A hike in cruise visitor head taxes and airport departure fees are among recommendations now before the Freundel Stuart administration for consideration.
At the same time, Government has been told it needs to undertake a full examination of the national import bill “with a view to identifying a list of non-essential items which would be subjected to higher tax rates and or quantifiable limits”.
The recommendations are among those put forward by the Foreign Exchange Working Group of the Social Partnership which was mandated by Prime Minister Freundel Stuart last month to advise on a series of measures to be taken to shore up the dwindling foreign exchange reserves which fell precariously from $1.4 billion in 2012 to $681 million by the end of last year.
Concerned that the bread and butter tourism industry is not producing the required financial returns while the island’s stock of foreign reserves is fast declining, the Committee has warned of the need for urgent corrective action to stem the downward trend.
“This requires a simultaneous parallel approach where incentives that earn foreign exchange are adopted, while at the same time measures to save foreign exchange are implemented,” the Report said, while warning of the need for “some radical impactful measures”.
Currently, the island’s debt service is estimated at more than $300 million annually and rising, in the context of dwindling access to capital loans through private placement, the apparent weakening of the link between arrivals and tourism revenue.
Hence, the committee has warned that the only way to shield the reserves in the medium term is through further intensified fiscal adjustment.
At the same time it has suggested that a greater effort must be made to boost the island’s overall competitiveness in both tourism and international business.
“Urgent and aggressive effort to revitalize these industries and address the ease of doing business is needed if Barbados is to improve its export earnings to the desired level,” the Report warns.
It further cautioned that Barbados, which has for a decade been a safe haven for Trinidad and Tobago capital in the form of deposits, mergers and acquisitions, was in danger of losing that status given the recent downgrades by international ratings agencies.
“Also, it should be noted that some large resident retailers have Trinidadian investments and may be facing foreign exchange constraints in that market as well,” it added.
Apart from the hike in tourism charges, the committee therefore recommends a stepped up programme of incentives with a view to attracting more investment to the island. It also advocates major engagement with the international business sector with a view to making it easier for the sector to do business in Barbados as well as stepped up communication with the public on the whole on economic matters as a means of boosting economic confidence generally.
In terms of capital flows and debt strategy, the Committee has recommended that the Central Bank and Government continue to engage with the high-end business and financial community on “a targeted programme of sterilized short and medium term loans”. It further suggests that measures to facilitate philanthropy by external high net worth individuals and remittances by the Barbadian Diaspora be put in place in earnest, while ongoing efforts to divest public assets continue to be explored.
The committee also recommends that there be frequent opportunities for domestic duty-free shopping zones where both locals and visitors can purchase items at duty-free prices in United States dollars, thus reducing the informal hoarding of US dollars by locals.
In terms of fiscal and administrative matters, it suggested that the private sector submits to Government a list of stalled projects, which may be held up in Town & Country Planning or Corporate Affairs, to see whether there are indeed projects that can and should be approved with dispatch.
Pursuant to the recent passage of the Barbados Revenue Authority Bill, the Committee also recommends that tax clearance certificates be issued within three working days.
It also called for priority to be given to foreign exchange earners in terms of the issuance of VAT refunds; for efforts to be taken to reduce the leakage of foreign exchange and for a rigorous procedure to be developed to ensure there is a nexus between concessions granted to investors and actual foreign exchange received.