Opposition Leader Bishop Joseph Atherley this morning warned that the “excessive” tax measures contained in yesterday’s mini Budget delivered by Prime Minister and Minister of Finance Mia Mottley will inflict further pain on an already overtaxed population, resulting in a counterproductive backlash.
In his more than one hour-long reply, Atherley took a turn in praising Government over its repeal of the National Social Responsibility Levy (NSRL), effective July 1, 2018.
“We laud Government for keeping its manifesto promise to repeal this all-pervasive and at the time unnecessary imposition on the backs of Barbadians . . . on the Barbadian economy. However, the removal of that levy has now been countered by the imposition of a raft of other taxes. That is where some people see the octopus image in the picture,” he said.
The Opposition Leader argued that while the NSRL, which was increased from two per cent to ten per cent on the customs value of goods under the previous Government, had had the effect of dampening consumer spending, its replacements would be equally deleterious.
The two-tier fuel tax on gasoline, diesel and kerosene that replaces the abolished road tax, effective July 1, 2018, also came in for heavy scrutiny from Atherley.
He said the idea behind the removal of the road tax was to avoid people having to pay a lump sum to the Licensing Authority. However, he said with the fuel levy drivers were now being forced to pay a “little” every time they filled up at the pump.
“The example of my friend who uses $100 per week in fuel is instructive. They will move from $400 in road tax, they suggest, to $603.20 by payment at the pump. That’s an increase,” he noted.
“A ZM [maxi taxi] utilizing $300 in fuel per week paying approximately $700 in road tax will find that this tax leaves him or her worse off,” he further pointed out, while warning that the situation could be much worse for ZRs and the state-owned Transport Board.
Atherley said the introduction of a new higher rate band of 40 per cent on incomes greater than $75,000 would also hurt the already struggling working class, many of whom had mortgages to pay.
“These are the people who employ domestic help. They spur small enterprise activity such as landscaping, car washing, babysitting. But these are also people who pay mortgages and who were already under pressure pre-this Budget and its proposals,” he said, pointing out that 43 per cent of bank, 48 per cent of credit union, 85 per cent of trust and finance companies and almost 70 per cent of household debt were mortgage-related.
He said the prescriptions in this Budget would be felt significantly among the working class.
At the same time, he attacked the increase in corporation tax from 25 per cent to 30 per cent, while warning of the possibility that Barbados could lose its advantage over other Caribbean Community (CARICOM) countries.
“We need to assess whether a move as well in this direction puts us in a worse position relative to competing with other Caribbean jurisdictions for set up businesses and new investment. My understanding is that Barbados enjoyed, because of its low corporation tax regime, an advantage over our CSME [CARICOM Single Market and Economy] neighbours. We are now moving in a direction where we are increasing corporation tax,” Atherley said.
He also expressed concern about possible adverse effects of the Airline Travel and Tourism Development tax to be paid by departing passengers, as well as the Garbage and Sewage Contribution (GSC) being levied on water bills.
The bishop singled out for particular condemnation, the impact of the GSC on pensioners, saying its imposition showed no mercy, despite an increase in old age pensions.
Atherley also took issue with the partial privatization of the Barbados Tourism Marketing Incorporated (BTMI) and the Barbados Tourism Product Authority (BTPA) whose funding is being removed from Government coffers.
In her presentation yesterday, Mottley said the BTMI and BTPA would now be financed through the proceeds from the Airline Travel and Tourism Development tax which the Government will collect and handover to those two entities. She had also announced that the BTMI would be led and managed by the private sector.
However, during his detailed response, the Opposition Leader also expressed fear that the new Barbados Labour Party-led (BLP) administration could fall into the same trap as the previous Freundel Stuart-led Democratic Labour Party (DLP) Government of putting citizens through more than $100 million in painful taxes with nothing to show for it in the end.
And while Government’s $1.2 billion adjustment plan was designed to stabilize the country’s current economic “mess”, he questioned the timing and level of the taxes.
Atherley, who crossed the floor after winning his St Michael West seat as part of the BLP team that swept all 30 constituencies in the May 24 general election, also made it clear he was not buying into the notion that Government needed to go to the IMF at this time, suggesting that approaches could have been made to a sovereign creditor, such as the Cayman Islands or Japan, as primary options.
He raised doubts as to whether the budgetary proposals were really homegrown, and suggested it could instead be a reflection of signals already being sent by the IMF, considering Government’s announcement that it would default on its debt repayments.
The Opposition Leader anticipates negative consequences from Government’s reliance on taxation, user fees and expenditure cuts to close its deficit.
He also warned Government that it ran the risk of contracting the economy and underperforming in its revenue-generating objectives based on the tax proposals outlined in the Budget.
The Opposition Leader also questioned whether voters had given the BLP a huge mandate to adopt this approach to tackling the current economic problems, saying Barbadians had “reasonably excited expectations” of the new administration.
“I just questioned myself and would ask others to reflect on this. Did we sufficiently send signals relative to the painful path ahead . . . the path on which we are now embarked? Can we simply and honestly say that reasonably and understandably so, we excited realistic expectations as a Government?” he asked his 29 former BLP colleagues in the Lower House.