A former senior economist at the Central Bank of Barbados is warning that the country’s high personal income tax rates are impacting people’s ability to invest in areas such as education, housing and business.
Therefore, Professor Winston Moore is recommended the reintroduction of some of the measures introduced in the 1970s and 1980s that gave taxpayers an ease.
The senior lecturer in economics at the University of the West Indies (UWI) Cave Hill Campus explained that although income tax rates were high during the island’s early post-Independence years – as high as 50 per cent of an individual’s salary – some allowances and other policies cushioned that blow.
“The policies that the Government used during that period of time were quite important. I think it is something we still can look at,” Moore suggested at the Henry Fraser Lecture Theatre as he delivered the inaugural professorial lecture under the theme In Plenty and In Time of Need: Barbados’ Economic Development Since Independence.
“So allowances for children studying at secondary schools . . . introduction of a slider scale for land tax, allowance for rent paid, allowance for mortgage interest, income tax allowances for savings in credit unions . . . All of these policies were aimed at increasing the disposable income of the middle class,” Moore said.
“So even though you had these high rates of tax you still try to ensure that your middle class had disposable income to invest . . . if they so desire.”
He contended that while there had not been many changes to the services provided by the state, including highly subsidized education and free health care, the tax structure had changed significantly.
“We’ve sort of seen the implications of that . . . in terms of the tax revenue and tax expenditure. But there is a fundamental issue in having such high rates of tax as well, because once you have such high rates of tax you really can’t invest in your children’s education, you really can’t invest in businesses,” Moore said.
In his June 15, 2015 presentation of the Financial Statement and Budgetary Proposals, Minister of Finance Chris Sinckler announced changes to the personal income tax structure, removing many allowances. At the same time, he announced a reduction in the 17.5 per cent income tax rate to 16 per cent and the higher rate of 35 per cent dropped to 33.5 per cent.