The recent recommendations put forward by the Foreign Exchange Working Group of the Social Partnership to raise cruise and airport taxes seem likely to be dead on arrival on the desk Minister of Finance Chris Sinckler.
Speaking to the media Wednesday during a visit to the three primary schools in his St Michael North West constituency ahead of next weeks Common Entrance exams, Sinckler seemed less than impressed with some of the committee’s recommendations, which included a hike in the cruise visitor head tax and airport departure fees.
In addition, the committee recommended 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” and the lowering of the Value Added Tax to below 15 per cent, with no exemptions, concessions or zero ratings for any sector.
The working group 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 was not producing the required financial returns while the island’s stock of foreign reserves was fast declining, the Committee 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 group said in its report to Stuart, while warning of the need for “some radical impactful measures”.
However, zeroing in on the proposal to increase airport departure taxes, Sinckler said he failed to see how it would bolster the foreign exchange reserves.
“If that is one of the recommendations – I can’t confirm if it was because I am not at liberty to speak to what is in the report – but even if that is the case, how would raising airport departure tax or whatever taxes they are recommending help the foreign exchange?
“I am not quite sure because taxes are collected in Barbados dollars at the airport. There may be one or two visitors who pass through who may not have Barbados currency and may pay in a foreign currency but that is few and far between. So I don’t see how that would affect the foreign exchange position of the country,” Sinckler argued.
The Minister of Finance also gave early notice that there was no guarantee of a wholesale acceptance of the recommendations. Instead he revealed that his intention was to assess the applicability and merit of each proposal.
“It is a matter of determining what in the circumstances is applicable, what makes sense, what can work and what cannot work. That is how you analyze stuff. People propose things – sometimes the people who propose may not be fully seized of the information – but for whatever the proposals made are worth, I am sure the Prime Minister thanks the Social Partnership for the excellent work that they did and then we take each proposal as they come and see what can be done with each of them,” Sinckler assured.
Earlier this week, economist Jeremy Stephen dismissed the recommendations as “piecemeal”. Making specific reference to the proposed rise in airport departure taxes, Stephen said some of these recommendations would do little improve the foreign exchange reserve “
“Unless the whole purpose behind raising the airport taxes was more along the case of retaining taxes, being able to grow tax revenue, I as an economist cannot fully support the rationale of that leading to foreign exchange retention as such, given the fact that most departure taxes are paid in local currency to begin with,” Stephen told Barbados TODAY.