The international business community is to pressure the Democratic Labour Party (DLP) Government to exempt the sector from the controversial ten per cent National Social Responsibility Levy (NSRL) due to take effect next month.
The Barbados International Business Association (BIBA) said the steep increase announced in last month’s Financial Statement and Budgetary Proposals would make the sector uncompetitive.
“The elevation of the rate from two per cent, which many businesses simply paid to get imports cleared, to ten per cent makes the impact on the imports of international businesses more significant,” BIBA President Gregory McConnie said in the association’s June newsletter released on Monday.
“This, combined with the natural inflationary impact of the combination of this and other taxation measures introduced on domestically sourced inputs, will raise the cost of operations for the sector. BIBA will continue to make representations to have the international business sector exempted from this tax,” he said.
Just last week the National Union of Public Workers threatened industrial action if Government did not repeal the tax or institute a “coping subsidy” for public servants until salary negotiations have been concluded.
Prior to that a number of private sector groupings, including the Barbados Chamber of Commerce and Industry, the Barbados Hotel and Tourism Association and the Institute of Chartered Accountants, expressed concern about the taxes, with some predicting a sharp rise in the cost of living as a result.
However, under-pressure Minister of Finance Chris Sinckler has since made it clear that the alternative to the taxes could be massive public sector lay-offs.
The BIBA president said he was particularly concerned that while the NSRL Act exempted some key sectors such as manufacturing, tourism and agriculture from the levy, it did not consider the international business sector, which was also involved in the business of importing.
The NSRL, which has been a major headache for some importers since it was first introduced last year, is charged on the customs value of all imports, with the exception of goods for the manufacturing, agriculture and tourism sectors.
In addition to the NSRL, McConnie said the two per cent charge on foreign exchange transactions had the potential to be “extremely harmful to the competitiveness of international business operations”, while adding a layer of uncertainty because there was no clear guidance on how it would be applied.
“We hope that such guidance will be forthcoming well before the July 1, 2017 proposed application date so that businesses can plan and structure their operations so that there are no unexpected consequences from the application of this new measure. Uncertainty and unpredictability are not qualities that we want to become known for as a jurisdiction,” he warned.
The international business executive speculated that the tax would be applied only in “situations where Barbados dollars are being converted to foreign currency” and not to the sale of foreign currency coming into Barbados, since this would be “counter to the objectives of encouraging foreign currency inflows.
“In addition, we also expect that no commission would apply to transfers of foreign currency held in foreign currency accounts at local financial institutions,” he added.
He also suggested the Freundel Stuart administration found it “unpalatable to commit to the tough actions” to address the fiscal problems because a general election was around the corner.
However, he warned that any delay in addressing the economic problems would make the recovery more difficult, while stressing that the taxes did not inspire investor confidence.
“If anything these measures are likely to weaken confidence further as higher costs of doing business and additional charges to convert domestic currency to foreign exchange for the foreign investor are major deterrents to new investment.
“When added to an environment where it has been continually getting more difficult to conduct business, the overall attractiveness of our jurisdiction is continuing to head in the wrong direction,” McConnie lamented.