Government’s “ad hoc” approach to taxation, which will not pull Barbados out of debt.
The warning yesterday from Opposition Leader Mia Mottley, as the House of Assembly debated the Value Added Tax Amendment Bill, which includes a 22 per cent tax on cell phone airtime services.
While declaring that “we cannot tax our way back to growth”, she stated the solution to the island’s prolonged deficit was not new taxes, but for Government to pursue a debt-refinancing arrangement.
“The Barbados Labour Party has been consistent in its point that this Government is taxing businesses into oblivion,” warned Mottley.
The BLP leader also attacked Government’s chief financial managers for refusing to take what she sees as the right and necessary steps.
“The obvious solution continues to be eschewed by the Minister of Finance and the Governor of the Central Bank, that the one thing that continues to grow in this economy is our debt service . . . but we are not prepared to pause and examine the option of financing our debt in order to pay out less on an annual basis than we are currently paying.”
In support of her contention that increased taxation was a futile effort at bailing Barbados out of its high debt situation, she compared public revenue before and after this administration’s imposition of new taxes, reaching back to 2009.
“In 2007-2008 [financial year] we were collecting a billion and fifty million dollars from direct taxation, income taxes, corporation taxes, property taxes, but at the end of the last financial year in March this Government collected $996 million, but inflation has increased in excess of 40 per cent in that nine-year period.”
Mottley said Government’s dwarfed revenue compared to seven years ago has happened despite a number of new tax measures, the introduction of which she described as “ad hoc”.
She recalled that back in 2010, there was a 2.5 per cent increase in the 15 per cent VAT, which was promised for 18 months only.
“We have now had a VAT rate of 17.5 per cent for five straight years.
“We were told in August 2013 that the Consolidation Tax would be for 19 months. The Consolidation Tax is still a part of the feature of our tax collection in spite of the fact that the 19 months finished in March this year, some nine months ago.
“In the same way Government has been unable to implement some of the ad hoc taxes that were not well thought out, Government has been unable to see the reality of the recovery of the Treasury, because the economic base has remained flat or has shrunk.
“Real economic activity in this country is still smaller than it was in 2006,” she contended.
The Opposition Leader noted that Consolidation and Bank Asset taxes were also added last year.
She said those tax measures could not close the gap between the last budgetary position of $2.5 billion in revenue and $4.3 billion in expenditure.
“We have reached the point where we have to determine whether it is not now appropriate to refinance a large part of Government’s debt because the gap cannot now be closed by a $10 million here or $30 million there, or even sending home 3,000 public servants.”