Cabinet has taken no decision on any formal programme with the International Monetary Fund (IMF), but Minister of Finance Chris Sinckler would sooner give the nod to the IMF’s recommendation for a complete overhaul of the domestic tax system than any proposed urgent corrective medicine.
Reacting to growing public debate over the issue, Sinckler, whose Democratic Labour Party lost power back in the 1990s after going the route of an IMF structural adjustment programme, said no such move was being contemplated at this time.
“I have heard the discussion, and I think the discussions are always good to have because you want persons to express their view on how they see things, but at this stage there is no decision by the Government to go through a formal IMF programme ,” he told Barbados TODAY in an interview following last week’s visit to the island by an IMF team.
Sinckler, who was quick to point out that the visit was just a routine one and not an official Article 1V consultation, has identified a more urgent need for tax reform, while admitting that the economy is presently overtaxed.
However, the Minister of Finance, who is due to present the national budget in a few weeks time, said it was still too early to talk in terms of any relief for the average Barbadian, although he did warn that something must be done about the current level of tax waivers and concessions.
“We have to put a discipline on waivers, no two ways about that. There are a lot of them, they are spread out over many, many sectors and we have to ensure that where they are given that they achieve the maximum effect that we expect.
“If you look at concessions for example, Barbados currently does about $700 million worth of concessions and waivers per year,” added Sinckler, who is seeking to bring down the overall figure to $500 million.
However, in light of recent concessions granted to local hotels, the Minister of Finance did acknowledge that “you have to give concessions if you want to remain relevant . . . but you want to ensure that you put discipline on them”.
Earlier this year, the IMF had raised concern about the large number of tax allowances and exemptions Government was affording Barbadians.
When pressed to state if this concern would be addressed in his budget, Sinckler said: “To some extent the economy has reached a saturation point with taxation and what we have to do [now] is to make what taxes we already have better.” However, he also said “if there is a way for us to restore our revenue base so that we get in more revenue because the taxes reach a wider cross section of the public, then that presents a fairly reasonable case for bringing the rates down.
“Nobody likes increased rates so that’s what tax reform is all about. So we are looking at the entire system. It has to be addressed in a balanced way,” he added.
The report of the Fiscal Affairs Department of the IMF as well as that of a special committee that was set up by Sinckler to review the IMF report and make recommendations are scheduled to go before Cabinet shortly.
The Minister of Finance has also promised to make the IMF tax reform study public and to share it with partners, including the Opposition, and receive their comments.
“And once we get all of those, we see what is the best mix of recommendations from everybody [and] we will seek to go with those,” he said.
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