WHAT MATTERS MOST: Solid waste tax the worst ever
The solid waste tax (SWT) is the worst tax ever put on the backs of Barbadians because it betrays the fundamental principles of taxation.
In addition, it is the final nail in the coffin of the collective Barbadian taxpayer who has endured an unbelievable stretch of burdensome taxation in a period of economic deprivation and reversal.
It is unfair to make a taxpayer pay twice for waste disposal. The Sanitation Service Authority (SSA) was in existence for several decades and it has been funded by taxpayers. It was and is responsible for waste disposal. The new SWT is not to help fund the SSA; it is to further burden taxpayers to accommodate the fiscal madness of the Government.
One of the first issues in taxation is to determine the incidence, that is, who will bear the burden. Typically, it is those who are able to pay the most. Let us apply this principle to the SWT. Since the tax is being imposed on the site value of properties, it means that the properties with highest values will pay the most tax. If it were simply a property tax, this would be understandable but it is not. Therefore, the concept of fairness in this instance is not who are able to pay the most.
The breakdown of the fairness principle is a direct consequence of the failure to establish a relationship between a SWT and the site value of a property. It is once again about putting the Government’s needs first.
Part of the fairness of a new tax is to take into consideration existing taxes and their incidence. Barbados already has a property tax that is imposed on the improved value. The difference between the site and improved value could be considerable. The site value is the value of the land, while the improved value is the combination of the land and the building. Several factors such as location and type of building help to determine the difference in the two values.
As is a feature of the income tax system, attempts are made to give relief to those at the bottom in the interest of fairness. In similar vein, there is a value exemption at the bottom of the property tax to give such relief.
Here comes the SWT and there is no consideration for those at the bottom, including pensioners. Furthermore, it is not recognised that at the bottom, the site value is a higher proportion of the improved value which has implications for the reversing of the intended relative incidence.
In short, individuals who do not pay or pay very little property tax are being called upon to pay the SWT that has nothing to do with the generation of waste.
At the top and in between, the issue is the high land values since the rate is the same across the board. Some businesses, like in agriculture and tourism, need land space. In the former, the unit value of land is lower but the quantities are huge, which gives rise to high site values. In the latter, the unit value is high and in some instances so too, is the quantity.
The point is that the site values are huge with no generation of waste in the former instance and in the other, waste generation is taken care of privately for the most part.
On grounds of fairness, it is difficult to justify the imposition of the SWT even on the big businesses. Such wayward tax policy, which has characterised the reign of the current administration, is done with reference only to the needs of the Government and not the economy and the taxpayers. It continues to baffle the reasonable minds among us that a Government would persist with wrong policies in the face of clear evidence.
In his first shot at the SWT in last year’s Budget, the minister of finance said that the then 0.7 per cent rate “should bring in a total of $49.3 million over the adjustment period”. Therefore, the new rate of 0.3 per cent should be bringing around $21 million. Instead, the minister is now expecting approximately $53 million with the much reduced rate. What a game of numbers!
This kind of foolish fiddling while Rome is burning is symptomatic of an administration that continues to take the task at hand for granted and prefers to confuse rather than confide in Barbadians.
The tax is a solid waste of time using public policy principles. It lacks clarity, certainty of incidence and consistency. It should be repealed.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email [email protected]