IMF Rejects VAT Cut, Suggests Higher Tourism Rate Amid Debt Concerns

International Monetary Fund (IMF) Mission Chief Sergei Antoshin, reporting on the organization’s Article IV consultation on St. Vincent and the Grenadines (SVG), at Cabinet Room on April 28

By Admin. Updated 2:23 p.m., Tuesday, April 28, 2026, Atlantic Standard Time (GMT-4).

The International Monetary Fund (IMF) has advised that St Vincent and the Grenadines should not reduce its Value Added Tax (VAT), warning that such a move would undermine efforts to address the country’s mounting debt, which stood at 113 per cent of GDP in 2025.

In its latest Article IV consultation, published on its website, the IMF stated clearly: “There is no room to lower the VAT standard rate; instead, the special rate for tourism should be brought in line with the standard rate.”

In Saint Vincent and the Grenadines (SVG), the Value Added Tax (VAT) rate for hotel accommodation and specific tourism-related services is currently 11 percent.

The IMF’s recommendation comes as the country grapples with widening fiscal deficits and rising public debt, which has increased by 45 percentage points of GDP since 2019, the period of the COVID-19 Pandemic, the 2021 La Soufrière volcanic eruptions, and Hurricane Beryl.

The Fund warned that without urgent policy changes, debt could climb to 145 per cent of GDP by 2031, placing the country at heightened risk of debt distress.

While the government has introduced VAT-free days and expanded social support measures in recent months (such as increasing public assistance to $500), the IMF stressed that tax revenues must be preserved, not reduced. It recommended broadening the VAT base and strengthening tax administration to improve efficiency and equity.

The Fund’s position is likely to spark debate locally, particularly among consumers who expected a fulfillment of the New Democratic Party’s campaign promise to reduce VAT upon taking office. That campaign promise was repeatedly refuted by Former Prime Minister, now Opposition Leader Dr. Ralph Gonsalves , who said the country would lose millions in revenue for each percentage point that VAT is reduced.

Hotel and tourism related businesses already facing rising costs linked to global oil price shocks triggered by the war in the Middle East are yet to react to the VAT increase suggestion for their sector.

Despite strong tourism performance, the IMF noted that fiscal pressures remain acute, with a projected deficit of 12 per cent of GDP in 2026, underscoring the urgency of revenue-enhancing measures.

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