International Financial Institutions such as the International Monetary Fund, (IMF), and the World Bank, have lauded the Government of Saint Vincent and the Grenadines' (SVG's), decision to establish and capitalise a contingency fund to respond to issues of climate change.
The fund was first established in 2017 and a levy on consumption was imposed by increasing the VAT rate by 1%, to provide a dedicated source of revenue to capitalise it. Over the eight months of operation, since its introduction in 2017, the levy capitalised the fund to the sum of $6.75 million.
Speaking during the presentation of the 2018 Estimates, Minister of Finance, Hon. Camillo Gonsalves, said that, "Saint Vincent and the Grenadines has been affected by several disasters over the past years, and given the country's vulnerability to increasingly intense adverse weather events, and the fiscal risks they pose, these international organisations have urged the Government of SVG to seek out additional means to increase the inflows to the contingency fund.”
As part of the government's introduction of new fiscal measures, Minister Gonsalves announced the introduction of a Climate Resilience Levy to be paid by all stay-over visitors in hotels, apartments and short-term rentals of EC$8.00 per night. This will take effect from 1st May, 2018, and the expected revenue from this measure is estimated at $1.7 million. In addition, as of 1st May, 2018 also, the government has imposed a ban on the importation of used motor vehicles older than 4 years. There will also be an increase in the fuel surcharge on motor vehicles older than 4 years. This measure comes against the backdrop of increased traffic congestion and the number of derelict vehicles left abandoned on roadways. Minister Gonsalves said, “this new measure is expected to yield $1.2 million in additional revenue."
It is proposed to reduce the kilo watt hour (kWh), threshold for VAT on electricity, from 200 kWh to 150 kWh. Minister Gonsalves said, “this means that all VINLEC domestic customers who consume 150 units or more monthly, will be required to pay VAT. With the lowering of the VAT threshold to 150 units or more, just 36.0 % of VINLEC'S domestic customers will now pay VAT. "
Minister Gonsalves added, "Saint Vincent and the Grenadines is one of few CARICOM countries where VAT is not paid by domestic customers consuming 200 units (kWh) of electricity or less." He further opined, “as consumers continue to implement more energy efficient measures in their households, the level of electricity consumption would decline, thus reducing the number of domestic customers who will fall within the VAT threshold."
The introduction of VAT on Electricity is expected to provide an estimated $1.0 million in additional revenue annually to the government.
These new fiscal measures will all take effect from 1st May, 2018.