WORLD TRADE
ORGANIZATIONG/SCM/Q3/LCA/5
19 June 2002
(02-3413)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies by ST. LUCIA to Questions Posed by AUSTRALIA,1
the EUROPEAN COMMUNITIES,2 JAPAN3 and the UNITED STATES4
The following communication, dated 17 June 2002, has been received from the Permanent
Mission of the St. Lucia.
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Replies to Questions from Australia
Fiscal Incentives Act
1. What types of activities are undertaken by the different categories or groups of
enterprises?  What determines how enterprises are categorised?
Reply
Mainly manufacturing in the areas of brewing, distilling and agro-processing. There is also
very limited activity in the garment industry and some handicraft. Enterprises are categorized by
percentage paid to locals in wages and salaries, in relation to the amount realized from sales of anapproved product.
Micro and Small Scale Business Enterprises Act
2. What are the criteria for receiving income tax relief under this programme?  Is this
benefit contingent on export performance?
Reply
The business must first be registered as a Micro and/or Small Scale business with the Small
Enterprise Development Unit of the Ministry of Commerce.
                                                     
1 G/SCM/Q3/LCA/1.
2 G/SCM/Q3/LCA/2.
3 G/SCM/Q3/LCA/3.
4 G/SCM/Q3/LCA/4.G/SCM/Q3/LCA/5
Page 2
Micro business is defined in the act as a small business enterprise:
(a) in which not more than five persons are employed;
(b) whose annual turnover does not exceed East Caribbean $100,000.00
(c) whose net assets do not exceed East Caribbean (EC) $75,000.00; and
(d) which is locally owned.
Small scale business enterprise means a small business enterprise:
(a) in which not more than fifty persons are employed;
(b) whose annual turnover does not exceed EC $1,000,000.00;
(c) whose net assets do not exceed EC $500,000.00; and
(d) which is locally owned.
Income tax relief is granted for the first five years of operations to a small scale business
enterprise subject to the business submitting to proper management and accounting practices. This
benefit is not contingent on export performance.
Replies to Questions from the European Communities
1. Please indicate when the pr ogrammes came into operation.
Reply
Prior to 1 September 2001: The Fiscal Incentives Act from 23 April 1974. The Micro and
Small Scale Business Enterprises Act was assented to on 14 September 1998 and the Free Zone Act
on 24 February 1999.
2. Please indicate whether the programmes pr ovides for other forms of subsidies than
exemption of import duties and internal taxes (e.g. grants, provision of goods or
services).
Reply
No.
3. The notification refers to "insurance and export credit guarantee facilities provided by
the Eastern Caribbean Central Bank" and the "export promotion support from the
OECS Export Development Unit".  Does St. Lucia consider these programmes to be
covered by the requirements laid down in G/SCM/39, in particular that only
programmes involving import duty and internal tax exemptions are covered?  Pleaseelaborate.
Reply
OECS export promotion support from the OECS Export Development Unit is funded through
external donors. This does not qualify as a subsid y within the definitions of 3.1 (a) and (b). TheG/SCM/Q3/LCA/5
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insurance and export credit guarantee facility is a lending product specifically designed to facilitate
exporters. There are no special concessions granted and each application is assessed on the perception
of risk and credit worthiness. While interest rates charged are sometimes below the overdraft
borrowing rate, rates are within commercial prime rates prevailing at the time of the facility and is
subject to change in keeping with market trends. Applicants do not enjoy any tax benefits.
4. Do the programmes provide for a condition to use domestic goods?  If yes, please
describe the relevant provision.
Reply
No. While reference is made in our Fiscal Incentives Act No. 15 of 1974 to local value added,
this must not be confused with the generally accepted definition of local content. In the case of local
value added, this does not mean that there is a requirement that companies favour the use of domestic
goods over imports.  Instead it reflects the concer n of the Government of Saint Lucia that employment
be created and that the economy be diversified.  Consequently, the provision is applied according to
the number of local persons employed in a domestic enterprise and expressed as a percentage of sales,for purposes of relief.
5. Please indicate the rate of import duty or internal tax exemption as of
1 September 2001.
Reply
The rate of import duty can rise to approximately 40 per cent ad valorem , while companies
are assessed at about 33,1\3 per cent on taxable income.
6. Please describe changes to the programmes since 1 September 2001, if any. In
particular, indicate any changes to the rate of exemption or the coverage of the
programmes e.g. in terms of products, location etc.
Reply
No changes have been made to date.
7. Please indicate for each programme how many companies have benefited from the
programmes as of 1 September 2001.
Reply
A total of 56 companies were benefiting from fiscal incentives as at 1 September 2001, of
which 17 are exporters.  Approximately 80 Micro and/or Small enterprises have benefited from the
Micro and Small Scale Business Enterprises Act, none of which are exporters.  Benefit has been
mainly by way of training various disciplines.
There are at present four (4) companies operating within the new Free Zone area in Vieux
Fort, but they are not engaged in manufacturing or export trade. There are also eight (8) companies
outside of the Free Zone area, but which have Free  Zone status under the previous Act. These are
engaged principally in electronic assembling, garments and novelties.  Items are assembled locallyand re-exported. Unfortunately, we have no data which we can make available at this point in time.G/SCM/Q3/LCA/5
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8. Please elaborate on when and how St. Lucia intends to phase out the programmes.
Reply
There are currently no plans in place to phase out these programmes which are essential for
the attraction of investment and the survival of the manufacturing sector. We intend to continue to
implement the existing programmes in keeping with our WTO obligations, including provisions
governing the phase-out of such programmes.  However, this will have to be conducted over an
extended period given the smallness and extreme fragility of our economy and manufacturing sector.
Replies to Questions from Japan
Fiscal Incentives Act1. This Act seems to include a requirement for local value added.  Could Saint Lucia please
explain its conformity with Article 3.1(b) of the ASCM?
Reply
While reference is made in our Fiscal Incentives Act No. 15 of 1974 to local value added, this
must not be confused with the generally accepted definition of local content. In the case of local value
added, this does not mean that there is a requirement that companies favour the use of domestic goodsover imports.  Instead it reflects the concern of the Government of Saint Lucia that employment be
created and that the economy be diversified.  Consequently, the provision is applied according to the
number of local persons employed in a domestic enterprise and expressed as a percentage of sales, for
purposes of relief. Since local value added refers to local labour and not goods, in our opinion this is
not a prohibited subsidy under Article 3.1(b) of the ASCM.
Replies to Questions from the United States
Fiscal Incentives Act No. 15 of 1974
Micro and Small Scale Business Enterprises Act
Free Zone Act
1. Because the benefits under these programmes can be for extended periods of time,
please explain how St. Lucia would modify these programmes so that subsidies do not extend
beyond any extension period provided.
Reply
There are currently no plans in place to phase out these programmes which are essential for
the attraction of investment and the survival of the manufacturing sector. We intend to continue to
implement the existing programmes in keeping with our WTO obligations, including provisions
governing the phase-out of such programmes.  However, this will have to be conducted over anextended period given the smallness and extreme fragility of our economy and manufacturing sector.
2. Please provide the customs duty and intern al tax rates companies would normally pay
absent these programmes.
Reply
The rate of import duties can rise to approximately 40 per cent on imported items outside of
CARICOM, companies are generally assessed at about 33,1/3 per cent of net taxable income.G/SCM/Q3/LCA/5
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3. Please provide additional explanation reg arding the Special Income Tax Concessions
and tax credits in accordance with the number of  nationals employed on a continuous basis
under the Free Zone Act.  How are thes e incentives determined and provided?
Reply
A Free Zone business, operating within a Free Zone area is given tax credits in accordance
with the number of nationals employed on a continuous basis, at the following rates:
10 to 30 citizens of St. Lucia employed – 0.1% of taxable income is allowed.
31 to 50 – 0.5% “
51 citizens and over – 2% “
Inland Revenue cross checks employment information from the payroll with data supplied to
the Free Zone Management Authority by Free Zone businesses to authenticate. Tax credits are
deducted from income tax due and payable.
4. Could St. Lucia please explain whether any subsidies under these programmes are
contingent upon the use of domestic goods?  In particular, in light of the local value-added
requirements of the Fiscal Incentive Act, plea se comment on whether this aspect of the
programme constitutes a prohibited subsidy under Article 3.1(b) of the Agreement on Subsidies
and Countervailing Measures.
Reply
St. Lucia has no programme of subsidies contingent upon the use of local goods.  Since local
value added refers to local labour and not goods, in our opinion this is not a prohibited subsidy underArticle 3.1(b) of the ASCM. While reference is made in our Fiscal Incentives Act No. 15 of 1974 to
local value added, this must not be confused with the generally accepted definition of local content.
Instead it reflects the concern of the Government of Saint Lucia that employment be created and that
the economy be diversified.  Consequently, the provision is applied according to the number of local
persons employed in a domestic enterprise and expressed as a percentage of sales, for purposes of
relief.
5. Are the benefits provided under the Micro and Small Scale Business Enterprises Act
contingent upon export performance?
Reply
No.
6. Could St. Lucia please explain whether it maintains any statistical information on the
number of companies located in Free Zones, the industries represented by these companies, and
the value and volume of exports from the Free Zone? If so, please provide that information.
Reply
There are at present 4 companies operating within the new Free Zone area in Vieux Fort, but
they are not engaged in manufacturing or export trade.  There are also 8 companies outside of the FreeZone area, but which have Free Zone status under the previous act.  These are engaged principally in
electronic assembling, garments and novelties.  Items are assembled locally and re-exported. We have
no data to date.
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