The National Strategic Plan of Barbados also recognizes that these
strategic goals are to be accomplished in a world engulfed in change. It is
a world in which old arrangements are breaking down; new ones are
emerging that have the potential for either tearing apart the social fabric
of nations or for expanding wealth and creating new levels of prosperity.
The Tyranny of Economic Paternalism in Africa. Here the writer asserts that the economic maturation of developing countries can be looked upon as a process of adjustment on three planes: political and territorial, sociological and economic, and psychological. Frankel contends that none of these can be separated into hard and fast compartments but can be seen as a struggle that is both objective and subjective.
No government can respond to all the social needs of its people at the same time. However, Frankel makes some interesting illustrations in observing that “if a man cannot build a house when he wants it, for the purpose for which he needs it and of the size he thinks suits his needs and pocket; if he cannot buy a farm or a shop or build a workshop where he thinks he will serve a useful purpose; and if he cannot prepare himself for, or exercise, an occupation for which he discerns a need, then once again an economic activity has become a political privilege dependent on a political decision – which is not his”.
Our National Strategic Plan therefore prescribes that in such a world, it is
not possible for Barbados to go forward simply by varying our path of
development.
In today’s global economy where the barriers of insularity have been ripped apart and developing nations find themselves struggling to cope with soaring oil prices, management of the economy will be the primary focus of those on whom will rest the decision in determining who is best capable of captaining the ship of state in this sea of economic turbulence.
It would be appropriate, once again to indicate that the great economic
transformation required of us because of the nature of the new global
conditions began in earnest in 1998
AN ECONOMIC POLICY that has as its pillar the sale of land could only be a short-term measure for Barbados’ foreign exchange demands. What’s more, political scientist Dr Don Marshall contends that “sooner rather than later Government will have to come face to face with the challenge of earning the requisite foreign exchange necessary for us to pay for our goods and services, as we have become a highly consumer-driven society with middle-class taste. “There is a strategy that the Arthur administration is pursuing which is based on selling off the best of Government resources for the foreign exchange that could be had on the logic of the law of value. So land and key state enterprises are up for grabs, based on that logic,” the University of the West Indies academic argued.
We had also to come to terms with the challenges posed to our
international business and financial industries by the OECD; to adjust our
tourism strategies to survive and grow in a post 9/11 world.
Estwick said Barbados faced serious economic problems, including what he called “a debt crisis”, with $682 million needed annually to service the debt, with a low level of exports and with non-exporting sectors like construction eating up the badly needed foreign exchange. Unless Government came up with corrective measures, he said, the problems would worsen within the next 18 months to the point where the currency would face devaluation and there would be “further selling of state assets and land to pay off the foreign debt and service the deficit”, Estwick warned. The Government’s current economic policies would also “lead to increase in costs of payments for public services”, he argued.
He said that the heavy expenditures associated with the World Cup had “worsened our current account deficit position”, adding: “Our external debt has skyrocketed because of the World Cup.” He said the World Cup would not present a quick fix to Barbados’ economic problems. “Cricket World Cup is part of the reason the deficit is $525 million,” he said. “. . . You think the Cricket World Cup is going to bring $525 million in a month?”
Rather, it mandates that we engage in a great
transformation of our society that continues to place people at the centre
of our development, and calls even more deeply upon the great gifts of
adaptability and resilience which are the hallmarks of the Barbados way
of life.
We have reformed our indirect tax system to reduce our dependence on
taxes on trade to be able to function successfully in a liberalized world. We have also reformed our personal and corporation tax systems to move Barbados in the direction of being a low tax jurisdiction.
THE SITUATION with Value Added Tax (VAT) refunds in this country is getting out of hand and causing undue hardship to companies, especially companies that manufacture for export. All Barbadians have been made aware of the need to export more to earn foreign exchange and close the widening gap between imports and exports.
This is essential.
Both the Central Bank Governor and the Prime Minister and Minister of Finance have spoken in great detail about the fiscal deficit and have exhorted Barbadians to moderate their spending on imported goods and services. The other way of closing the gap is, of course, to earn foreign exchange by exporting goods and services, and here is where the VAT Department could be more supportive. Manufacturers in this country who export a significant percentage of their production are always owed money (refunds) by the VAT Department because of the disparity between input and output VAT, as the exported product does not attract VAT, therefore, there is nothing to offset against.
(In addition, some companies’ products are in the main zero-rated for VAT but the raw material inputs attract VAT).
PROMOTERS OF PUBLIC ENTERTAINMENT are reminded that they must be registered with the Value Added Tax (VAT) Division of the Customs and Excise Department at least 14 days prior to any scheduled event.
This advice has come from an official of the VAT Division, who explained that all tickets for public entertainment events, including all complimentary ones, must be stamped by the department at least 21 days before they are due to go on sale. However, the input tax credits will be reduced in proportion to the number of complimentary tickets. All supplies made by the promoter are taxable and these include ticket and bar sales, concessions to vendors, costumes, compact discs, toys and programmes.
In addition, he said the current administrative set-up at the VAT Office meant that manufacturers experienced “persistent and chronic” delays in receiving their VAT refunds.
“I propose that the qualifying registered exporters should no longer be required to pay VAT at the time of importing of the imputs – that is their raw materials, their packaging and their equipment,” the Prime Minister said.
“The qualifying criteria will be set in such a way as to ensure that the exposure of the VAT Division would be no more than it would be with a non-exporting company.”
The removal of VAT was just one of a number of proposals he revealed for the island’s industrial sector.
We have introduced major new incentives and supports to shore up all of
our productive sectors, and introduced modern legislation to encourage
the development of our small businesses.
Through a myriad of new financial institutions and arrangements
managed by Fund Access and The Enterprise Growth Fund, the
Government has provided the development finance to facilitate the redevelopment
of our productive system.
Over the past ten years, the Barbados Government has been very liberal in its expenditure, apparently in the supposed interest of economic growth. However, the growth has taken place mainly in the non-deficit in Government expenditure. It is an elementary error to confuse short-term cyclical variations of this nature that benefit a select minority with a long-term tax strategy for attaining sustainable economic progress, which is designed to benefit the community as a whole. The hard fact is that taxpayers are deprived the benefits of their money whenever there are changes in Government policy that result in a reduction in what is left of their income for spending on themselves, after all taxes including levies and national insurance contributions are extracted. One example is the response to the proposition put forth by the International Monetary Fund to raise the Value Added Tax (VAT) from 15 per cent to 17 per cent, as part of a package to reduce the deficit between the foreign exchange earned by Barbadians and expended by them.
Mr Mascoll went on to contend that raising the VAT is not the preferred option, because that process would be inflationary. Rather, [he said] Government had earmarked a portion of money from the National Insurance Scheme (NIS) for use as part of its public expenditure budget that would obviate the need to implement the IMF-proposed increase.
However, his proposed utilisation of funds from the NIS in this way merely serves to create an optical illusion, because he knows that the logic of his contention is valid only if he uses a very limited definition of what constitutes taxes to conclude NIS.
All of this is merely the first phase of the Great Transformation which
must be sustained to enable us to realize the goals we have set ourselves
in our National Strategic Plan.
In the past few years, a far-reaching programme of fiscal reform has been
carried out that has seen 26,000 persons taken off the tax roll, the first
25,000 dollars of personal income exempted from tax, the top personal
income tax rates brought down from 40% to 35% and the basic from 25%
to 20%. It has also seen the corporation tax rate reduced from 40% to
25%. The reform of the property tax system has also been carried out on
a comprehensive and unprecedented scale, relieving persons with homes
valued at under $125,000 from the payment of land tax entirely.
Castigating those who refused to pay their taxes, the Prime Minister said there were two Barbadoses.
“We have the small people who are afraid of the tax man and make sure they pay their taxes on time. Then there is a class of Barbadian who do not feel they must respect the tax rules. Even when you put in place a programme to help them, they completely ignore it. Yet they want to continue to enjoy access to the high quality of services that other people’s taxes must pay for.”
He added: “It is sad to say that there would have been no need to bring tax measures to the House if the Barbadian public, especially those in capacity to pay, were paying their fair share.”
Arthur promised there would be an aggressive programme to deal with tax defaulters.
He warned: “I have given the very clearest instruction to all revenue agencies that they must pursue this $400 million in arrears.”
Income Tax (Amendment) Bill, 2007, and the International Financial Services (Amendment) Bill, 2006, which were debated together and later passed, that the Owen Arthur Administration was “compressing” the middle class. “If you analyse what is happening, you already have a situation where those persons who earn less than $22 500 don’t pay income tax. “You already have low-income earners who own a home of less than $125 000 not paying land tax. You already have low-income earners who are renting a home who now have access to a Catastrophe Fund and can execute a deduction,”he said. “You already have low-income earners who can access a Catastrophe Fund directly because they are low-income earners. But the middle class earners in this country have to pay the land tax . . . Value Added Tax . . . income tax. “All of the pressures that the honourable member (for Christ Church East) spoke to as being removed from the low-income is being concentrated on the middle income persons in Barbados. One only has to speak to any one of them; they’re under significant pressure,” he said. Estwick had some questions for Minister of State in the Ministry of Finance Clyde Mascoll.
He asked if the measures being introduced would allow for a reduction in the revenue collected by Government within the next financial year, and if he was expecting “to have a windfall increase on the income side from VAT.
“These are fundamental questions because we’re talking about fiscal policy,” said Estwick.
Despite this massive programme of tax relief Government’s fiscal
position has remained strong and indeed has improved with the fiscal
deficit this year projected to be 1.9% of GDP, well within the target and
about 2.7 percentage points lower than that for 2005.
Our foreign exchange reserves have remained in a very sturdy condition.
Like all other nations, Barbados has had to borrow to support our
development programme. We continue to service our debts on time and
will continue to do so for the foreseeable future.
But the growth in our national debt requires that we make early corrective
adjustments to some of our macro economic policies to avert the
debilitating debt problem that has overtaken some countries.
There is also evidence that the strength of our social capital and the
functioning of some areas of the social sector, especially the health sector
need to be improved and to be provided with greater resources.
A $4 MILLION GRANT has been handed over to the Barbados Government to help with the reform of its health sector.
The cheque was presented to Kerrie Symmonds, Minister of State in the Ministry of Foreign Affairs, by Amos Tincani, head of the delegation of the European Union (EU) Commission in Barbados, at the PomMarine Hotel last week, where the EU held its 50th anniversary celebrations.
The money, which is the second tranche of a BDS$25 million grant, has been provided under the 9th European Development Fund (EDF) programme to support the Government in implementing the 2002-2012 Barbados Strategic Plan for Health and will go directly to the Ministry of Health’s budget instead of being designated for specific activities or projects as has traditionally been the case with project type aid…This brings the total handed over so far to $6.45 million and will assist areas such as streamlining management functions for increased efficiency at the ministry, health information systems, home and community based care for the poor, cardiovascular diseases and HIV/AIDS.
THE BARBADOS FAMILY PLANNING ASSOCIATION (BFPA) will ask Government to increase its subvention, particularly now that there are plans for the facility to be overhauled and its programmes and expanded.
“Last year we were able to get an increase from Government, after not having one in seven years. So certainly we will be applying for an increase this year because we really want to expand our work. “We want to do more in the community. In fact we had to scale down some of our operations because we just did not have the money. “We are looking forward in the near future to formulating a project that will see us reach out to commercial sex workers in Barbados . . . where the action is to engage people in discussion about HIV/AIDS,”
“If we had the additional funds, there would be so much more that we would be able to do,” he said. But with an annual budget of $1.7 million, Griffith said “there was no more fat to cut and if we keep cutting we will be cutting bone”.
The list could go on, but I implore you to read this for yourself and see what is actually being done.
