Senator suggests a redesigned tax structure could give a financial break to taxpayers, boost spending power

By Jenique Belgrave

There may be no need to discuss raising wages and salaries if Barbados redesigns its current tax structure.

Independent Senator and economist Crystal Drakes suggested during today’s session of the Upper House that the island needs a nimble tax regime that can respond to external shocks, while alleviating the financial burdens on the population.

“If we reduce the amount of direct taxes on income, I think in that scenario, that alleviates the pressure of government having to increase salaries and wages, because it will have the same type of effect. There’s more disposable income in people’s pockets if you reduce the direct income tax that is coming out of your paycheck. So rather than having a conversation about increasing wages and salaries, which has a secondary knock-on effect on inflationary existing pressures, which we know we don’t control, then is that an option that we can take?” she queried.

Noting that Barbados has both high indirect taxes and high direct taxation, the senator stated it was time to reevaluate the entire structure.

Speaking during the Value Added Tax (Amendment) Bill debate, Drakes gave a snapshot of the various direct and indirect taxes paid by citizens.

She pointed out for example, that several taxes were taken out of paychecks including a pandemic levy, health levy, an income tax of between 12.5 to 28.5 per cent depending on income as well as NIS.

“On aggregate, that is a hefty amount of taxation coming out of your direct income. But Barbados, this is not necessarily an anomaly in this regard. Jamaica has an income tax rate of between 25 and 30 per cent; St. Lucia 10 per cent or 30 per cent; Grenada 10 to 20 per cent. But on the other side of things, you have places like Antigua, Bahamas, and St. Kitts that have zero income tax. Those three countries here in the Caribbean do not pay income tax. So there is scope for us to redesign the tax structure, or at least explore where the burden is being carried,” she said.

In addition, she noted that while VAT is 17.5 per cent, on mobile services this rate was 22 per cent.

“So clearly, then, Mr. President, there are areas by which there are changes that can be made for us to somewhat regularize the tax system to bring relief, but still maintain fiscal discipline. On top of that, we have things like customs duties, the petroleum tax and fuel tax, land tax, travel tax, foreign currency tax across the board. And when all of these are accumulated, it seems as though there’s a real sense that on both earnings and on consumption, Barbados is heavily-taxed and given the unique experience that we’re having in terms of the cost of living crisis, is there a way by which we redesign the tax structure by that, we reduce the amount of direct taxation on one end and increase the level of indirect taxes on the other end? Or vice versa?” she added.

jeniquebelgrave@barbadostoday.bb