#BTColumn – Taxation policies 2022

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

by Ann Walcott

The Sunday Sun reports Bishop Joe Atherley has called for a 2.5 per cent reduction in VAT. The BLP “Advisor” and UWI Professor caution some tiny adjustment might be possible, providing it did not interfere with the IMF programme.

I disagree. An examination of past taxation policies will show that we did not always depend on VAT, or any Sales Tax to produce the revenue to run the country and that it is exactly this Barbados Labour Party policy shift from direct to indirect taxes in the last 25 years which has caused many of the problems we now experience by unfairly increasing the cost of essential goods and services

The reality is far more might be done to relieve the enormous tax burden placed on the majority of working Bajans if the BLP were not so deeply committed to preserving their right wing tax agenda begun in 1997 and instead considered a more fair and equitable distribution of the tax burden according to who could afford to pay and not lumber the lower and lower-middle income brackets who are struggling to afford even the basics with an unfair portion of the cost of running the country whilst constantly reducing the share paid by the biggest corporations
and the highest earning brackets.

Anyone under age 40 is of the post-VAT generation and takes for granted that VAT should provide the bulk of Government’s tax revenue and therefore VAT cannot be touched because any reduction could leave Government short of funds to meet its IMF targets.

VAT did not exist prior to 1997 and Barbados did not have any sales tax – the short-lived 5 per cent imposed by Errol Barrow to lift Government out of the hole dug by the 1973 Oil Crisis cost him the 1976 election and Tom Adams removed it shortly after.

The majority of Government’s revenue was provided from Income and Corporation Taxes levied on higher salaries and customs duties collected on imported goods. Not many workers prior to the 1960s reached the threshold to pay Income Tax and there were no taxes on locally manufactured goods and services, which gave them an advantage against the imports which VAT removed. P.A.Y.E was introduced (I think) 1965, or 1966, and more workers found taxes being deducted from their salaries but the basic allowance spared those at thebottom, although they did start to pay NIS at very low rates compared to today.

The very concept that essential services and utilities such as electricity, water, cooking gas and telephone should be taxed was unthinkable to leadership determined to bring modern development and raise the standard of living of ordinary Bajans.

The Skipper’s five per cent taxed only purchases of goods and I suspect that if any “advisor” had suggested to him, or to Sir Grantley, or Tom that Government should make money off people’s electricity bill, far less water and cooking gas, when they were just trying to ensure provision of such services to the entire country, much of which could not afford such ‘luxuries’, I suspect the proverbial boot would have impacted that advisor’s behind and he would have been out the door and down the stairs before he had time to blink.

I still find it shocking that any Barbadian Prime Minister would have considered it palatable to increase an electricity bill by close to 20 per cent by means of taxation, far less imposed what to users of minimum usage of water amounts to a 145 per cent tax (46.5/32 per cent).

Who in his, or her, right mind thinks it justifiable for example that seniors with severe pain and ‘mobility’ problems should pay an extra $5.63 tax on a tube of Voltaren? Don’t dare suggest that getting it on prescription would remove the VAT, because the prescription would cost a $100 doctor’s visit.

I find it unconscionable that this Government considers the above to be reasonable sources of revenue in preference to taxation of huge corporate profits, but then I was raised in a different era – the time when Civil Rights, progressive taxation and improvement of the human condition was considered important after the destruction the Great Depression and WWII had created such misery and suffering throughout the world.

In Sri Lanka the IMF have recently suggested that Government needs to raise taxes to increase revenue in order to bail them out of a similar situation, yet in 2019 the “IMF tax reform team here working with Government” actually advised the BLP administration, who claimed we were in similar circumstances, to give away tax cuts to corporations and the high earners, something I have never been able to understand.

I am asking Dr. Kevin Greenidge, Professor Robinson and the other experts to explain to Bajans how it is that an administration which claimed it could not pay its debts and seized and locked up seniors’ savings and pension funds for 15 years, even for those about to retire and dismissed thousands of Government workers who because of the dire unemployment situation were unable to find other jobs, could reduce direct income taxes by millions of dollars which they gave back to big businesses and those earning over $5,000/month, yet now they cannot reduce (I’d prefer REMOVE) the VAT on basic needs that is killing us.

I am awaiting my electricity bill to see if the “cap” on VAT on fuel includes the fuel charge. We should never be paying Government a tax on this fuel charge, especially when fuel prices are so artificially inflated by the speculation and price gouging from the oil suppliers who are taking advantage of a war to enrich themselves.

If the fuel “cap” applies only to vehicle fuel and not to fuel on electricity this will show once again the short-sighted reactionary behaviour, without fully thinking through the consequences, of this myopic Government.

For parents trying to keep the lights on so their children can do their homework to have to pay extra tax on an artificial rise in fuel costs is cruel and to have this revenue replace the revenue given away to large (many foreign) corporations and the richest citizens is atrocious. Having to pay 145 per cent tax on WATER is absolutely sickening.

The root of our current problems and the increasing cost of living is in fact the tax policies of this Government as expressed by Dr. Greenidge at a BCCI luncheon in February 2020 that “we are shifting from direct to indirect taxes moreso” and as explained to me personally on the phone by a very senior member of the BLP in 1997 when I wrote a criticism of the introduction of VAT that once the revenue from the VAT was realized they would be reducing income tax rates on ‘people like me’.

These two statements by BLP big shots and advisors were followed by huge tax cuts in 2001-03 (Income Tax), 2004-07 (Corporation Tax 40 to 25 per cent) and in 2018 (Corporation Tax 35 to 5.5 per cent) and 2020 (Income Tax).

There is a reason Bajans feel there are two separate Barbadoses, because there are – those earning less than $5,000/month who bear (because of VAT and indirect taxes) the vast burden of the cost of running the country and those earning above $6000/month and businesses who have received huge bonuses in the last 25 years.

I am in the process of mining past tax returns for rates, allowances and NIS data for subsequent articles since few young professionals today have any concept of our pre-VAT economy, I have returns going back to 1979, but nothing with the changes Tom Adams made in the late 1970s. Prior to 1992, we had numerous income tax rates which increased (if I remember correctly) 5 per cent either every $5,000, or $10,000. Tom changed this and reduced the number of rates.

After the IMF progamme of 1992 there were only two rates, one up to the NIS Maximum and one above. Since NIS was not allowed after 1992, I have scanty information on the NIS rate changes. If anyone has information on the Tax and NIS rate changes going back to 1976, I would be grateful for the information.

You can contact Barbados TODAY for my email. I believe a wider knowledge of the full scope of our tax history would help young economists to craft a fairer and more equitable tax and NIS system which could aid in the development of our economy.

We MUST NOT depend totally on indirect taxes heavily impacting the lower income brackets or we will go the way of Jamaica with poverty, crime, drugs and murders increasing, as they are now, to the point where they destroy this Island which I love.

Ann Walcott is a veteran commentator on issues of national interest.