THE ISSUE (ON THE RIGHT): Budget was about raising revenue
Did the Budget adequately deal with key issues facing Barbados?
I think the key context that we have to put this Budget in is the Estimates that were presented earlier this year. The Estimates presented earlier this year projected a fiscal deficit of about six per cent of GDP on an accrual basis and about 8.3 per cent on the usual cash basis.
Obviously, a fiscal deficit at that magnitude is not sustainable, so this Budget was clearly set in that context to raise revenue. So most of the measures in this Budget are about attempting to raise revenue rather than to some extent addressing the expenditure side.
The establishment of a credit bureau by the Central Bank of Barbadosis one of those fairly interesting ideas that address a couple of key challenges that we know we face in the Caribbean.
One of the key challenges in the Caribbean is the financing challenge and what a credit bureau does is it provides financial institutions with more information, and most countries that have a credit bureau in place usually find that they have lower collateral requirements and therefore it is easier for businesses to access financing.
So I think the idea of establishing a credit bureau in Barbados is really an excellent idea and I did a few simulations on the Doing Business Index.
If we establish a credit bureau in Barbados it will actually push Barbados significantly up the Doing Business rankings once that establishment is put in place.
So it is a fairly interesting innovation that was highlighted.
Obviously, this is more of a medium term objective rather than a short term objective because and it will take a bit of research to get this done.
The rise in the threshold for VAT is also going to reduce the cost of doing business because it is a fairly costly exercise for Government to try to incorporate these relatively small businesses into the tax net, so this actually should actually reduce the cost of collecting taxes for Government in Barbados.
The other issue is the elmination of allowances for individuals.
The elmination of the allowances obviously would push up the tax liabilities for most individuals in Barbados. But I did a few calculations and I realise that most individuals on a monthly basis would actually obtain between $80 to $200 extra, I am talking about middle to lower income individuals.
Most middle income individuals are on the lower band at 17.5 per cent threshold so with that reducing now to about 16 per cent most of those individuals are going to see maybe about $60 to $100 extra in their pocket each month.
That has different implications for businesses.
Individuals that sell traditional small ticket items like supermarkets and clothing retailers, they obviously would not be significantly affected by the removal of allowances but if you are selling big ticket items, where you are selling a stove or a fridge, where most people would have utilised those tax rebates or tax refunds at the end of the year to purchase those items, then you might see some significant impact on your business. Because those individuals no longer have those large tax refunds at the end of the year, usually based on the mortgage interest, to finance those purchases.
So the impact on individual businesses is going to be quite different.
Dr Winston Moore, an ecomoist, made these remarks at the Barbados Chamber of Commerce and Industry’s post Budget discussion.