That one percent Customs Service Charge
There has, in recent times, been a resurgence of criticism of the Customs Service Charge imposed by the government as part of the 2021 Budget as a means of raising revenue to meet critical needs. The objections focus on the effect of this measure on the cost of living in what is already a very difficult economic situation, including how it will be compounded by the VAT calculated on the increased prices.
These are of course reasonable concerns shared by all citizens but one needs to be objective in analysing the situation.
It certainly does not help when the Leader of the Opposition describes the levy as “a wicked tax”, extreme language which bears no correspondence with reality.
Anyone paying attention to the situation on the local and global scene must have expected that the 2021 Budget would be one of the most difficult in our history given the COVID-19 situation. Government is forced to spend more, far more, to deal with the situation, but at the same time is faced with falling revenues. How is a poor country going to deal with such a situation? Indeed it is remarkable that, bar the 1% customs service charge increase, the Budget avoided any other burdensome tax measure.
In the face of an obvious and substantial revenue shortfall and increasing demands from different sectors for more government support, the question which must be asked is how is the shortfall to be met? Government has elected to go for the customs service charge increase and no one can reasonably deny that it is going to affect the cost of living, made worse by the fact that it will be compounded by the VAT.
We may or may not agree with this approach but should we not adopt a rational approach to it? It was therefore heartening to hear our own Professor Justin Robinson of the University of the West Indies provide an analysis of the tax last Sunday on We FM.
He raised the question of how critical is the tax measure and what is its purpose. Government has stated that the 1 per cent increase is to provide stable funding to meet our obligations to regional institutions. Being a political entity, Government did not hesitate to front-load those institutions very relevant to current circumstances (CEDEMA, CARPHA, the UWI-SRC, the RSS etc.) as a means of winning support for the measure. However, St Vincent and the Grenadines, like all CARICOM countries must come up with sources of revenue to meet essential regional obligations.
Professor Robinson also contextualized the environment, which he described as “the worst” since Independence, raising the limitations of the external capital market. He therefore posed the question some critics seem to avoid, “What are the options?” which we can expand by asking, “What are the alternatives?”
How can we on one hand continue to support every demand from whatever quarter for more government support, but then oppose a government revenue-earning initiative without providing an alternative? Is it not time that we try to be more responsible and recognize that politicking, of one sort or the other, will get us nowhere and that solutions, not political barbs are called for in the circumstances?
Admittedly, the government itself, often creates the impression that it can be “all things to all men”, and does not emphasize sufficiently the gravity of the economic situation. Until we come out of it all, sacrifices will have to be endured. It is the duty of the government to try and protect the most vulnerable in this situation and that should be the focus of us all.