NEARLY TWO DECADES after the controversial introduction of VAT, essentially to simplify the indirect tax system and cut the high level of imposts on extra-regional imports, a study has concluded that it failed to meet the mark and instead contributed to an increase in the burden of indirect taxes.
“The introduction of the VAT [in 1997] did not materially alter Barbados’ tax structure,” said a team of four Central Bank economists, headed by Governor Dr DeLisle Worrell, “given that the proportion of direct and indirect taxes to total revenue remained unchanged on average over the period 1980-2011.
“Within the category of indirect taxes, the three largest items [consumption tax, VAT and import duties] accounted for over 80 per cent of collections, for both the pre-and post-VAT period.
“The burden of indirect tax increased with the imposition of the VAT, from an average of 6.4 per cent of GDP to an average of 8.4 per cent.”
