WHAT MATTERS MOST: Headed for a coma
Last week, I wrote that the Barbados Government is selling the soul of the country if it intends to make substantial changes to the tax system purely for the purpose of raising additional revenue.
This is consistent with the following which was written in December 2010, “unless my training has betrayed me, the fiscal crisis in Barbados is not the result of a major loss in revenue during the current recession; it is more the result of excessive spending.
A budget that ignores the facts and imposes heavy taxation on households and businesses is simply wrong. No amount of propaganda changes the facts of the country’s fiscal crisis.”
As early as 2009, the fiscal situation was being characterised as in crisis and the response of the naysayers was that the message was one of gloom and doom. In the same article of December 2010, it was suggested that “the message now is that the Barbados economy has received the wrong medicine in spite of the obvious nature of the diagnosis. Furthermore the economy would become sicker as a result.”
There is now doubt that the economy has become sicker but even more worrying, the same medicine is being prescribed five years later. If common sense does not prevail this time around, then the economy would go into a state of comatose by the end of this fiscal year.
The Government seems prepared to take ongoing chances with the Barbados economy, not with the intent of solving the problems but rather prolonging the agony in the hope that some external event would become the savour. The most recent external prospect is to join CAF Development Bank of Latin America in anticipation of being able to borrow from the same at lower interest rates. It is now believed that this will be the new solution to the country’s economic woes.
It is very evident from the mouthing of the minister of finance that the Government has to borrow from external sources very soon to shore-up the foreign reserves.
Unfortunately, the persistent downgrades of the country’s international credit rating, though described as unimportant by some Government officials, have proven to be very costly. The last foreign loan raised by the Government came at a cost of almost 11 per cent, which is almost double the going rate in a low international interest rate environment.
The country continues to be taken for a ride by the Government and its advisers. When Barbadians should be expecting some relief in the aftermath of the Independence celebrations and into the coming Christmas season, they are going to be further punished by taxation. This nonsense started in 2008 and has continued unashamedly since then.
Just as ignorance of the law is not an excuse, the same must apply to the economic management of the country.
It is inexcusable not to increase workers’ salaries for six years; it is also inexcusable to continuously impose taxes on these same workers and businesses and it is inexcusable to deny these same workers their income tax refunds. How much more punishment can they bear?
What makes matters worse is that the minister of finance and his advisers are seemingly not appreciative of the plight of Barbadians. Perhaps the political class is so drowning in its privilege that it is oblivious to the real state of affairs confronting everyday Barbadians.
When the financial sector, broadly defined, that has been the standout performer in an otherwise economic meltdown is now facing the prospect of downsizing, it must be sending signals to the blindfolded among us.
In fact, the New Year will also see the staff at the central bank being downsized. This was promised before and with the recent statement of confidence, in the words of Nat King Cole It’s Just A Matter Of Time.
It is also just a matter of time before the true state of the economy is known. It’s just a matter of time before households confront the toughest period of the year in January after efforts have been made to enjoy the festive season at all costs. And it’s just a matter of time before the toughest year for debt servicing is upon us coupled with an economy crippled by more taxation.
The song may be interpreted to show that after Barbadians have given everything they had you laughed and called them clowns, but remember in your search for fortune and fame what goes up must come down. In short, the efforts of Barbadians have not been appreciated.
Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email [email protected]