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THE ISSUE: A balancing act with consequences

Natasha Beckles

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AS?MINISTER?OF?FINANCE?CHRIS?SINCKLER brought his 2010 Budget to a close last November, he conceded that the increased taxes would cause some discomfort at all levels.
And while he acknowledged that critics would call some of the measures too harsh, he said the alternatives were ten times as painful.
“Our mission and mandate as Barbadians must be to protect the ship of state and be our brothers’ keepers.
“I take no pleasure in treading this path, but I take comfort in knowing that through these initiatives we will save hundreds of jobs and keep several families together,” Sinckler said.
In the months following his presentation, there have been suggestions that some of Government’s fiscal policies have exacerbated the already high cost of living.
Chief among Sinckler’s proposals was the 2.5 per cent increase in the value added tax rate which came into effect December 1, 2010.  
The minister said this was intended to be an 18-month measure which would be reviewed at the end of one year “with a view to providing relief subject to progress in reducing the fiscal deficit”.
This measure was expected to raise $124 million.
Another decision which caused concern was the elimination of tax-free allowances for travel and entertainment, a move intended to result in revenue savings of $25 million.
Sinckler said this allowance was discriminatory to self-employed people and corporations, since such persons had to prove that travel costs were in fact expended, and entertainment funds were expended for the purpose of earning revenue. Employees given these allowances were not required to do so.
Bus fares were also increased by 50 cents in an effort to improve the finances of the Transport Board by $8.4 million in revenue.  
Also of note was the removal of the allowance for investing in mutual funds and savings with credit unions which, Sinckler said, “was useful as a means of stimulating investment using these two vehicles”.
“There is no doubt that it has contributed to the growth of credit unions, and today one of the largest credit unions is the owner of a mortgage company.
“The credit unions now control significant assets in the country and the larger ones such as Public Workers’ are bigger than some banks. There is, therefore, no need for an allowance to encourage persons to save with credit unions,” he noted.
The removal of this allowance would result in savings of $9 million.
In addition, Sinckler increased the excise tax on gasoline by 50 per cent in order to raise an additional $22.7 million in a fiscal year.
He also proposed that effective April 1, 2011, people who have their prescriptions filled in private pharmacies pay a dispensing fee.
“This measure will result in an inflow of about $12 million annually but $1 million of this will be reinvested to ensure that our public pharmacies are equipped with the necessary human and technological resources to meet the increased demand,” he noted.
Sinckler also announced measures which would serve to mitigate the impact of the aforementioned policies.
He proposed an increase in the welfare grant from $35.00 per week per child to $45.00 per week per child at an additional cost to Government of $982 800 per annum.
Requests for vouchers
Also, he said, “Given the indication that the recession will be protracted and also bearing in mind the consequential effects of disasters such as Hurricane Tomas resulting in more requests for food vouchers, an additional provision of $200 000 for food vouchers will be provided for the financial year and should assist in this regard.”
Sinckler added that the minimum contributory pension would be increased to $163 per week from $155 and the non-contributory pension would be increased to $133 per week from $127.
He also proposed to make available to the Ministry of Education an additional sum of $500 000 for primary school students most in need of assistance.
He said also the ministry was aware that approximately ten per cent of the primary school population are seriously challenged to acquire the texts and workbooks that parents are required to purchase.
At the time of the Budget, registered farmers were paying for water at a higher rate than the flat commercial rate available to manufacturers. Sinckler said this put farmers at a disadvantage and begged the question of equity in a competitive business environment.
He therefore noted that effective January 1, registered farmers could apply to the Barbados Water Authority for the flat commercial.
He also said the factoring programme for small and medium-sized businesses would be launched December 1, 2010, to provide an ease for those who did business with Government but had to wait a long time for payment.
“This should vastly improve cash flows,” he said.
Sinckler also abolished the environmental levy in a move which would help to modulate the impact of the VAT increase.
In addition, he proposed that fees for minibuses and route taxis be reduced by 50 per cent effective April 1, 2011. This would result in a $1.2 million loss in revenue to the treasury.
Also from April 1, Public Service Vehicle employees will be expected to pay a flat driver’s licence renewal fee of $80 dollars a year instead of the current $230.
This will bring them in line with their Transport Board counterparts.
Meanwhile, small shopkeepers’ cost of doing business was immediately lowered following a reduction in the retail license for liquor from $1000 to $500.
Noting that tourists today are more discerning and have come to expect much more for their dollar, the minister said that in order to remain competitive, small hotels’ product offering must improve.
To this end, he proposed that a $20 million Small Hotels Refurbishment Programme be established that would align approximately 300 rooms in the small hotels group with established market standards.