HOW DO THE two entities charged with working out the numbers underpinning our economy come in so far apart in their projections?
Take these two statements, for instance. First, we have Minister of Finance Chris Sinckler saying in his Budget Speech in August 2016 that: “On the cash basis the measures are expected to result in a deficit of 5.8 per cent down from the current projection of 7.9 per cent.”
Then, we have the Central Bank of Barbados, in its September 30 press release, published late October, 2016, saying “The combined effect of the August fiscal measures and revenues from the sale of the Barbados National Oil Terminal Ltd. is expected to reduce the Government’s deficit to the end of the fiscal year slightly above four per cent of GDP.”
Both Sinckler and the Central Bank, in the above quotes, were referring to the current fiscal year, 2016 to 17.
To get the deficit down, Sinckler must pull in a lot more revenue this fiscal year, and as we all know, he outlined measures to do just that in his August Budget.
The highlight of this increased pressure on consumers was, of course, the National Social Responsibility Levy on imports. In a full year, said the finance minister, “when applied at 2.0 per cent it is estimated that the levy alone will raise additional annual revenues of $60.8 million, while the additional revenue expected from VAT which will be applied after the levy is imposed, will be $62.1 million.” On top of that, he said, “the application of the levy on domestic (manufacturing) output will be around $19.2 million.
However, since it only went into effect from the beginning of the second quarter, the total yield was expected to be around $83 million this financial year. An increased bank asset tax was expected to produce another $14 million and arrears coming in for VAT and Property Tax under the current amnesty could also throw another $15 million into the fiscal pot.
So those taxes were expected to bring in another $110-plus million to the Treasury for the remainder of the financial year, while a reduction in spending of about $25 million would also help in the overall effort to reduce the fiscal deficit.
Much as I dislike the idea of a tax at the port without a reduction in the overall VAT, the Government is lucky that lower oil prices have remained in place, because otherwise the inflation would probably hit home much harder than expected as the levy begins to push retail prices up.
But as I noted in a previous column, Government’s announcement of $200 million in new tax measures in last year’s Budget (April 2015) fell far short of projections, with a total increased revenue of only about $67 million ($2 572 million for 2015-16, compared to $2 505 million in 2014-15). That $2 572 million was nearly $100 million below the revised estimate of $2 668 million.
Seen against the backdrop of anemic tax responses no matter what he tries, one can sense the sense of frustration the finance minister must feel in trying to close the deficit gap. So now we are into the last large-scale effort before he has to do some giving back in order to appease the overtaxed consumer.
In other words, with his projected deficit of less than four per cent for 2015 to 16, turning into a 7.4 per cent debacle, the finance minister has had to make a last-ditch effort.
Tourism’s comeback and lower oil prices are the only things saving us from an even worse situation, so I am hoping Sinckler’s going for broke this time around does meet with success, otherwise we may all soon be.
Patrick Hoyos is a journalist and publisher specialising in business. Email: pathoyos@gmail.com
