Yesterday, we brought you Part one of our indepth interview with Minister of Finance Chris Sinckler in which he zeroed in on the current level of taxation
During that interview, Mr Sinckler spoke of the need for an overhaul of the system, in light of recent recommendations made by the International Monetary Fund, as well as a special tax committee set up by him to review and advise on the IMF tax policy findings.
Today, we bring Part two of his interview with our Editor-In-Chief Kaymar Jordan.
Mr Sinckler give us an update on the Municipal Solid Waste Tax? That would have been the main topic of discussion back in June, but now that the controversy has died down, are Barbadians actually making payments?
Sinckler: I can’t give you current figures because I haven’t checked the current figures recently, but what I can say is that up to the end of July when we had the first cut off point, before we had extended it, it was trending exactly as we had expected.
The money that had come in was precisely what we anticipated. So now that the time has stretched [until December 31st], payments would obviously have slowed because people have a longer time to make those payments . . ., but based on the figure that I would have seen up to August, it basically would have been where we expected. In fact, all of the tax measures that we put in place from last August in relation to our [ 19-month adjustment] programme have actually performed precisely as we had anticipated.
Can you say in dollar terms what that means?
Sinckler: No, I wouldn’t be able to say because I don’t have the figures in front of me, but, I can say, based on what I know, that each one of them that have actually been implemented has basically performed almost exactly as we planned.
And that means that you will also stick to your deadlines for removal?
Sinckler: The deadlines, some of them have been established in law so they automatically trigger, and we would relook the situation as it comes through. We are in a race to get our deficit down.
Earlier you said the aim was to get the deficit down to 6.6 per cent of GDP, where are we now?
Sinckler: As I said we are going to have a full update shortly. I wouldn’t want to give a figure, that would be difficult right now. You know how the budget system works in Barbados, you look at the deficit now, and the deficit might say three per cent now, but coming in the second half of the year when you have all of those supplementaries and so on, that’s when it balloons, so to give a figure now may be misleading. But in a couple weeks time, the full up to date figures will be given.
What would be the occasion for this full statement on the deficit?
Sinckler: We had agreed that we would give periodic updates and so one is due and they are running the figures all now to ensure that they get as accurate a reflection.
This would be before or after the budget?
Sinckler: This will more than likely be before.
Mr Sinckler, you sound very calm and cool, your tone is like you have everything under control and there is no need to panic. But all around us, we are hearing a number of people in the economic sphere, many of them experts in their own right, warning that pressure is building, and that we simply can’t afford not to go to the IMF right now. Beyond that, we hear and see problems everyday with the unions and the workers who have lost their jobs, the Transport Board and Beautification workers who have gone home, don’t have money, NIS payments are late, Income Tax refunds late, etc. So is this an act, or do you really have things under control?
Sinckler: We have set a course. People seem to think that when you set a course that everything runs in a straight line. Everything does not run in a straight line! You’re going to have ups and downs, achievements and setbacks. But you can’t throw your sweaty nightcap in the air and panic and totally lose it and say, ‘everything is going bad, let’s go to the IMF’ as though the IMF has some panacea up there waiting. That’s not how you run the system.
You have to be confident in what you are doing. You have to know that challenges are going to pop up in this type of situation, it’s inevitable. But you deal with them as they come and you try to find the most responsible way of ensuring that you get to achieve what you have set out to achieve.
Now we have had setbacks as you know. At the beginning of the 19-month programme we ended up last financial year with this ballooning deficit because of the things we had to bring on board, quite a bit of which we did not anticipate having to do. We got hit very hard and were judged very harshly for it, but, in my view, it’s better to know what the worst case scenario is, and then deal from there. So we have been working on this thing consistently, I mean really nuts and bolts working on it.
It is not easy because bringing down the structural expenditure is always going to be challenging. These are structures that have been built up over a number of years and weaning people off of them, changing them, reforming them, is going to be challenging.
Perhaps people, who are not as close to the situation as some of us are, don’t understand it; they feel that it can just be easily done. You are hearing the public saying, ‘oh, we want expenditure cuts, Government has to reduce its costs, Government has to do this and do that’. Of course, when you start to do them, the pain kicks in, because these things are never painless, then people will say, ‘Why the Government had to do this? And why you had to stop paying for the students at UWI? Why do you have to increase fees at QEH?’ But all of these things go towards making up expenditure, and making up the challenge fiscally. So you have to really maintain poise in the situation.
But that doesn’t mean that you are not worried?
Sinckler: Like any good or useful policymaker, you get worried about this or that, and you want to know really how things are going to pan out. If you put a policy in place, you expect it to behave in a particular way. If it doesn’t behave in the way you want it exactly, you have to go back and make adjustments. This is what the process is. It is working through it, because there is no single, absolute method of achieving all of these things. You have to counter balance fiscal adjustments, contraction of demands, fiscal consolidations, with achieving economic growth. It’s a balancing act!
It is not as easy as people believe it is, or as some people would try to make you believe that they can get up one morning and implement this and that, and all is well. It doesn’t work that way. So what you call calmness, is the experience of going through this thing on a day by day basis, and knowing that they’re certain points at which you need to be. And if you see you are close to those points, or on top of them, or slightly ahead, or even slightly behind, but you see that target in view, then you feel reasonably assured that you can achieve the goals which you want to achieve. That’s how we are doing it here at the Ministry of Finance and in the Government generally.
There are no perfect people around here; we are not going to get everything right, as some people seem to think that you have to get it right. You strive for excellence, you try to get it right but, but if you do not, then recognise what the issue is, and go in and quickly try to change it.
Having served up the UWI bitter medicine, are any concessions likely to come in the short to medium term in terms of Government’s new policy of not paying tuition fees? Any adjustments going forward now that it has been implemented and you’ve looked back at it, anything that would be changed there?
Sinckler: No, I don’t see that. I mean the policy is new, it’s young. We are still working through it. This is the first year in which it is going to be implemented, so you have to give it time to see what happens. If you implement a policy and before it gets a chance, you change it, well then you really didn’t want to have the policy in the first place. So we are going to look at it, and we are going to see. I am reasonably assured, in my mind, based on what I saw and what was available to me, and the best advice that was available to me, that the alternative action would have been much more harsh, and worst than what we had to do in the end. Nobody took pleasure in having to do it, but based on what we were seeing, and the fundamentals of the cost structure of tertiary education in Barbados, something had to be done. It could not be left untouched, and the alternative, in my view would have been much worse.
What alternative could have been worse than having to pay your full tuition fee?
Sinckler: I would have a lot more to say about that in the future. But looking at the costs and how it has escalated, and matched against Government’s ability to pay, if left in place, not just tuition fee, but economic costs, which is the larger part of the bill, may have come under scrutiny and come under need for change. And we didn’t want to go there. Somebody had to act, and act to some degree [with] expedition, so we looked at it and discussed it between the ministries and the Government responsible, we made that choice.
Government has also been hinting very strongly of payment changes at the QEH? When is the proposed user fee coming?
Sinckler: I haven’t seen any such plan. But of course the QEH operates on the basis of orders that would have to go to parliament through the QEH Act. You can’t just go increasing fees like that. But the whole debate about financing of public health care is something which the Government, the private and public sector, the union, everybody is discussing it, because everybody has seen, the exponential increase in the cost of providing public health care and they have all come to the conclusion, some later than others, that it is not sustainable in the current form that we are doing [it], so they have to look at it.
What is the latest on Four Seasons?
Sinckler: (chuckles) Somebody has suggested I don’t have anything to say on Four Seasons so perhaps that’s the route I will take. But suffice it to say, there will be a full, frank, open discussion on that matter in the parliament of Barbados, no lesser place, in the not too distant future.
Why does this matter have to go before parliament?
Sinckler: It’s about updating the public, seeing where we are, what we’ve done, where we are going, some of what has transpired, so people understand why what was done had to be done, and how we are going to work on that matter going forward.
I’m particularly looking forward to it, because I have taken a lot of blame for something that really had nothing to do with me, and to a larger extent the Government, so I’m looking forward to it. When all the facts are laid bare people will get to see that the Government has acted responsibly and honourably in the circumstances in relation to that matter.
And coming out of that parliamentary debate will we hear a new date for implementation, or that the project is it off the table for good?
Sinckler: No, no, no. That project, I expect, is going to happen. No two ways about that, it is going to happen. There are private people around there and it is going to happen. I’m not going to put a date on it, but there are people working every day and very, very hard to get that project going.
On to another matter, I know you are not the Minister of Social Security but you do control the Government’s purse strings, so will the pensioners and other NIS beneficieries be paid on Friday?
Sinckler: From what I have heard, yes. I expect that all will be well, or is well. They are just in the process of getting the cheques and so on.
These things happen, nobody wants it to happen, but if you have a mainframe [computer] system and it runs into problems and then you have to switch to backup, and the backup can’t handle the load completely, or [if] that gives problems, then you have to investigate the issue, and seek to have it repaired. Sometimes solutions are not immediately available on island, you have to fly people in and equipment in and parts and that kind of thing. With all good intentions, those things take time, but you try to get things done as quickly as humanly possible because you don’t want people to be without their pensions.
So there is no need for any heads to roll?
Sinckler: Well, I don’t get involved in those things. That is not for me to comment on.
But what about the income tax rebates, when are those going to be issued?
Sinckler: Payments have begun. They are a little slower than they were last year, but people have begun to receive theirs, and of course you know income tax returns are done on revenue. As revenue comes in, you pay your returns. The Government has had cashflow challenges, so it is a matter of working that through the system. But some people have gotten people have already started to receive [payments], and we would like to get through all [the outstanding payments] as soon as possible. Those that fall beyond a certain date, interest attaches. Government does have to pay interest, just as it charges people interest, so you want to ensure that you don’t go too far beyond the payment period. That would be an additional cost to the Government.