A four-member panel of experts this morning concluded that Barbados could plummet into a worse economic situation, if Government fails to faithfully implement the “harsh”, but necessary measures proposed in last evening’s Financial Statement and Budgetary Proposals of Minister of Finance, Chris Sinckler.
Speaking at the Barbados Chamber of Commerce and Industry-organised 2013 Post-Budget Breakfast Discussion at Hilton Barbados Resort, the panelists representing taxation, economics, business and banking, also agreed that implementation must go hand-in-hand with business facilitation for the “pain to prove useful”, while urging that the additional tax revenue earning proposals, would truly be temporary as promised.
Yesterday, Sinckler proposed nearly $436 million in austerity measures to last for the next 19 months, as Government tries to fix its “deteriorating” finances and search for economic growth. Job losses have not been ruled out, with retrenchment contemplated as “a last resort”.
Tax Engagement Leader with PriceWaterhouseCoopers, Louisa Lewis-Ward suggested that the easier it was to do business in Barbados, the more likely new enterprises would be formed and existing companies would grow.
“Economies which are easier to do business in, tend to attract investment from overseas, providing much-needed boost to economic growth,” Lewis-Ward argued.
“For tax purposes, the Government can improve the ease of business in three ways: by lowering tax rates and easing the overall burden, creating a more business-friendly tax system, (or) shifting the burden from wealth-generating activities towards personal expenditure or by broadening the tax base,” she noted.
The tax expert said Barbadians would be feeling anguish at the additional land tax charge of 0.7 per cent on the approved value, as well as the fiscal consolidation tax and the 50 per cent reduction in reverse tax credit from $1,300 to $650.
She said that at least these changes would be seen as even-handed, in that they would impact a large cross-section of the population.
“The fiscal consolidation tax that has been introduced, is a temporary tax, with a categorical assurance by the minister that it would be removed in March 2015. The return of 7.5 per cent of the VAT rate on accommodation and the reduction in VAT rate on direct tourism services, once clearly defined, would be welcomed, and the increase in the BTA marketing budget and the hotel refurbishment fund.”
The tax executive also welcomed the $7 million for Invest Barbados, although it was “unclear” what the actual promotional budget would be. She believe the streamlining of business licence renewals would also be well-received and also acknowledged that the proposed Business Facilitation Unit has “great” potential to accommodate and attract increased foreign investment, “if implemented with the right personnel”. The renewable energy proposals were also supported.
“The partial removal of free tertiary education would have a significant impact on all Barbadians on their pockets and on our psychy.”
Lewis-Ward also stated that while these measures would impact all income groups, “we do view a significant number of the measures proposed of having the greatest negative impact on Barbados’ middle clas”.
“A middle class is expected to be primary to spur the growth and to enter into entrepreneurship endeavour,” she added.
Describing the minister’s proposals as courageous, Dean of the Faculty of Social Sciences at the University of the West Indies, Cave Hill Campus, Dr Justin Robinson, asserted that the first priority of the Budget was to “stop the bleeding” of foreign reserves, without which all other measures would be irrelevant.
In fact, Robinson suggested that considering the state of the world economies, the proposals were inadequate “and did not go far enough”. The prominent economist said he believed if the required measures were imposed, they would be described as draconian. Conceding that the proposals were painful, nevertheless, he said they were a step in the right direction.
With respect to growth, he said he felt there could have been a more austere Budget, adding that he was pleased with the “strong” emphasis on growth. Robinson hoped the taxes being imposed on commercial bank assets would be temporary, but supported the introduction of the tuition fees at the University of the West Indies for Barbadians, considering the costs of social services rise every year.
The UWI dean said he also looked forward to the revenue measures being removed in the short term.
He too was of the opinion that business facilitation needed to be improved in the future.
Chairman of the Barbados Private Sector Association, John Williams, another panelist, said there were no surprises in the Budget, noting “it was what we said was needed”.
“It was a total focus on the national Government’s finances. Our position is in line with the Government’s. I think that for most of the people of Barbados the maintenance of the fixed exchange rate for the Barbados dollar, is a key plank.”
The Private Sector Association spokesman lamented though that more taxes were imposed even with the country already heavily taxed. However, he saw taxes as the lesser of the two evils (the other evil being a far worse economic situation without the measures).
President of the Barbados Bankers’ Association, Horace Cobham, was most concerned with the likelihood of the country sliding further into economic decline because of “the culture” of governments not to implement as pledged.
Cobham questioned Government’s ability to succeed in cutting the $285 million in expenditure, suggesting that “a leopard doesn’t change its spots”. He asked how the Government can achieve the spending cuts, when there was no management accountability (within the public service). Cobham further wondered about the expenditure being reduced within the 19 month time frame announced by the minister, advising that Government would have to reinvent itself. While objecting to the proposed imposition of taxes on the assets of commercial banks, he appealed to the Freundel Stuart Administration to communicate and dialogue more with the banking sector for the sake of Barbados. (EJ)