IMF austerity drive ‘may still need revenue’

Prime Minister Mia Mottley has not ruled out the imposition of additional taxes and user fees for some services as the island continues under the austere International Monetary Fund (IMF) programme. Barbados Economic Recovery and Transformation (BERT) programme.

“I am not going to give any assurance to anyone that there will be no taxes or fees. What I will say is that whatever increase there is will be justified on the basis on prudence [and] stability,” she told a gathering of the country’s leading business people at the first Barbados Chamber of Commerce and Industry (BCCI) luncheon for 2020 held with a packed house today at the Hilton Barbados Resort.

Her comments came in the question and answer segment of the event after featured speaker Senior Technical Advisor to Government Dr Kevin Greenidge gave the assurance that the economy had been stabilized and promised that once Government stuck to the strict programme it should begin to see some growth.

Mottley said she was satisfied her administration had “done the right thing” to date in order to put the economy on a path of recovery over the past 20 months.

She pointed out that Government had allowed individuals and businesses to benefit under new corporate and income tax regimes and an extended reverse tax credit, while keeping the Value Added Tax (VAT) rate at 17.5 per cent.

“It has meant however, that we have to look at aspects of our revenue collection because our corporation taxes are $40 million less than what they were at the end of December. With that, we are still on target because we made decisions to be able to increase our taxes on land assets and we have made adjustments to other things. We are pretty much steady,” said Mottley.

However, she quickly pointed out that some fees that have not been “touched” for “20 years, 30 years and 40 years” were hampering the delivery of some services and would need to be reviewed in the coming months.

“If we try to bring the provision of those services back onto the central Government, then this country will face continued erosion. And we are not going to do that at any cost,” she told the hundreds of business officials.

“So I am not going to give any assurance to anyone that there will be no taxes or fees. What I will say is that whatever increase there is will be justified on the basis of prudence [and] stability. We are sensitive to the fact that we want to increase disposable income in this country because Governments don’t trade and don’t grow on their own. Individuals do and companies do,” said Mottley, without identifying which fees were likely to be changed or how soon.

The finance minister made it clear however, that her administration would not be taxing businesses “out of existence” since that was counterproductive.

She said in addition to stabilizing the economy, Government would be continuing with its transformation and improvements in efficiency.

“So I can give you the assurance that the Government is sensitive to the condition of households and companies and will ensure that whatever decision we take with respect to revenue adjustment will not in any way topple the apple cart,” she promised.

In relation to future layoffs in Government, Mottley said she could not give any guarantees there either, adding that “we cannot insulate everybody at all times for all reasons”.

She said at this time the economy called for all hands on deck and an increase in productivity.

In relation to concerns about the ailing ease in the doing business climate, which ws raised by President of the BCCI Trisha Tannis, Mottley disclosed that every month Government was picking apart the recommendations of the World Bank Doing Business Reports in an effort to make the necessary changes.

However, she said some areas required a lot more work than others.

In his presentation, Dr Greenidge pointed out that of the seven percentage points improvement in revenue that Government was expecting by the end of March this year, only two percentage points would be from tax receipts and the rest would come through efficiency gains on Government’s expenditure.

“And that is even done in such a way to ease the burden. So we are shifting from direct to indirect taxes moreso, and research has shown that the indirect taxes like VAT and those kinds of taxes are more conducive to growth than direct taxation,” he added.

In relation to the growth prospects, Greenidge said it would come through “sticktoitiveness” in the transformation of state-owned entities, improving Government efficiency and strengthening institutions, capacity building in the public sector and increasing productivity in the private and public sectors.

“On the private sector side, your role is to invest,” he added, while insisting that now was the time to “buy up, build and expand businesswise” in order to grow this economy”.

Dr Greenidge whose is on secondment to the Barbados Government from his role with the IMF, gave the assurance that the digitization of Government was “well on its way”, adding that public sector reform was also ongoing.

He urged the business community not to panic, adding that all the key economic indicators were pointing in the right direction with the debt levels now down from 176 per cent of GDP to around 119.5 per cent of GDP at the end of December; reserves are up and the Barbados peg of BDS$2 to US$1 is protected.

Pointing out that no country involved in an IMF programme had ever seen growth in the first year, he said it would therefore be unreasonable of any one to expect otherwise for Barbados.

“That is why it is called austerity . . . I am not sugar coating it. There is no magic pill,” said Greenidge.

“I can tell you that based on what we are doing, I am confident we are going to get growth this year if we continue to do what we are doing and continue to stay the course and do the transformation and the private sector continue to invest and do things,” said Greenidge, without given an indication of how much growth he was expecting.
marlonmadden@barbadostoday.bb