Barbados opposition leader says more hardship ahead

Barbados opposition leader says more hardship ahead …as new taxes announced.

Opposition Leader Mia Mottley

Opposition Leader Mia Mottley

Opposition Leader Mia Mottley warned Barbadians they can expect more taxes to be imposed during the coming fiscal year as a result of the revenue-raising measures announced by the Finance Minister.

Editor’s Note: The Barbados dollar is FIXED at US$1 = BDS$2.. The eight Organization of Eastern Caribbean States (OECS)  states have a fixed rate US$1= $2.66 EC$.   Jamaica, Trinidad and Guyana have floating currencies.

BRIDGETOWN, Barbados, Tuesday March 18, 2014, CMC – The Barbados government says it intends to sell off some assets as it moves to reduce the fiscal deficit by March next year.

Finance Minister Chris Sinckler presenting the Appropriations Bill in the House of Assembly on Monday announced a raft of new tax measures, including an increase in gasoline prices and the sale of the Barbados National Terminal Limited to help ease the financial burden facing the Freundel Stuart government.

In an immediate response, Opposition Leader Mia Mottley warned Barbadians they can expect more taxes to be imposed during the coming fiscal year as a result of the revenue-raising measures announced by the Finance Minister.

She described the new revenue-generating measures as an ambush, adding that the proposed new energy taxes comprising the removal of the subsidies on diesel and a BDS$0.20 cents (One Barbados dollar = US$0.50 cents) increase in excise taxes on gasolene from April 1, will in reality also affect households.

Sinckler told legislators that in the period 2005-6, subsidies and transfers were estimated at BDS$782.1 million increasing to as much as BDS$1.137 billion by 2007-8. He said the figure increased by another one billion during the 2009-10 period.

“This shows that . . . expenditure has been growing, whilst the revenue has been shrinking. These things began from around 2005 to show up structural problems in the government finances. It is popular for the other sides and others to give the impression that it was due to government’s fiscal indiscipline and all of these things to give the impression that this entire story can be told from the beginning of January 2008.”

Sinckler said that the situation does not “square with the facts” and “if we are to correct these issues, we have to be honest and fair up front, recognise that government is a continuum. History did not begin in 2008, but a build-up of challenges over many years”.

He said a study was done by a Governor of the Central Bank spoke about the need for government reform.

“He made the point that government was too big and that 36 cents of every dollar was going to pay wages and salaries and that you had to do something because if you did not address the issue along with other issues Barbados has within the economy, structurally it will come back to haunt us.

“The main point that I am saying is that he recognised then, as did many other people, that we had some fundamental structural issues to address. But at that time we were basking in the glory of the great expansion, money was flowing, drinks were being bought, all was well and we believed that we could postpone dealing with these fundamental issues,”  Sinckler added.

The Finance Minister said that no one expected the scale of the financial crisis which arose from the financial crisis which gripped the world in 2008.

“We know that business cycles go up and business cycles come down and that it was inevitable that we would have a global recession, because that is part of the nature of business cycle.

“However, nobody expected the financial crisis would have been so devastating to economies across the world and particularly to our major trading partners. We did not expect it. We never expected that it would have lasted this long and drag on. The Governor of the Central Bank was saying that we should have been repositing ourselves. That is the real issue,” Sinckler said.

He said the government continues to have a problem with a shortfall in revenue, particularly with respect to personal and corporate taxes.

“The situation is a major worry to the Government especially as it relates to the contribution of the International Business and Financial Services sector,” said Sinckler, noting that because the retrenchment process in the public sector had not been totally completed at the time of the preparation of the Estimates, they could not be fully reflected in the document.

But he said that would be done and once the process is completed along with the reforms of 19 state institutions, government will realise additional savings of about  BDS$40 million by the end of 2014-2015.

“It means therefore we will be left with a shortfall of BDS$105 million to get to our target,” he said, adding “in accounting to get to our desired target it will be necessary for Government to make additional adjustments of $145 million,” he said.

The Finance Minister said in order to close the BDS$105 million loophole, the tax applied to Bank Assets will be extended to all financial institutions effective April 1, 2014 and is expected to raise an additional six million dollars.

Sinckler acknowledged that there would be an “immediate impact on motorists” as a result of the new tax, adding also the government expects the Barbados National Oil Company (BNOC), “to remit …both the 2013 and 2014 dividend to the Government which will account for BDS$24 million in additional revenue coming into the Government account.

Sinckler said the sale of the Barbados National Terminals Limited would realise at least BDS$70 million.

“Of these two revenue measures Government expects a minimum of $123 million to come into the Consolidated fund by March 2015,” he said.

But Mottley said that the government was introducing as much as BDS$100 million in additional taxes on the population.

She said the new taxes would force some people to put down their cars and push owners of enterprises who rely on their vehicles to transport commodities, to the brink of insolvency.

“The government has runaway expenditure, but worse, an implosion of revenue, our revenue has collapsed. And as a result of the revenue collapsing, expenditure still up in the vicinity of BDS$3.8-$3.9 billion, the financing of government deficit, has become the most critical problem facing this country, so that you move now from unsustainable fiscal deficit to a financing problem, that by reason of the choice or manner of financing, short-term financing through treasury bills by the Central Bank printing money, the reserves have been put under pressure..

“What is of more concern is that if you could not achieve BDS$120 million adjustment in seven months announced in the budget in August; BDS$88 million in expenditure cuts, and BDS$36 million in revenue, how, pray tell, are we going to achieve a  BDS$510 million adjustment in 12 months?” she asked.

Mottey told legislators that the BDS$120 million adjustment meant that banks and other financial institutions, which would now be subjected to increase taxes on their assets, will pass them on to consumers.

“I could paint it, Sir, for every person who is now paying the consolidation or stabilisation tax since September 1 and whose disposable income continues to contract and who wonder ‘how much more can you take out of me, how much more can you tax out of me?” Mottley contended.

“And for those who feared that question, if they listened to the debate this morning would hear that the Government did not believe it had reached its limit of taxation; more taxes coming.

“More taxes coming on every single consumer because when you tax and increase the excise tax on gasoline, you effectively tax the entire economy, every household, every enterprise…,” she added.     Source: http://www.caribbean360.com/

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