Barbadians in general and the private sector in particular are no doubt waiting with bated breath to see what comes out of a planned review of the controversial ten per cent National Social Responsibility Levy (NSRL) which, Prime Minister Freundel Stuart has promised, will be carried out at the end of this month.
Since the tax measure aimed at making a major contribution to virtually eliminating the fiscal deficit over nine months took effect on July 1, a little over a month after it was announced by Minister of Finance Chris Sinckler in the 2017 Financial Statement and Budgetary Proposals, there have been widespread complaints about its devastating impact.
Consumers, who have suffered an erosion of disposable income, have seen a general increase in prices for food and other items. In the case of producers and traders, their main complaint has related to a drop in business and higher operating costs, adding to their challenges in an economy that has generally under-performed for most of the past decade.
Against this backdrop, the obvious expectation is that some kind of relief will be forthcoming. The extent to which this will happen, if it does at all, is left to be seen. However, the fact that a general election is approaching and incumbent administrations have traditionally shown an inclination to dish out goodies around this time in an effort to be in the good books of voters, there may very well be a reduction in the NSRL. Who knows? It may come as a welcome gift in time for Christmas.
The private sector and the island’s four main trade unions, which jointly staged a protest march that brought out an estimated 20,000 persons on to the streets of Bridgetown in late July over the measure, have been lobbying for a downward adjustment to five per cent, citing the hardships created by the ten per cent rate.
To give an indication of the devastating impact of the NSRL, President of the Small Business Association (SBA) Dean Straker last week reported that business among members had suffered a 20 per cent decline since July 1.
He said some businesses already had been forced to send home workers, and if changes were not made to how the tax was applied to the manufacturing sector, more workers could lose their jobs soon.
“Sales are generally down anywhere between 15 and 20 per cent since July 1 and we anticipate that things could get tougher coming down into October,” Straker said. “It is obvious that if your revenue is down 15 to 20 per cent, the only way you can tackle it and deal with it on your own is to start looking at your expenses, and your expenses are going to impact on employees. That is where you are going to have to go.”
Some major companies, including Massy and Bryden’s, are also reported to be embarking on downsizing in response to the challenging economic environment. If this trend of business contraction gains further momentum, the downside, given the critical role of the private sector in generating economic growth, would be a setback for the recovery of the economy which has started in the last two years to modestly expand again after being in decline for most of the previous seven years.
In seeking to drastically slash the deficit and, at the same time, ease pressure on the island’s declining foreign reserves which have fallen below the international benchmark of three months’ import cover, Government is walking a tightrope in addressing the issue of the NSRL. While there is a pressing need to maximize revenue, other economic realities also have to be considered, which requires a skillful balancing act.
When the private sector and unions again made their case for an immediate reduction in the NRSL at the nationally televised meeting of the Social Partnership last month, Government responded by saying that the tax should be given some time to work before any review of its impact.
Barbadians, known for their willingness to sacrifice for the national good, are not really opposed to paying the NSRL; they are simply saying the ten per cent is too onerous, coming after previous hefty tax impositions. It is hoped that Government will take all of these issues into account when carrying out the review and arrive at a decision which effectively addresses the concerns of Barbadians with its overall economic recovery objectives.