Private sector workers who might be expecting a wage increase because of the proposed reduction in corporation tax could forget about it, at least for now.
In fact, President of the Barbados Chamber of Commerce and Industry (BCCI) Ezra Prescod said it would be “reckless” if he should agree that private sector bosses give their workers a pay hike without first understanding what their businesses have gone through over the past decade.
He was responding to suggestions made last week by Minister of Transport, Works and Maintenance Dr William Duguid, who pleaded with private sector operators to give their workers a wage increase in a bid to spur economic recovery.
Duguid had argued that it was only fair for the local private sector to give an increase to workers considering Government’s recent decision to lower the corporation tax rate from 30 per cent to be between zero and 5.5 per cent, effective January 1, 2019.
However, Prescod suggested that should private sector workers get an increase in wages it would have to be “some ways out”.
“To speak now to wage increases would be reckless of me as a representative of the private sector without having an understanding of what businesses have to really recover, because you would imagine that some would have gone through financing to keep their businesses open, some would have really cut as much as they could cut and really now need to stabilize their own businesses to continue into the future,” said Prescod.
“I am certain though that once they are able to do so, people in a bid to become more competitive in the world economy need to invest in training, they need to ensure they have the right talent and properly positioned talent and also ensure that the talent that they have is well rewarded. At that point, and that is some ways out, I do think that they will have to address that, but to say now they are going to raise wages I think is irresponsible and I can’t speak to that,” he said.
The BCCI head explained that since the reduction in the tax rate would not take place until early 2019, that meant companies would still have to file their next tax return at the current rate of 30 per cent come the middle of next year.
Furthermore, said Prescod, due to the harsh economic climate over the past decade, businesses have been constrained, and have had to endure some contraction in most operations due to various tax measures over the years.
“One of those measures is the imposition of taxation at the corporate level, the adjustment up to 30 per cent on corporation tax. That corporation tax still becomes due, further to the minister of finance’s comments, at the end of fiscal year 2018/2019. So that 30 per cent is going to carry through,” he explained.
“We are going to be recognizing at the end of that period a decrease in tax rate for most entities within the band that has been defined by the Prime Minister up to the end of calendar year 2018/2019, which then becomes due for filing in June 2020,” he said.