Haynes: Grow, not tax, way out of recession

This is not the time to raise taxes, the opinion of Governor of the Central Bank on Thursday, suggesting the Government focus instead on economic stimulus as a year-old recession drags on.

Cleviston Haynes, taking questions from the media and members of the public during his first quarterly economic review for the year, conceded that the imposition of taxes was entirely within the domain of Minister of Finance, Prime Minister Mia Mottley, and such a question should be posed to her. Yet he suggested that the moment requires a jumpstarting the economy.

He reported that the economy passed four straight quarters of economic decline as of March this year, with a 20-per cent shrinkage of the economy in the first quarter of 2021.

Noting that the public sector is essentially a major pillar in the economy at the moment, Haynes said: “We are already seeing fiscal measures on the expenditure side… and in an ideal sense, one does not want to impose new taxes at this point in time because you want to be able to stimulate the economy. That has been the position which we have believed in, that we don’t want to raise taxes at this point.”

The central banker’s advice to the Government was to keep a close eye on spending, ensuring that it prioritized its spending.

Haynes said: “There are lots of demands being placed on Government. They have the traditional expenditure, and they have the expenditures that are being driven now by this COVID-19 activity.

“We have to be able to improve our collection of taxes to finance as much of this demand as possible because while last year we were able to get a substantial amount of financing from the international financial institutions, we don’t believe you will get that much financing during the current year.”

As the state pays attention to spending, the governor said, it has to also ensure that it has the money required to finance its various programmes.

Haynes said: “It is important that we don’t get too far out of line. We have to make expenditure decisions because there are things that are cropping up.

“If you look at the volcano issue, we had to spend money on the ash cleanup and that was not envisaged when a budget was being generated a few weeks ago. There are a number of challenges a government will face but the idea is that we should not have increased taxes at this time.

“For the ordinary man, you would certainly want to avoid that because they are the ones who are hardest hit throughout this crisis.”

Meanwhile, the Central Bank Governor said international business, which was a major contributor to Government’s corporate tax take in 2020, pumping some $600 million into the Treasury, was unlikely to be so bountiful this year.

But he acknowledged the industry will still play a key role in generating revenue for the Government. (IMC1)