The foundation upon which any national effort to lift Barbados out of recession must be built is the re-establishment of the soundness of the finances and credit of our Government.
Make no mistake about it, the institution known as Government has to take the lead in addressing the recession and bringing the nation out of the economic doldrums. However, if the Government is to be able to provide such leadership, it must begin by restructuring and strengthening its own finances and credit, because without that no real leadership is possible.
A Government whose finances are in disarray will simply not be in a position to go on to tackle the other aspects of the rescue plan such as restoring the purchasing power of the Barbadian people, securing welfare services, providing employment in essential public works projects, and re-energising the major productive sectors of the economy.
The fundamental problem we are facing with Government’s finances is that for several years now our Government has not been living within its income. And this fact, along with the recent decline in Government’s tax intake caused by the recession, has created a $500 million annual structural deficit in Government’s finances.
The immediate task therefore must be to bring our Government’s annual regular or recurrent expenditures within the limits of Government’s annual income. And this must be done even in a situation where Government, in dealing with a recessionary situation, may actually need to be borrowing and spending many millions of dollars to energise economic growth and development in the country.
Of course, the key to this is that the great majority of the emergency money or capital resources that is borrowed and spent must be paid out by Government in the form of sound loans which will be repaid to the Treasury over a period of years.
So how can the Barbados Government go about closing a $500 million gap between its annual recurrent expenditure and its annual income?
Well, the most painless place to start would be with a rationalisation of existing Government departments, projects and programmes, with a view to cutting down duplication, inefficiencies and non-essential spending. An effort also has to be made to restructure the management of the statutory corporations, with a view to making them more efficient and less costly to finance.
But when all efforts at rationalisation and restructuring are exhausted, it may still become necessary to increase Government’s tax intake. And if this becomes necessary, the sectors that must be asked to bear the increased tax burden must be the wealthy and the big corporate sector!
Indeed, what we would simply need to do is to roll back a portion of the tax cuts that former Prime Minister Owen Arthur gave to the wealthy and to the corporate sector during his 14-year reign.
We refer to Mr Arthur’s 1995 “Group Tax Relief” which permitted tax losses incurred by a company that was a member of a group of companies to be set off against the taxable income of other members of the group. We also refer to the reduction of Corporation Tax from 40 per cent to 25 per cent, the reduction of income tax on the wealthy from 25 per cent to 20 per cent, the 35 to 60 per cent reduction of income tax on personnel employed in international business companies, and to the removal or reduction of taxes on yachts, marinas and luxury cars.
The wealthy individuals and corporations that benefited must now be called upon to give back some of this wealth – in the national interest!
• The PEP column represents the views of the People’s Empowerment Party. Email [email protected].
