Independent Senator Crystal Drakes on Monday delivered urgent pleas to the Mia Mottley administration to lower the income tax on an overburdened middle class and offer reprieve on private pension plans.
During the post-lunch session of the debate on the Appropriation Bill, 2024 the economist rapped the government for not doing more to address the high cost of living as she warned that the middle class cannot bear any more pressure.
“The first plea that I have is a reduction in income tax for those in the tax band between $25 000 to $75 000 per year – what we call the middle class, persons starting between $2 500 and $6 000 per month,” she said.
Drakes argued that the disposable income of the middle class has been eroded due to the inflationary effects post-COVID. She noted that the group which has been supporting their households and other relatives while paying for government services has been carrying the country’s economic burden for too long.
“I say that is unjust because they have been bearing the brunt for a long, long time. They need breathing room as well because, as I said, they don’t qualify for welfare and they don’t have large savings. Many of them are one pay cheque from having no clue about where they can sleep, how they will pay the mortgage, if they will have a car to drive, how they will buy food; they have no clue, one pay cheque away. They are relying on that paycheck every single month. There must be a way for the government to give them breathing room,” the senator pleaded.
“I am asking if the government cannot relook the personal income tax for that tax bracket, that the first taxable income bracket goes up to $75 000 a year; it is now at 12.5 per cent. And because we have changed the structure of the tax regime for companies and the government is anticipating $300 million more from corporate income tax, why can’t we not see a reduction in personal income tax that will directly affect their ability to see money in their hands? Whether it is two per cent, one per cent, I am telling you it will make a difference. They are carrying too much load…. I don’t understand how this was overlooked. Somebody is not talking to the right people.”
Noting that the economy has three main actors – the State, firms and households – she warned that it cannot function if households collapse.
“How are you going to get the four to five per cent growth if the bottom of the middle class falls out?” Drakes questioned. “We do not understand that there’s a glaring, glaring exemption in terms of making direct intervention on how households, particularly those in the middle class are surviving in Barbados.”
Senator Drakes then proceeded to make an equally strong case for the government to scrap the high withholding tax on private pensions, noting that pensioners who choose to take 100 per cent of their pensions lose a substantial portion of their savings to taxes.
“Do you know how much the government is asking you to pay in withholding taxes?… It is 25 per cent, a quarter of your money, if you say I want the lump sum. It is the highest rate in the Eastern Caribbean. Even if it has always been, it is wrong.”
The independent senator further questioned why the government had failed to give back the tax allowance on private pensions so that current workers would not have to depend only on NIS pensions, as she noted the island’s ageing population.
(SD)
