The IMF has released a Working Paper that reviewed the tax administration reforms that have been undertaken by 20 Caribbean countries including Trinidad and Tobago, with the support of the Fiscal Affairs Department of the Washington-based financial institution and the Caribbean Regional Technical Assistance Center since its inception in 2001.

The Paper titled “Tax Administration Reforms in the Caribbean: Challenges, Achievements, and Next Steps” notes that over the past decade, Caribbean governments have introduced the VAT to modernise their tax system, rapidly mobilise revenue and reduce budget deficits.

The study looked at the VAT systems in Anguilla, Antigua and Barbuda, the Bahamas, Barbados, Belize, Bermuda, the British Virgin Islands (BVI), Cayman Islands, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, Trinidad and Tobago, and Turks and Caicos.

The IMF said that altogether, these 20 countries and dependent territories represent a total population of 17 million inhabitants with great diversity in terms of size.

The study analyses VAT performance in the region and concludes that while it has boosted revenues, the VAT has not reached its potential.

It said that the VAT, intended as a broad-based tax with limited exemptions, a single rate and zero-rating confined to exports, it’s design often lacks these characteristics.

The revenue increases from VATs range from 0.9 per cent of gross domestic product (GDP) to 5.4 per cent of the GDP in the countries that introduced the VAT tax in the period 2005–2013.

The study argues that, instead of eliminating the VAT, the objective should be to strengthen it.

It said that tax policy decisions regarding other major taxes continue to impact tax administration performance adversely, and require closer attention.

The modernisation of the tax system is far from being achieved.