he emphasized.

“That’s the money which pay civil servants and police; and buy medicine and pay teachers and put the furniture in the school and so on and so forth,” Gonsalves commented.

One third of the $200 million, is $67 million.

“Where you are going to find the $67 million from? If you do that, you’re not going to be able to pay civil servants,” or buy medicine, pay teachers, police, etc; the Prime Minister contended.