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RIGHT OF CENTRE: New Govt taxes, fees raise prices

Douglas Skeete

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IT?WAS NOTICEABLE in 2007 that prices were on the rise.
Back then, the United States economy started to feel the fallout from the sub-prime mortgage debacle.
This would lead eventually to the failure or near failure of a number of large American financial institutions carrying worthless mortgages that contributed to the recession.
It was also a time when crude oil prices for the first time had gone as high as US$140 per barrel.
In Barbados, consumers were also feeling the effect that increases in the price of food, housing, transport and other goods and services were having on their disposable income.
There was a lot of talk then of the high cost of living, price-gouging and that the then Government was in bed with merchants, thereby contributing to these ailments.
The end result was an electorate convinced that a remedy was possible if there were a change of Government. The mantra of the suitor was that it would make the high cost of living job number one, two and three.
But alas, some things are easier said than done.
The electorate responded to the clarion call and charm of their suitor and the longed-for change came in the first month of 2008. But local food prices continued to spiral upwards even when the price of crude oil abated.
At first we were told that Dominica could supply us with enough fruit and vegetables to drive down the prices of those local commodities but for some unknown reason that solution seemed not to have borne fruit.
There was the constant Government reminder that if distributors and retailers refuse to control prices, it would have no choice but to invite the big United States retailer Cost-U-Less to our shores and bring relief that others have either been unable or unwilling to provide.
Government has not said much about whether these proposed ventures have taken off and if they have, what success they have achieved to date.
Prices continued to rise and consumers complained about Government’s inability to bring some relief.
Since the July 2008 Budget, the Minister of Finance has imposed $104 million in highway taxes, professional and licence fees, among others. These impositions were meant to close the fiscal deficit gap, remove pressure on foreign reserves and reduce the need to borrow.
These measures have not been successful as the fiscal deficit continues to widen, Government borrowings have increased and control over expenditure has been poor.
The one saving grace in all of this is that the foreign reserves have not deteriorated enough to cause alarm.
Government’s second Budget on May 18, 2009, did not repeat the level of impositions of its first Budget. However, the new Finance Minister last November attempted to deal with a number of structural problems that continue to destabilise the economy.
Fiscal measures in the 2010 Budget were just as imposing as those in 2008 or even more so – in addition to seeking $124 million in additional VAT by increasing the rate from 15 per cent to 17.5 per cent, it also sought to raise revenue from excise tax, immigration fees, drug service fees, bus fares, the removal of tax-free travel and entertaining allowances, and the allowance for credit union and mutual fund contributions.
One can submit therefore that the VAT increase will contribute to an increase in food and other prices.
There was also the argument that the 2008 Budget impositions fuelled inflation since professional, licence and other fees would have been passed on to consumers.