Government’s suite of tax measures seem to be reaping sweet dividends, with the Central Bank of Barbados reporting overall revenue yield of almost $3 billion for the fiscal year ending March 31.
This comes as the country recorded a decline of 0.2 per cent and the gross international reserves rose by $64 million to reach $1.1 billion by the end of the reporting period.
Giving an update on the island’s economic performance on Thursday from the Central Bank’s Bridgetown headquarters, Governor Cleviston Haynes said Government also managed to contain the fiscal deficit to 0.3 per cent of gross domestic product (GDP) by the end of March. This is exclusive of interest payments.
Haynes said the macroeconomic environment continued to recover during the first quarter of this year as Government focused on implementing the Barbados Economic Recovery and Transformation (BERT) programme, and he called on residents to exercise further patience given the light at the end of tunnel.
“It is not something you can do overnight. So we ask persons to be patient. I think the progress we have made so far is very encouraging. We have taken some very difficult decisions. We have taken them in a very short period of time and we have made some progress, but we have to continue to work to meet the objectives – get the stabilization complete. This year is going to be very important in terms of how we advance,” said Haynes.
The revenue intake for the fiscal year reached $2.99 billion or 29.3 per cent of GDP, of which $933.1 million came during the January to March 2019 period. Total revenue intake for the fiscal year ending March 2018 was $2.85 billion.
Haynes said the new tax measures outlined in the June 2018 budget “boosted the revenue intake even though the resumption of timely payment of current year tax refunds offset some of the gains in revenue”.
“Taxes on incomes were buoyed by the improved performance of personal income taxes – $482 million, and corporate taxes – $356 million. Corporate income taxes benefited from the earnings of recently registered international business companies. Property tax receipts also grew, due in part to taxpayers taking advantage of the extension of the tax amnesty,” he reported.
He said the Value Added Tax (VAT) and new fuel tax proved to be “efficient sources of revenue”, adding that collections from the Garbage and Sewage Contribution (GSC) levy and the Hotel Room Levy boosted revenue.
However, Haynes said the repeal of the controversial National Social Responsibility Levy (NSRL), coupled with declines in import duties due to lower levels of imports, weakened growth in overall direct taxes.
“The Airport Development Levy also suffered from lags in collection,” said Haynes.
The governor also reported that during the period under review, there was an overall increase of four per cent in wages as the five per cent salary hike was partially offset by the reduction in employment in the last half of 2018.
“Grants to individuals and public institutions also rose but transfers to the monitored enterprises were kept within budget limits. Capital spending also increased as government sought to upgrade existing infrastructure,” said Haynes.
The economic advisor said he was confident Barbados would meet its targets under the BERT programme when the International Monetary Fund (IMF) carries out its quarterly review in the coming days, and would therefore be able to draw down on its second round of about $49 million funding by early July.
At the same time, Haynes said he was equally confident that government’s ambitious target of six per cent surplus of GDP at the end of this fiscal year was achievable.
“One has to continue to monitor very closely, and outcomes will determine if any additional adjustments are required. But at this point we believe the six per cent is achievable,” he insisted.
Haynes was unable to say how soon negotiations for the external debt restructuring would be completed, but said “We think it is important to bring a resolution to that as soon as possible to remove the uncertainty and create further confidence in the system.”
Barbados’ bread and butter tourism industry witnessed a slight increase towards the end of March this year, expanding by 2.2 per cent which was less than the 5.7 per cent growth for the same period last year.
While the English Cricket Tour resulted in increased arrivals from the island’s main source market the United Kingdom, other markets including Canada, Trinidad and Tobago and “other” Caribbean declined by 6.8 per cent, 10 per cent and 4.6 per cent, respectively.
The Central Bank is estimating economic growth to be between 0 and 0.25 per cent for 2019.
The governor explained that against the background of the recently-implemented fiscal consolidation measures, preliminary estimates suggest that economic activity remained subdued in the first quarter when compared to the corresponding period a year earlier.
However, he said new private sector investment projects have started, offering the prospect of growth in the current fiscal year which should also help with the reversal of recent job losses.
“The rate of economic recovery will hinge on the pace of economic diversification, which is needed to supplement traditional foreign exchange earnings,” he said.