The Institute of Chartered Accountants of Barbados (ICAB) is describing as unsustainable, the tax measures introduced yesterday by Government.
And in a release today, Executive Director Reginald Farley said ICAB was concerned that missing from the Budget presentation was a suggested date by which the taxes would be phased out.
“ICAB is concerned that the tax measures did not include an indicative date by which they will be phased out since such high levels of taxation are unsustainable in the long term. The increased cost to businesses and consumers will further worsen our international competiveness and our ability to sell our goods and services to earn foreign exchange.
“Ultimately Government must also take meaningful steps to reduce its expenditure to fit within the level of tax revenue which the economy can sustainably generate,” Farley said in the release.
Among the measures announced by Minister of Finance Chris Sinckler were an increase in excise on fuels, a 500 per cent rise in the National Social Responsibility Levy and a two per cent fee on foreign exchange transactions.
In his 2017 Financial Statement and Budgetary Proposals Sinckler also announced the planned sale of the Hilton Barbados Resort, as well as savings on Government expenditure this year, without providing details.
“The measures are expected to reduce the deficit by $542 million and will thereby reduce the required Central Bank financing. This sharp adjustment came on the heels of the recent indication from the Central Bank of Barbados at its recent press conference that it would be rolling back the practice of printing of money to finance fiscal deficits,” Farley acknowledged.
“The minister admitted that the steep increase in taxation is also intended to dampen overall demand in the economy to ease pressure on foreign reserves. As such, the fact that the Budget measures will add to the cost of doing business, increase the cost of living, increase inflation, and reduce the rate of growth by an estimated 0.5 per cent in the short term are the intended consequences of the measures which represent an internal devaluation,” he added.
Farley predicted that the two per cent fee on foreign exchange transactions would not only raise revenue for Government, but also increase the cost associated with the purchasing of foreign exchange.
Stating that Sinckler did not introduce any specific measures for structural reforms in Government, Farley expressed disappointment that another enhancement programme was set up instead to effect a new medium term growth strategy.
“ICAB is disappointed that decisions in these areas which are critical to economic growth have been deferred for further consultation since the last few months have been spent in several rounds of intense consultations culminating in the submissions of the two Social Partnership working groups on foreign exchange and the fiscal deficit,” he said.
“These matters have been, for several years, the subject of detailed study by local and international experts and many recommendations have been made. Government is urged not to further postpone these reforms. A clear growth strategy needs to be articulated as a matter of urgency.”
Notwithstanding the deferral of the full reform programme, Farley said there were some initiatives from the Budget that were worthy of support, including the extension of a tax amnesty and a new corporate governance code for state owned enterprises.
Farley also commended Sinckler for seeking to ease the cash flow burden caused by Government’s arrears in Value Added Tax (VAT) refund through a proposed VAT factoring programme.
However, he said, “it is our view that the current reluctance of investors to hold Government debt may make it difficult to find financiers for this initiative”.
The ICAB spokesman welcomed the planned divestment of the Hilton Barbados Resort, adding that his agency was looking forward to “a clear articulation of Government’s strategy on which state-owned entities it will divest, those that it will make financially independent through raising user fees and those that are to be fully supported by general tax revenue”.