BRIDGETOWN: The Government of Barbados says it intends to sell off some assets as it moves to reduce the fiscal deficit by March 2015.
While presenting the Appropriations Bill in the House of Assembly on Monday, Finance Minister Chris Sinckler announced several new tax measures, including an increase in gasoline prices and the sale of the Barbados National Terminal Limited to help ease the financial burden facing the Freundel Stuart government.
In response, Opposition Leader Mia Mottley warned Barbadians they can expect more taxes to be imposed during the coming fiscal year as a result of the revenue-raising measures announced by Sinckler.
She described the new revenue-generating measures as an ambush, adding that the proposed new energy taxes comprising the removal of the subsidies on diesel and a BDS$0.20 cents (one Barbados dollar = US$0.50 cents) increase in excise taxes on gasoline from April 1, will also affect households.
Sinckler told legislators that in the period 2005-6, subsidies and transfers were estimated at BDS$782.1 million, increasing to as much as BDS$1.137 billion by 2007-8. He said the figure increased by another one billion during the 2009-10 period.
“This shows that expenditure has been growing, whilst the revenue has been shrinking. These things began from around 2005 to show up structural problems in the government finances.
“It is popular for the other sides and others to give the impression that it was due to government’s fiscal indiscipline and all of these things to give the impression that this entire story can be told from the beginning of January 2008,” he said.
Sinckler said that no one expected the scale of the financial crisis which arose from the financial crisis which gripped the world in 2008.
“We know that business cycles go up and business cycles come down and that it was inevitable that we would have a global recession, because that is part of the nature of the business cycle,” he said. “However, nobody expected the financial crisis would have been so devastating to economies across the world and particularly to our major trading partners. We never expected that it would have lasted this long and drag on.”
Sinckler said the government continues to have a problem with a shortfall in revenue, particularly with respect to personal and corporate taxes.
“The situation is a major worry to the Government especially as it relates to the contribution of the International Business and Financial Services sector,” he said, noting that because the retrenchment process in the public sector had not been totally completed at the time of the preparation of the Estimates, they could not be fully reflected in the document.
However, Sinckler said once the process is completed along with the reforms of 19 state institutions, government will realize additional savings of about BDS$40 million by the end of 2014-2015.
“It means therefore we will be left with a shortfall of BDS$105 million to get to our target,” he said, adding “in accounting to get to our desired target it will be necessary for Government to make additional adjustments of $145 million”.
The Finance Minister said in order to close the BDS$105 million loophole, the tax applied to Bank Assets will be extended to all financial institutions effective April 1, 2014 and is expected to raise an additional six million dollars.
Sinckler acknowledged that there would be an “immediate impact on motorists” as a result of the new tax, adding also the government expects the Barbados National Oil Company (BNOC), “to remit…both the 2013 and 2014 dividend to the Government which will account for BDS$24 million in additional revenue coming into the Government account”.
Sinckler said the sale of the Barbados National Terminals Limited would raise at least BDS$70 million.
“Of these two revenue measures Government expects a minimum of $123 million to come into the Consolidated fund by March 2015,” he said.
However, Mottley said that the government was introducing as much as BDS$100 million in additional taxes on the population.
She said the new taxes would force some people to put down their cars and push owners of enterprises who rely on their vehicles to transport commodities, to the brink of insolvency.
“The government has runaway expenditure, but worse, an implosion of revenue; our revenue has collapsed. And as a result of the revenue collapsing, expenditure still up in the vicinity of BDS$3.8-$3.9 billion, the financing of government deficit, has become the most critical problem facing this country, so that you move now from unsustainable fiscal deficit to a financing problem, that by reason of the choice or manner of financing, short-term financing through treasury bills by the Central Bank printing money, the reserves have been put under pressure.
“What is of more concern is that if you could not achieve BDS$120 million adjustment in seven months announced in the budget in August; BDS$88 million in expenditure cuts, and BDS$36 million in revenue, how, pray tell, are we going to achieve a BDS$510 million adjustment in 12 months?” she asked.
Mottey told legislators that the BDS$120 million adjustment meant that banks and other financial institutions, which would now be subjected to increase taxes on their assets, will pass them on to consumers.