An increase in bus fare, new taxes on the gaming industry, and new rates of payment for water for commercial entities, are among the sweeping measures outlined in Government’s 2019 Budget, aimed at raking in more than $117 million per year.
In her more than five and a half hours major Budget presentation in Parliament on Wednesday, punctuated by a call for Barbadians to “stay the course”, Prime Minister and Minister of Finance Mia Mottley made no apologies for imposing a range of new measures, insisting that those who could afford to bear more of the burden should be made to do so while those who can’t should be protected.
“The future looks bright but we are not there yet,” she insisted.
“In some instances, it will require some relief and in some instances it will require additional revenue measures, so let us go. I am asking those who can afford to lift a little weight to let us lift it for a little while longer. But I am equally saying that there are some among us who need to be protected and who need some relief as we go forward because they cannot carry any more,” said Mottley.
The most far-reaching of the tax measures is the increase in bus fares, which went up by 75 per cent, to push bus fares from $2 to $3.50 from April 15.
Making a case for the increase, Mottley told her parliamentary colleagues that the Transport Board was in a very untenable position, with a deficit of about $45 million per year.
This situation, she said, demanded some increase in bus fare given that a fare hike had occurred once in the last 30 years and the hike was 50 cents.
The PM and Minister of Finance said the Transport Board would be announcing some weekly and monthly discounted packages and transfers in the coming days to help frequent commuters to better manage the fare increases.
There will be some legislative changes to the sector as well.
Perhaps the brunt of the burden this time around has been placed on property owners with those with residential properties valued over $450,000 and up to $850,000 attracting an increased rate of 0.7 per cent up from 0.45 per cent effective fiscal year 2019/2020.
Meanwhile, those properties with a value of over $850,000 will now pay a rate of one per cent, up from 0.75 per cent.
This means that the maximum amount of tax that can be collected on such a property now goes from $60,000 to $100,000.
Individuals whose property is valued at $150 000 and less will continue to be free of any land tax obligations. There will also be no increase in land tax rates for properties valued up to $450,000.
The rate on non-residential properties (commercial) goes from 0.7 per cent to 0.95 per cent.
Meanwhile, owners of vacant lots of over 4,000 square feet will have to pay a rate of one per cent, up from 0.8 per cent, in an effort to encourage persons to make productive use of non-utilized lots.
Owners of vacant lots of 4,000 square feet or under have been excluded from any increase in property tax.
The expected revenue from the changes to property tax rates is $61.9 million, with non-residential properties accounting for some $39 million of this collection.
“This is consistent with us asking those who can afford to pay more to do so,” said Mottley, adding that those companies being asked to pay were the same ones who would have benefitted from lower corporation tax rates.
Meanwhile, commercial entities will see a change in the rate they pay for water above certain usage.
Effective May 1, the commercial rate will be $4.66 per cubic meter up to 40 cubic meters and then $7.78 per cubic meter for usage in excess of 40 cubic meters of water, with a monthly cap of 12,000 cubic meter, after which the rate reverts to $4.66 per cubic meter.
This tariff change is expected to result in a net revenue increase of $2.1 million per month for the Barbados Water Authority.
Meanwhile, Mottley has announced that effective May 1, there will be a 20 per cent withholding tax on winnings from lotteries and betting. Similarly, there will be a 17.5 per cent gambling tax on the net-drop of all gaming establishments.
Furthermore, the Prime Minister announced that gaming establishments have until January 1, 2021 to change out slot machines to auditable machines, adding that Government would collect three per cent of the monies owed for the period 2011 and 2018, over a four-year period.
“This will trigger, we believe, further economic growth by putting money into people’s pockets. We are shifting the burden of taxation away from taxing work and production, to taxing assets and consumption,” said Mottley, adding that the gaming industry has not paid any taxes since 2011 due to the argument that a “Standstill Arrangement” was reached with the government in relation to licence fees.
In relation to the tourism sector, Mottley said the increase in the Value Added Tax (VAT) rate from 7.5 per cent to ten per cent effective January 2020 should raise some $27 million in a full calendar year and only $4.5 million in this fiscal year.
In addition, the increases in the room rate levies on the various types of accommodations should result in about $15 million reaching Government’s coffers, in addition to the $47 million the October 1, 2018 rates were expected to rake in.
On the bright side, however, the Prime Minister announced that with immediate effect, individuals earning between $18,001 and $25,000 per year would be entitled to a reverse tax credit of $1,300, essentially putting back an estimated $20 million into the hands of low-income Barbadian workers.
For those who earn $25,000 but below $35,000 per year, government will also be introducing a “Compensatory Income Credit (CIC)”.
Mottley said she was being very cautious with the revenues she expected to rake in from the new measures.
“We have been very conservative in the revenues that we are projecting to achieve from the taxes and measures that I have announced today because we are in the middle of an IMF (International Monetary Fund) programme. Let me underestimate and over collect so that we can come and make adjustments in the future,” said Mottley. email@example.com