PenDragon - the official magazine of Lyford Cay International School PenDragon Vol 1, Spring 2015 | Page 18

WILL VAT’S IMPLEMENTATION IN ST. LUCIA PROVIDE
LESSONS FOR SMALL ISLAND DEVELOPING STATES
CONSIDERING NEW TAX SCHEMES?
By Luigi Charles, 12th Grade Student
This paper provides a condensed
summary of the research conducted
by 12th grader, Luigi Charles, for
his extended essay. The extended
essay is one of the key components
of the International Baccalaureate
Diploma Program. Luigi will be
attending
Columbia
University
this fall to pursue a degree in
mathematics and economics.
The spread of Value Added Tax (VAT)
has proven to be a popular form of
tax policy since its development in
1954. VAT is an indirect, broad-based
tax levied at multiple stages of the
production and consumption of goods
and services. In St. Lucia, a history
of excessive trade liberalization
coupled with inefficient tax systems
eroded government revenue. When
Gross Domestic Product (GDP)
became stagnant at $1.2 billion and
unemployment peaked at 22.2%,
VAT was seen as an elegant and
pragmatic solution to the nation’s
“THE GOALS OF VAT IMPLEMENTATION IN ST. LUCIA
WERE TO ENCOURAGE DOMESTIC AND FOREIGN
INVESTMENT, ELIMINATE DISTORTIONS OF PRICES IN
THE PRODUCTION PROCESS, MINIMIZE TAX LEAKAGE,
AND BROADEN THE TAX BASE.”
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