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EDITORIAL: Spend less, save more

rhondathompson, [email protected]

EDITORIAL: Spend less, save more

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TOUGH TIMES ARE a challenge, but they often bring out the strength of character and adaptability of a people. Barbadians are known for their resilience and we are convinced that though the period of austerity confronting this country could be long and quite severe, our indomitable spirit will see us through.
As a people, the key thing for us is to focus on meeting our needs rather than trying to satisfy our wants. Though this is easier said than done, the reality is that many people will have little choice in this as the measures imposed in Monday’s Budget will increase costs while at the same time reducing salaries, especially in middle income households.
The particular measures of which we speak are firstly, the 50 per cent hike in excise tax on gasoline. This will increase the costs of operating vehicles for both individuals and businesses, so we can expect a rise in the costs of goods and services.
To reduce costs, householders will now have to consider the necessity of the number of trips they make, while those who send their children to school via shuttles or take taxis themselves, may face higher rates as this tax will cut into those operators’ bottom line.  
The second is the elimination of allowances for travelling and entertainment for employees commencing in this current income year. These allowances are usually paid to supervisors to managers and were used by many companies to increase the disposable income of these employees in the face of consistent price rises.
 These are often the people who tend to have mortgages and vehicles to pay the bank for monthly, as well as the ones who take annual holidays overseas. The effect of this measure on some of them could be devastating.
In their analysis of the Budget, Ernst & Young best sums up the impact this measure could have saying: “This measure will lead to individual taxpayers, who travel and entertain in the course of their employment, suffering tax at the rates of 20 per cent and 35 per cent, where applicable.”
 Evidently, this affects the employees directly, but in due course may also increase the cost of doing business, as employees seek to recover this shortfall by demanding higher wages. The effect of the above measure on the take-home pay of employees who travel and/or entertain in the course of their employment may be substantial. . .
“In addition . . . the fact that the allowances will be eliminated during the 2010 income year will impact greatly on taxpayers, as the deductions currently made by employers under the Pay-As-You-Earn system for the months of January to November 2010, would have taken into account the application of the allowances. Their elimination will mean that taxpayers have to obtain funds to pay for this increased liability from their current cash resources.”
The third particular measure that will impact households significantly and which should serve to encourage individuals to focus on their primary needs is the increase in VAT from 15 per cent to 17.5 per cent.
This in itself would have resulted in higher prices for goods and services to householders, but taken with the increase on the excise tax for gasoline along with a reduction in take-home pay by those affected by the taxing of allowances, can have a crippling effect on quality of life.
With Christmas around the corner it will be interesting to see just how the combination of these measures will impact on the season. It is hoped that Government will review the basket of basic foodstuff and other items and VAT will continue to be zero-rated on them.
The fourth and fifth measures are the payment of user fees for prescriptions filled in private pharmacies from April 1 and the increase in bus fares by 50 cents.
In these circumstances we urge householders to budget more than ever before. Take control of your finances and limit the use of high interest credit cards; spend less on fast foods and take the time to prepare meals for lunch; and walk more and drive less.     
We can make several other suggestions, but the bottom line is that the less we spend the more we will have to save for any eventuality. And in these perilous times, this is a necessity.