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Volume No. 1 Issue No. 78 - Thursday March 02, 2006
Dominica Introduces VAT
Sean Douglas


Wednesday, March 1, 2006 saw the introduction of the Value Added Tax (VAT) in Dominica, arguably the most fundamental change in the country�s tax system. Dominica will join more than 120 countries that already have a VAT in place.

Over the last eighteen months, there have been much discussion and public education on the Value Added Tax. The White Paper on the VAT was published and circulated in 2004. In the last year, the VAT Implementation Team has conducted a series of public education activities on the VAT in villages all over the island. In addition, over 300 businesses have registered for VAT. The Team also conducted training sessions for the private sector.

VAT will replace the Consumption tax (20% on most goods), the Sales Tax (7.5% on all goods), the Hotel Occupancy tax (5%) and the Entertainment tax. The VAT will be imposed at a general rate of 15%, but at a reduced rate of 10% will apply to hotel accommodation.

According to a leaflet from the VAT Implementation Team of the Ministry of Finance and Planning, the introduction of the VAT should see a reduction in a number of household purchases.

Sugar, flour, cooking oil, milk, rice, potatoes, toothpaste and sardines are just some of the items that are expected be cheaper under the VAT. The prices of bread, fuel, cigarettes, alcohol and water are expected to remain unchanged as a result of the VAT.

In his 2005/2006 Budget Address, Prime Minister, Hon. Roosevelt Skerrit gave Parliament the reasons for the implementation of a VAT in Dominica at this time: � VAT will simplify the tax system in our country; on balance it will not have a negative impact on the cost of living, and will significantly reduce the cost of doing business; it will make for more equitable treatment of taxpayers; and is consistent with fiscal repercussions of international trade agreements that tend to result in a reduction in international trade taxes.�

The decision of the Government of Dominica to introduce VAT at this time is consistent with a study conducted in 2002 by the Fiscal Affairs Department of the International Monetary Fund. The study recommended, among other things, the introduction of a VAT.

In 2004, the OECS Tax Commission conducted a review of the tax system in the OECS and also recommended the implementation of a VAT within the member states of the sub-region.

A VAT Task Force made up of persons from the public and private sectors and led by former Financial Secretary, Mr. Alick Lazare did much of the preparatory work in advance of the introduction of the legislation to Parliament in 2005.

The introduction of the VAT is part of a wider tax reform process designed to simplify the tax system, broaden the tax base, shift the incidence of taxation away from production and exports to consumption and to improve revenue collection.

Comments about this article? Email:
editor@
thedominican.net
Telephone:
1-703-861-9411
Fax:
1-202-589-7937

Volume No. 1 Issue No. 77
John Loblack: Mental Entree
Carib Village Opens
Miss Dominica 2006?
Cuba helps out
Remembering Dame Eugenia




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