WHEN the Island’s goods and services tax was introduced in May it was understood that it would be levied at three per cent across the board to minimise complicated bureaucracy and, therefore, the cost of collecting what was due. It was also argued that the fewer the complications, the lower the rate at which the new tax could be levied.
These were fundamentally sound principles, but what made full sense in the lead-up to the introduction of GST is far more suspect in the present economic circumstances.  We are now in a situation in which food prices have risen dramatically and may well continue to do so. We are also dangerously near a situation in which the least well off in our generally affluent community will find it difficult to make ends meet — even in terms of the basic necessities of life.
The impact of GST on the relatively poor was meant to have been balanced by the new income support scheme. Unfortunately, the cost of basics — including fuel and power as well as foodstuffs — has risen so steeply that calculations made before GST came on the scene may no longer apply. If this is indeed the case, action will have to be taken.
A measure of the seriousness of the present state of affairs is the decision of the Council of Ministers to hold a special meeting tomorrow to discuss prices and GST. It has been widely forecast that ministers will conclude that GST must be taken off food and also that duty on fuel must be frozen at current rates.
A decision to lift GST on food would undoubtedly amount to a U-turn on the part of the architects of our fiscal strategy. These, however, are exceptional times, and exceptional measures may have to be taken.
The freeze on duty, meanwhile, can be justified because of the adverse effects of high petrol and diesel prices on the distribution sector and also on industries such as fishing which risk becoming unviable in the face of escalating fuel costs.
It remains the case that this Island is autonomous in matters of taxation and that, politically, we are in charge of our destiny. That said, our present difficulties illustrate all too clearly that we are by no means insulated from major fluctuations in global economic conditions.