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by Ann Walcott
Barbados TODAY reports that “The Mia Mottley administration has been advised to find another source of funding to pay public servants’ pensions as its continued use of government revenue to do so is now “unsustainable”. It continues “The current approach of funding retirement benefits out of current expenditure is unsustainable and places a significant and growing demand on current revenue to continue to meet these obligations,” Co-Chair of the BERT Monitoring Committee (BMC) Trisha Tannis stated in the committee’s latest report for the period ended March 31, 2022.”
How disgustingly ironic, Miss Tannis is the successor to Ed Clarke as Chairman of the Barbados Private Sector Association who in November 2018 recommended Government reduce the Corporation Tax charged on business profits from 30 per cent to a maximum of 5 ½ per cent. In her June 2018 budget, Miss Mottley considered raising Corporation Tax by 5 per cent which she said would increase Government revenue by $57 million. In reducing the Tax by 24 ½ per cent this reduced revenue by almost $280 million.
This huge giveaway to big business was followed in the March 2019 Budget by recommendations from a special IMF team, led by Dr. Kevin Greenidge, to reduce Income Tax rates in line with the reduction in Corporation Tax.
Those earning less than $5,000/month had their small reduction of 3 ½ per cent offset by the 1 per cent increase in NIS due to the transfer of health care expenses to the NIS by means of a Health Levy and the water and fuel taxes, in addition to losing the Child Allowance which cost them another $125-250 in tax. In other words, their taxes went UP.
Those earning from $5,001 – 6,250/month received a hefty reduction of 21 per cent on the excess over $5,000. They had their Health Levy, Water and fuel tax offset by the reduction up to $5,000 and then got an additional extra tax cut of $3,150 per year. Those earning over $6,250/month got a reduction from 40 to only 28 ½ per cent (11.5) on the excess, so they received $115 for every extra $1,000 above $6,250 plus the $3,150, therefore those earning $10,000/month received a nice gift from the Government of $5,175 plus the $3,150 for a total of 8,325/yr. At $20,000/month they received gifts of $18,175+3150=$22,125.
Since these massive giveaways to Corporations and those earning over $75,000 annually, we have heard a constant refrain from Government that they cannot afford this, that and the other expenses which previously came out of revenue – the same revenue that they found they could afford to give away in 2018/19 and now, therefore, they must find other ways of funding these expenses. Inevitably, the cost then falls on the lower and lower-middle income earners who are already struggling to pay basic expenses like rent, food, transport to work, far less raising children, and it seems that these recommendations come most often from the Private Sector organisations – the same ones who benefitted most from the recommended big tax giveaways.
I recently discovered on the NIS website a long list of expenses that had previously been funded from Government revenue, which have been transferred as Levies to NIS and have absolutely nothing to do with our pensions or benefits – one of the reasons our contributions keep going up, while pensions remain low. This included non-contributary old age pensions and financial aid to low-income earners whose homes are damaged/destroyed in a disaster as well as many other items. It also includes of course the 2 ½ per cent Health Levy imposed in June 2018. I suspect they are now angling to have Government pensions fully funded out of NIS and have Government workers accept reduced pensions.
By transferring expenditure out of Government revenue onto NIS this shifts the expense from those who pay taxes at the top end to those at the very lower end even below the $25,000 tax allowance and it comes out at a higher rate as NIS is charged only up to a maximum, currently $4,880/month.
Since 1973 Government workers pay into NIS and receive pensions up to the NIS maximum, Government now has ceased to pay most of the pensions and only pays the excess over the NIS Pension. It seems they are now looking to land the rest of us with this expense to help compensate for the shortfall in Government revenue which resulted from the consecutive tax giveaways designed by the BLP and beginning in 2001 to enrich the high earners and businesses while funding the cost of running the Government out of the pockets of those in the lower income brackets by means of VAT, indirect customs and import duties and other “service fees” such as the Water Tax and Fuel Tax, Health Levy, etc.
Once again under the BLP, it is the lower income (under $5,000/month) and pensioners who will suffer as with the seizure in 2018 of pre-retirement seniors’ pension savings at Central Bank, the dismissal of many seniors from Government jobs, despite promises of last in, first out (which did NOT happen), stopping payment of two pensions to Government employees, additional taxes such as the On-line tax – which is in fact much higher than VAT as I discovered to my dismay when attempting to buy a book on economic history on Amazon at the US $27 with added B’dos Taxes of US$20, which almost doubled the cost to over BD $100.
Anyone who doubts that the BLP is in fact the party of big business and the rich has only to look at the history of changes in taxation in Barbados beginning with the imposition of VAT in 1997 and note also the number of times these recommendations came from representatives of the Private Sector organizations, while the Unions seemingly remain silent.
In my opinion, the BLP no longer has the right to call themselves a “Labour” party as their policies since 1996 benefit mostly the upper-middle and upper economic brackets. Now with rapidly rising inflation, they deny the Government workers the needed increase to allow their families to survive, as well as threatening workers’ pensions, after giving away huge tax cuts to those at the top in the midst of what was supposed to be a financial disaster.
Ann Walcott is a veteran commentator on issues of social, economic, and political interest.