Governor of the Central Bank of Barbados Cleviston Haynes is predicting that the scrapping of the National Social Responsibility Levy (NSRL) will have no negative impact of Government revenue if the fiscal measures announced by Prime Minister and Minister of Finance Mia Mottley in her austerity Budget in June are effective.
The NSRL, which was first announced in April 2016, and which took effect on September 1 that year, brought in $29 million in revenue during the first half of this year, according to Haynes, a suggestion that it was performing a long way below what was initially expected.
In keeping with an election campaign promise, Mottley discarded the much hated tax from July 1 this year, but announced a series of revenue earning measures in her $1.2 billion mini Budget on June 11, including a tax of 40 cents per litre on diesel and gasoline and five cents per litre on kerosene to replace the road tax, a sewage and garbage tax of $1.50 per day, a ten per cent tax on online purchases, a fee of $400 on the transfer or sale of private vehicles and $1,000 on the purchase of a new or second hand commercial vehicle; and the introduction of an Airline Travel and Tourism Development tax of US$35 for travel within the region and US$70 for travel outside the Caribbean.
“You have to take measures in their totality. From our perspective when we look at the fiscal [situation], once everything is implemented in the way that it is supposed to be implemented, there will be a net gain in revenue. So from a macroeconomic perspective, then there is no great concern for us,” Haynes told reporters during a press conference this morning at the bank’s Church Village, Bridgetown headquarters where he revealed the country’s economic performance for the first half of this year.
However, he warned that any lag in the implementation of the new fiscal measures would make it difficult to achieve the revenue targets.
“Everyone recognizes that there were problems with the NSRL. But from our perspective, what we want to see is that you are now able to collect the revenue which we intended to collect at the end of the day . . . because if we are unable to achieve the fiscal collections, that would create more macroeconomic challenges for us,” Haynes said.
“These measures, when taken in their totality, should give you a better yield than you had before,” he stressed.
The Central Bank governor also explained that the new taxes would affect prices, although he did not expect those to be as high as what consumers were made to pay before the NSRL was scrapped.
“What you might end up with is a price that is higher than the pre-NSRL price, but not necessarily as high as the NSRL price, if the impact of the other taxes is not as strong as the NSRL itself,” he said, adding that while the prices of imported goods still at the Bridgetown Port would have been automatically adjusted when the NSRL was removed, the same could not have applied to locally manufactured items.
“I think what one could possibly see is some lags in terms of the impact of the increased fuel cost on businesses as we go forward. But I think you would probably see a net benefit to the consumer, relative to the NSRL,” he said.
When the NSRL was implemented in September 2016 at two per cent of the customs duty of locally produced and imported goods, then Minister of Finance Chris Sinckler had said it would raise $142.1 million in revenue annually.
Less than a year later, the levy was increased to ten per cent, causing an uproar among Barbadians. Sinckler had said then it would raise $291 million in revenue for a full financial year, and $218 million for the remaining nine months of the 2017/18 fiscal year.
In October of last year, Sinckler had told Parliament that the tax had brought in $50 million in the first three months after the 400 per cent increase.