The General Sales Tax (GST) is now law but it won't be implemented until July first of 2006. Government gave the bill its second and third readings today at a rare House sitting scheduled between Christmas and New Year's. As we've reported, the general sales tax is modeled off the VAT tax of 1995 but will be charged at 10%, not 15%. Government says it will be revenue neutral, meaning it hopes that it can collect the same thing as the sales tax, which is $131 million. Today the Prime Minister led the presentations saying that the sales tax, the same one crafted and implemented by his government in 1991 was flawed.

Rt. Hon. Said Musa,
"The study of our tax system has highlighted certain weaknesses in the current tax structure. The Bill eliminates the negative impact of cascading, a term which is used when tax is charged on another tax. The sales tax, as it currently operates, has served the country well but it does create a situation where there is some level of cascading. On a whole this Bill, which is essentially a restructured and reformed sales tax, will improve the efficiency of the tax while eliminating its negative impacts. It will prove influential in removing distortions and inequities in the tax structure. It will create more fairness in the system since there are built-in mechanisms to minimize the effects of smuggling and under-invoicing of goods and services. It will also protect the consumer against cascading and thus assist in the spreading the tax evenly among all sectors of the economy and ensure even greater equity in its application. In fact a proper implementation of this tax will result in a reduction in the shelf price and the ultimate cost of living. Finally I must mention that the government has agreed to delay the implementation of the GST under July 1, 2006."

Hon. John Saldivar, Cayo South
"I hear the Prime Minister saying that this new tax, and I really can't call it the general sales tax, this new tax is a restructured and reformed sales tax but the truth is it's a watered down version of the Esquivel Administration's VAT. I say watered down version because from the perspective of the consumer, this new tax doesn't come anywhere close to being consumer friendly as the VAT tax that was supposed to be such a killa. The same VAT which was a killa back in 1998, now the words that I hear the Prime Minister describing this new tax, its déjà vu as they say to when the VAT was being discussed. The reason that we are here at this point, where we have to be changing the tax structure once again, let us not forget why we are here, we are here because of the recklessness of the government. We are here at this point because of the corruption that has taken over our government. It is because of their mismanagement, it is because of their overspending that we are at the point where we have to be implementing this radical change to our tax structure."

Hon. Johnny Briceno, Deputy Prime Minister
"No government likes to introduce tax and nobody likes to pay tax but we recognize that taxation is necessary for the development of a country and as a government we have to take a global view as to what's happening in this country and how we can continue to meet the challenges that we are faced everyday in this country. Today we are coming up with the GST. It is a tax that has some features of the VAT but it also has features of the sales tax. I think presently we are in a position where we can see the strengths of the VAT and its weaknesses and look at the strength of the sales tax and its weaknesses and learn from that."

Hon. Patrick Faber, Collet
"The killa VAT is dead. Those were the words from our Prime Minister, 'the killa VAT is dead,' March 16th 1999. It would seem to us now Madam Speaker that the killa VAT wasn't dead, in fact they had just put it out of commission. I wish that the Prime Minister would be as honest as his representative from Caribbean Shores and really come out up front to the people and tell them what the GST is. Tell them that it is the VAT, tell them that he made a mistake because he seems to have a problem and cannot say that he made errors and that is in effect what he is doing here: bringing back the monkey but this time dressed in silk. Bringing back the rose but just calling it another name. They were aware that the sales tax is not something that they just dreamt up, they knew that there would be a cascading effect, they knew that there would not be able to police it, they knew that the exporters and the local producers would be at a disadvantage under sales tax. Do they honestly wish for us to believe that they did not know that there would be a cascading effect and that in effect when the Belizean consumer goes to the store, because of that cascading effect, they would not be paying the different rates of 8,9, or 10 or whatsoever the rates are under sales tax but in fact would be paying as high as thirty add percent on these goods. Are they telling us that they did not know that Madam Speaker? Are they expecting us to believe that or are they saying, 'we put this tax in place because we were trying something, we were trying to fix the tax system'? So they are gambling, they are playing around with the administration of this country Madam Speaker? They are doing trial and error with our government and our people? Madam Speaker is that what they want us to believe? You claim now that the sales tax had so many Belizeans but you are the ones who chose the sales tax so you're saying you're incompetent, that's what this government is saying to come and complain now about cascading and about policing mechanism. In effect they are saying the government was incompetent. Madam Speaker if they truly want to reform the tax system they should resign today."

Hon. Francis Fonseca, Attorney General
"I think what we are seeing today from their side is a perfect example of politics as usual. Out of one side of their mouth they talk about the great VAT, the great efficiency of that tax, and they talk about their great leader Manuel Esquivel. And then out of the other side of their mouth they're complaining about this bill and of course they say this is the VAT still. So on one hand they are saying what a wonderful thing the VAT was and then they are saying this is the VAT and then they go on to condemn everything else in the bill and say we are not supporting it, or that seems to be the general direction in which they are heading. But as I said it seems to be a very confused argument that they are putting forward today."

Hon. Dean Barrow,
"There is no confusion Madam Speaker. We are making it clear that as was said at the time the UDP implemented the VAT in 1995, or at least passed the bill in 1995, the mechanism is in fact the fairest way of collecting tax revenue. We continue to hue to that position. There are though major differences between the method of implementation of the VAT under the UDP and what is happening now. This Madam Speaker is the Value Added Tax without the Prime Minister or his government accepting an iota of blame for the fact that they did away with the same tax for no good reason, causing all the dislocation and disruption that I spoke about, and now they have to come right back and sheepishly re-implement the same Value Added Tax. What we particularly complain about is the absolute hypocrisy of those on the other side who at the time the Value Added Tax was introduced by the UDP beat their chest, acted like chicken little, engaged in a propaganda war, played the meanest, lowest, dirtiest form of politics with what in fact was an issue of fundamental national importance. This bill will represent an increase in taxation upon the Belizean people. Last year at budget time, which led to the disturbances and the riots and may they never happen again, there was an increase in taxation that the Belizean weren't prepared to tolerate. It needs to be pointed out that what is happening now is another increase in taxation. This government, broke and desperate, doesn't have a choice. Let me put it in a nutshell: seven hundred items being zero rated under the UDP in comparison to three under the PUP must result in a clear and measurable difference. The UDP's implementation of the VAT was designed to assist the Belizean public, the Belizean and the Belizean taxpayer. This VAT being passed today by the PUP is designed to raise their tax revenue."

Hon. Jose Coye,
"For my colleague on the other side to say that this is an increase in taxes is totally untrue because it can only come from partisan passion, it could not have come from scientific analysis or any shrewd observation. The fact is that the technical team that we had combined with our foreign consultants from the IDB, international experts in taxation, along with our local experts in taxation had said that if we wanted to increase the tax, rather than it being revenue neutral, we would have had to take up the rate. The decision taken by the Cabinet, led by the Prime Minister, is that we would not increase the taxes. We cannot be making pronouncements on such a fundamental issue as the tax system based on our partisan passion. It is no substitute for scientific analysis and shrewd observation when we are to make decisions about such important, essential, and fundamental issues of this country. We cannot allow our partisan passion to be substitute for scientific analysis."

And while there was much debate over the comparable merits of sales tax and GST, the core of today's debate was about zero-rated items, and exempt items. Under the UDP's 15% VAT, there were over 700 zero rated items, under the PUP's 10% GST, there are fewer than 5. The Musa administration's technicians argue that the greater the number of zero ratings,. The higher the tax, while the Opposition argues that this almost exemption free tax is a cash cow for government. Which should you believe? Well you can analyze the arguments for yourself.

Rt. Hon. Said Musa,
"If too many goods and supplies are zero rated, it narrows down the tax base and puts pressure on the rate of tax. It is true that some of these items were zero rated under the old VAT system, but the rate of VAT was 15%. We have decided to maintain the uniform rate of 10% for GST."

Hon. John Saldivar,
"I cannot for the life of me see how our Prime Minister or the People's United Party that claims to be the party of the poor can actually come in here today and tell us they're moving items such as educational textbooks and medicine, agricultural products, agriculture is the bedrock of this society, it is the industry that keeps poor people going, and you are going to take those off the list of zero rated items. Medicine Madam Speaker. Education, Madam Speaker. Perhaps they might feel that the Belizean people do not know the difference between zero rated and exempt and I would like to tell that them that when you get an item that is exempt, you are still paying the tax because when the product is imported, what happens is that the company is unable to get it back so it has to pass it on to the consumers. So when they come and try to pretend they are easing the burden on the consumers because they are exempting a certain item, they are only once again trying to pull the wool over the eyes of the Belizean people."

Hon. Dean Barrow,
"Under the UDP's VAT, prescription medicine were included, all prescription medicine. They, under their original listing in their new VAT bill, GST, prescription medicine doesn't find its way there at all. But then they turn around, and even the few medicine that they did have in the zero-rated category, they are moving now to the exempt category. The literature makes clear that that will mean instead of there being a complete from VAT, an extra charge on these medicines for the consumer, the consumer will have to pay an additional cost."

Hon. Jose Coye,
"Ask those on the other side to please desist from abusing the line 'our people' for cheap political games. We owe it to the people to give them the facts and let them form their opinion on those facts. The truth about it Madam Speaker, what ever you may want to call it: the GST, the VAT, sales tax anything you can to call it---the truth about it is that this system, that was developed in the world after fifty five years, when it was first implemented, was fundamentally for a broad based tax, very broad based. In other words, it was never intended to have exemptions. Exemptions in a tax like this is like an aberration in the logic of the tax; it was never intended to be that. So the boast being made here about the VAT of 1996, that was not VAT in its true sense because one of the fundamental characteristics of it was indeed for it to be broad based, that there were to be no exemptions if possible. So to tell me now you are boasting that you had a VAT but you had all these exemptions, is a contradiction; you cannot have a VAT when you have all those exemptions. How can you have a duck that can't swim? But no, speaking from the popularist's pulpit, and deceiving the poor, words which you hear so much today. Everything is about the poor: 'we want to help the poor, look how we exempted 700 items to help the poor.' The truth about it is that when you exempt those items you don't help the poor. That is a fact, the studies have shown it."