By KHRISNA VIRGIL

Tribune Staff Reporter

kvirgil@tribunemedia.net

A FINANCIAL advisor to the Christie administration yesterday cautioned the Free National Movement over its promise to repeal parts of Value Added Tax, saying it was a “premature” declaration less than a week after the tax went into effect.

James Smith, a former Central Bank Governor, told The Tribune that what the FNM is proposing would more than likely spark unintended consequences.

He said before the FNM spoke definitively on what it would repeal should the party win the next general election, it would be smart to analyse vigorously the new tax system.

This comes after FNM Leader Dr Hubert Minnis said on Sunday that his party has formed a special commission to look into repealing VAT-applied categories, including utilities, children’s clothing and breadbasket items.

“All of the studies have indicated that the most successful tax systems have few or no exemptions,” Mr Smith said. “They really ought to refer to experts and see if what they are proposing is wise. If they were to take office, it would be more than two years that the tax was in operation and easier to note the shortfalls.

“They say electricity would be exempt and I understand their sentiments. But bear in mind that electricity is consumed by everyone so you would really be shooting yourself in the foot there.

“My only advice would be subject VAT to vigorous analysis because you might get unintended consequences. What the FNM proposes to do is more than a matter of opinion. You would need hard data. I wouldn’t jump the gun on it. To say otherwise at this stage is a little bit premature.”

On Sunday, Dr Minnis said the special commission is also considering repealing the VAT charge on the management of pension funds.

He said: “This government is again showing no respect for the poor or middle class. With an already shrinking middle class and poverty increasing, to further increase taxes is an insult to the poor and middle class.”

Dr Minnis forecast that increases to electricity costs will lead to more layoffs.

VAT is charged at a rate of 7.5 per cent on most goods and services, with few exemptions.

Since the new tax was implemented last week, there has been widespread concern from consumers and the business community over fears of price gouging or fraudulent tax application.