University of the West Indies (UWI) economics professor Justin Robinson has questioned the creation of a new state-owned enterprise aimed at easing the way Barbados does business proposed in Monday’s Budget.
The academic has also expressed disappointment that the more-than-four-hour presentation by Prime Minister Mia Mottley lacked “fiscal arithmetic” or supporting documentation.
Professor Robinson, a professor of corporate finance and principal of UWI Five Islands, made the comments in his analysis of the Budget which places heavy emphasis on priming the pump for private sector investment.
Reacting to Mottley’s statement delivered in the House of Assembly, Professor Robinson said: “The 2024 budget speech and proposals are heavily focused on facilitating and incentivising private sector investment in a variety of traditional and emerging areas. I am of the view that such a focus is entirely appropriate and I applaud the government for such.”
But, while supportive of the overall focus, Professor Robinson expressed scepticism. “While I support and applaud the focus in the budget, I am not yet persuaded as to the efficacy of a number of the proposed measures in achieving the desired ends and the cohesion of the new investment and corporation tax regime.”
Professor Robinson has questions about plans to establish Business Barbados which the prime minister said will be a critical arm in the “investment architecture” of the country, focusing on ensuring all the services from pre to post-incorporation of companies are seamless.
“It is not clear to me that the creation of a new entity, Business Barbados, which has to become operational and navigate a path around the existing entities is a surefire way to enhance the ease of doing business in Barbados, but only time will tell and I wish the new entity well,” the university principal said.
The 15-point economic strategy which Mottley outlined in her Budget emphasised economic growth, national resilience, and shared economic benefits. It includes public-private partnerships, modernising the tax system, unlocking the mortgage market, increasing access to financing for the private and public sectors, monetising illiquid and derelict assets in the public and private sectors, incentivising a vibrant creative industry and film industry, and unblocking renewable energy investments.
But Professor Robinson called for further clarity on the details of a number of the initiatives, especially those around unblocking investments in renewable energy, which he contended were presented in a “very general way” in the Budget presentation and supporting documentation.
The UWI academic again expressed “serious” doubts about the success of the proposals which demonstrated a major shift in the corporation tax.
His uncertainty also relates to the raft of tax credits “with a new regime around concessions or so-called tax expenditures and the introduction of probably the largest number of investment-related tax credits presented in a budget in Barbados”.
“I am open to persuasion,” Professor Robinson insisted, “but I harbour serious doubts about the effectiveness of corporation tax credits in stimulating investment in a context where the corporation tax rate is already at such a low level.”
The university professor added: “The 2024 Budget includes a number of fiscal measures which are important, well-intentioned and may well boost growth in the economy which is a key element in achieving the debt to GDP target. However, I find the absence of any fiscal arithmetic in the budget presentation or supporting documentation somewhat disappointing.”
He grounded his disappointment in the fact that he was unable to assess the fiscal impact of the budget and in particular its impact on the achievement of the debt-to-GDP target and the financing needs of the government for the 2024/2025 financial year.
“The administration made a special effort to find fiscal space to provide some eases and incentives to residents of Barbados and this is to be applauded. The Budget rightly focused on facilitating and incentivising private sector investment, but there is scope for debate among reasonable people as to the efficacy and clarity of the proposed measures.
“I am not yet persuaded as to the efficacy of the combination of a low and highly competitive corporation tax rate, incentives targeted at reducing that already low and highly competitive effective corporation rate and the restriction of concessions on the high VAT and import duties.”
The prominent economist contended that only time will tell the effect on the ability of Barbados to attract and retain private investments.
“As a citizen, I am thankful for the eases at the personal level,” he concluded.
emmanueljoseph@barbadostoday.bb
