Home' Trinidad and Tobago Guardian : June 1st 2017 Contents JUNE 1 • 2017 guardian.co.tt BUSINESS GUARDIAN
VIEW | BG3
BG VIEW ANTHONY WILSON
Chief editor business
Editing and design
NATASH SAIDWAN OFFICES:
4-10 Rodney Road,
PO Box 122.
Telephone: 225-4465, ext 2035, 2025
Fax: (868) 225-3147 (Editorial)
Fax: (868) 623-2050 (Advertising)
Will Imbert follow Sinckler
in raising taxes...again?
On Tuesday afternoon, the Bar-
badian Minister of Finance and
Economic Affairs, Christo-
pher Sinckler, presented the
island's 2017 budget to the
Barbados House of Assembly.
That presentation is important, not only
because there is a great deal of T&T money
invested in Barbados (including ANSA McAL,
the Massy Group and the Mouttet family) but
also because a large number of T&T citizens
visit the island for the long vacation every year
and several of the hotels in Barbados are owned
by local interests.
But Mr Sinckler's 2017 budget is also impor-
tant for T&T consumption because Barbados
is a significant export for T&T manufacturers
and the policies implemented by Barbados may
foreshadow fiscal developments here when
T&T's Finance Minister, Colm Imbert rises to
deliver the 2018 budget in September.
The economies of Barbados and T&T are
similar in some respects and they are different
in other ways.
On the one hand, Barbados has a debt prob-
lem that is much more severe than T&T's (144
per cent of GDP vs 61 per cent) and the servic-
ing of debt absorbs a much larger percentage
of Barbados' total expenditure than T&T's (41
per cent vs 15 per cent). As well, Barbados is
much closer to running out of foreign exchange
than T&T (just under three months import
cover vs just over ten months import cover).
On the other hand, both countries are heavi-
ly dependent on one industry to generate a sig-
nificant percentage of their foreign exchange
revenue and the governments of both islands
have faced recent difficulties in attempting
to bring their total expenditure in line with
In fact, the fiscal deficit in both islands was
estimated at six per cent of gross domestic
product (GDP): in the case of Barbados for the
period ending March 2017 and for T&T for the
period ending September 2017.
What is most interesting about Mr Sinckler's
2017 budget presentation is that it envisages
a small surplus, which means that Barbados
proposes to achieve fiscal adjustment of about
six per cent of GDP in the current fiscal year,
which runs from April 1, 2017 to March 31,
2018. It is also useful to note that the five-year
term of office of the ruling party comes to an
end in February 2018.
How does a party facing a general election
propose to balance its budget in the current
fiscal period, when it could not do so for eight
consecutive fiscal years?
• Huge increase in the National Social
The levy is effectively an import tax that was
introduced in September at two per cent. The
levy was increased on Tuesday to ten per cent
on all taxable imports and domestic produc-
tion. The increase becomes effective on July
1 and it is anticipated that the measures will
yield B$291 million over the full fiscal year.
The measure will effectively raise an additional
B$186 million from the increase in the NSR and
an additional B$32 million from VAT.
Of the levy, Mr Sinckler said: "Like the VAT,
it has become an efficient tool for gathering
tax revenue, but without many of the admin-
istrative and process challenges of the VAT.
It is also a preferred method of revenue gen-
eration because it exempts critical sectors as
per its original design, is charged predomi-
nantly at the port on imports and compounds
the VAT for additional coverage.
"It can also have a dampening effect on im-
ports, hence reducing the demand for foreign
exchange, shifting the consumption patterns
more towards domestic consumption and
By my estimate, about half of the fiscal
adjustment that the ruling party in Barbados
has imposed on the people is coming from the
five-fold increase in this import levy. Because
most of what is consumed in Barbados is im-
ported, that policy measure is likely to mean
a significant increase in the island's cost of
living with the burden falling hardest on the
middle-income households, which have seen
their standard of living deteriorate every year
of the last eight.
• New commission on foreign exchange
Effective July 1, a broad-based foreign ex-
change commission be charged on all sales
of foreign currency at a rate of two per cent,
extending all wire transfers, credit card trans-
actions and over-the-counter sales of foreign
currencies. The measure is expected to raise
B$140 million over a full fiscal year. In intro-
ducing the new commission on foreign ex-
change transactions, Mr Sinckler made it clear
that the measure was "in an effort to signal the
need to reduce the demand for consumption
goods," adding that "more has to be done to
stem the demand for foreign exchange, par-
ticularly the demand for consumer durables."
• Increase excise on gasoline and diesel:
Effective June 1 (today), Barbadians will have
to pay an additional B$0.25 per litre, which
takes the excise from B$0.74 to B$0.99 and
on diesel by B$0.24 from B40.20 to B$0.44.
The Barbadian finance minister said of the fuel
excise: Given the continued relatively subdued
levels of price increases for both the world
oil and imported refined products, we have
determined that an increased excise would
be useful in assisting government to meet
its deficit reduction targets without placing
undue burden on Barbadians;
• Debt reprofiling:
The minister of finance envisages that the
government would save in the region of B$70
million in interest expense if the Central Bank
of Barbados and the island's National Insur-
ance Scheme engaged in "discussions for a
possible swap programme where they and
government can reissue some existing se-
curities in their portfolios at lower interest
rates agreed by the parties."
• Increasing the tax net:
The Barbados Revenue Authority (BRA) will
establish a special task force to establish a
national tax administration registration in-
itiative, aimed at ensuring that all of those
persons who are operating businesses, are
self-employed, sole trader or professionals
and artisans are registered with the BRA.
• Divestment of the Hilton Hotel at
Needham's Point which is currently held
under the portfolio of the Needham's Point
Holdings Ltd, which has been valued at
US$100 million (B$200 million) with the
minister hoping to receive US$50 million
net of debt.
Why has the Barbadian minister of finance
adopted such a hostile approach to the cost
of living in the country, by increasing an im-
port tariff by a factor of five, imposing a new
foreign exchange tax and increasing the duty
on gasoline and diesel?
My own view is that these measures are
meant to reduce the demand for foreign ex-
change, while raising some revenue, which
would help Barbados close the gap between
expenditure and revenue.
On the other hand, if everything becomes
more expensive, it probably means that fewer
goods would be traded in Barbados and there
would be a reduction in the amount of goods
the island imports.
But most of all, the 2017 budget measures
are meant to ensure that Mr Sinckler can keep
his promise to the Barbadian people not to
interfere with the value of their currency, even
though by the new taxes achieve the same
end of reducing the value of workers' salaries
Will Mr Imbert be tempted to go in the di-
rection of sharply increasing consumption
taxes on the T&T population as a means of
avoiding correcting this country's grossly
overvalued exchange rate?
As Mr Imbert made clear in his mid-term
budget presentation last month, he is just
as stout in his defense of the exchange rate
as the Barbadians: "With respect to the ex-
change rate, we have also made it clear that
we will work in tandem with the Central Bank
to ensure that there is an orderly and stable
exchange rate regime, based on foreign ex-
change inflows and the demand for foreign
exchange, with a suitable focus on the facil-
itation of exports. There will be no drastic or
sudden depreciation of the currency."
If he is defending the currency, does he
have any choice but to ensure there is no
Barbados Finance Minister Chris Sinckler
Minister of Finance Colm Imbert
Links Archive May 31st 2017 June 2nd 2017 Navigation Previous Page Next Page