The Chamber of Commerce and Industry (BCCI) today warned that any further increase in taxation during the current fiscal year will negatively impact any chance of growth in the economy. In its first response to the 2014-2015 Estimates Of Revenue And Expenditure laid in Parliament by Minister of Finance Chris Sinckler last month, the chamber further cautioned about the need for Government to reduce its spending and to rein in the country’s fiscal deficit, saying the situation was adversely impacting the domestic business climate.
The chamber also questioned whether Government really intended to reduce its expenditure, while warning that any further delays in its announced retrenchment programme that was due for completion by the end of March would prove more costly for taxpayers in the long run.
“The Estimates do not show any significant difference in the change of expenditures for Government. Thus, at this point, the conclusion is that the adjustment programme we are meant to be in, cannot materialize any of the targets for revenue or expenditure as outlined in the Budget of 2013 and the subsequent Ministerial Statements on Finance,” the BCCI said.
“As a member-based organization, BCCI has seen an 18 per cent reduction in its members’ employment figures so far for 2014, and anticipates a further reduction given the growth projections,” it added. On the vexing question of increased taxation which has been on the lips of several Government ministers in recent weeks, the chamber warned that “confidence is already very low in the economy and the introduction of additional taxation will not do much to improve the situation”.
“On the business side in particular, the extension of the Banks (Tax On Assets) Act to ‘all financial institutions’ at the minimum, requires explicit clarity since pension funds, mutual funds, finance companies, insurance companies, etcetera are all financial institutions, and not just credit unions.
“Additionally, the $0.20 increase in the excise tax on gasoline will only serve to increase the operational costs for those businesses with fleet vehicles,” it said. “The reversal of the subsidy on diesel will not only increase operational cost for those companies operating in the transport sector, but will also increase the cost of doing business in general.
“Companies already having significant cash flow issues may at the worst have to devise exit strategies,” it added.
The chamber also described the effect these tax increases on disposable incomes of the average household as “troubling”.
“Not only will households be further negatively impacted but businesses will also experience further declines in demand for their goods and services,” it said. “Thirdly, it seems that lessons have not been learnt from the results of the previous tax increases –– because of these increases, revenue will most likely fall further and business activity will, as a consequence, decline due to diminished disposable incomes,” it added.
On the whole, the Chamber expressed worry about the weakening macroeconomic fundamentals that prevail, while noting that it had consistently called on Government to make some adjustments, to address the spiralling expenditure and augment the revenue collection, “so as to ensure that the gains we have made over the last few decades, are not eroded”.
“We have written letters, held meetings, requested feedback and made some proposals, but to date we are not convinced that there is any real sign of repair to this struggling economy,” the statement said, while noting that the BCCI had also done a full analysis of the National Consultation of June 2013, the 2013 Budgetary And Financial Proposals presented in August, Central Bank of Barbados Press releases of July, October 2013 and January 2014, the Minister of Finance’s Parliamentary Ministerial Statements of December 2013 and March 2014, along with the Barbados IMF Article IV Consultation for 2013.
“In spite of all that has been articulated in all of the public releases regarding the state of public finances, the BCCI is extremely concerned about the financial management of the public purse.”
Between April 2013 and January 2014, the Government had spent on average $293.4 million per month and its expenditure projections for February and March 2014 were $400 million and $472 million respectively. Furthermore, the BCCI said, while Government in its August Budget had indicated that over the 19-month adjustment period, the measures taken would reduce current expenditure by $285 million, an additional $285 million was projected to have been spent in February and March 2014.