The announcement by Republic Financial Holdings Limited that it benefitted from the massive corporate tax cut by the Mottley administration nearly a year ago is by turns unsurprising and ominous.
This news tends to give lie to the rhetorical notion that all hands are on deck, shoulders to the wheel, grinding away in the national effort to boost our economy while taking bitter medicine and making necessary sacrifices.
As we have been at pains to point out repeatedly here, the homegrown austerity package of the last year – personified as BERT – coupled with the Government’s precipitous jump to conform with the dictates of the world’s richest economies on taxation, all in response to a trumped up charge that this nation facilitates the flow of dirty money and harmful tax practices, has served only to inflict the greater share of pain on the working man and woman of this country.
Pensioners and thousands of other working people have seen their full faith and credit in the Government of Barbados through their ownership of Government securities dashed for the sake of saving our dollar and reducing the national debt burden.
It is Barbadian individuals and institutions who have received the most unkind haircuts of all under the Government’s debt restructuring programme. Yet no effort has been spared to minimise the blow to foreign holders of government paper – at their own urgent insistence.
The Chairman of Republic Financial Holdings Limited (RFHL), Ronald F. deC. Harford announced that the Group recorded profit attributable to equity holders of the parent of US$0.24 billion for the year ended September 30, 2019, an increase of US$38.66 million or 19.5% over the profit of US$0.20 billion reported in the previous financial year.
Mr. Harford, in announcing the results said, “These results include two significant one-off items, the net impact of which increased profits by US$12.5 million. Firstly, the bank in Trinidad and Tobago amended the terms of its post-retirement medical benefits plan in line with market, resulting in a write back net of deferred taxes of US$41.21 million. Secondly, Barbados reduced its corporation tax rate from 30% to a range between 1% and 5%, which resulted in a charge to our income statement of US$28.71 million due to the remeasurement of deferred tax assets at the lower tax rate. “
One may well imagine myriad other corporations whose boards of directors will no doubt be smiling at the end of the calendar year, if not already beaming at the end of the fiscal year.
Whether Barbadians corporations make millions or billions from the tax cut, those funds could buy a lot of public goods. It could certainly replace the transfer slashed from the Queen Elizabeth Hospital, our primary healthcare giver, twice over. It could almost pay the Government’s entire rent bill for the year. It could fund university education for thousands of Barbadians, seeking to lift themselves and their families from poverty.
It could hire nurses to nurse us, police officers to police us and judges to rule over us. So the question remains: was it worth it? Did we stand to lose in as many months through defiance as much we have lost in tax revenue from kowtowing to the OECD?
We argue there should have been more time to investigate and weigh the pros and cons of this bonanza. For we are yet to see a commensurate boost in productivity, job creation and foreign exchange generation as a result of this exercise in corporate welfare.
For a government that speaks so much and so often about “resource constraints”, and grapples with an open economy driven by a singular main money-earner, high costs of production, limited tax base and a paucity of policy options, it would appear that the chickens have come home to roost. But the eggs they lay are for a precious few board directors and shareholders. One cannot even point to a boost in the number of individuals who own shares through the Barbados Stock Exchange or an improvement in their own personal finances from this act of trickle-down economics.
One to five per cent of any firm’s profits can run whole nations – when that firm is Google, Microsoft or Apple. But many of the corporations so dominant in our lives in this country are, to be candid, mere small businesses by global standards. As such they should be expected to play an outsize role in supporting public services commensurate with their own say share in our markets and our pocketbooks.
Last week, Government and the International Monetary Fund were in agreement that Barbados is on the right track back to prosperity. But the greenest of green shoots have begun to appear from the depths of economic depression. Boasting about high levels of foreign exchange reserves in advance of a final deal on foreign debt restructuring is not only premature but dangerously close to being recklessly irresponsible.
We are not yet out of any woods. Unemployment remains high, our balance of payments are precarious and the level of public investment has shrunk. Our economic crawl space has been made all the smaller by moving too fast, too soon to relieve some of the strongest among us of any responsibility to bear up this nation through tough times.
And yet again, it falls to the middle class and low-income working people to carry the burden of taxation, user fees and lost earnings from devalued government bonds, notwithstanding modest adjustments in the tax bands for some Barbadians. The tax revenue that we forgo to pay off our Greece-like indebtedness was done no favours by this huge corporate tax write-off.
Indeed, to whom much is given, much is expected. What then can we expect from corporations in Barbados who are now rubbing their hands in delight at being able to pull off higher profits based not on higher productivity but by prime ministerial fiat?
Sadly, we already know what is expected of ordinary working Barbadians.
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