In recent days a hot topic of public discussion has been the International Monetary Fund’s (IMF) proposals for reform of Barbados’ taxation system.
Government, through the Ministry of Finance and Economic Affairs, requested the Fund to examine the island’s tax regime and make recommendations on how it could be improved. The United States-based financial institution recently presented its report – A Tax Reform Roadmap For Simplicity And Revenue Buoyancy – to Government and its proposals are now being considered.
Most of the comments emerging ever since the IMF report was first made public by the SUNDAY SUN on October 26, relate to proposals concerning value added tax, and the overall IMF suggestions that, if implemented, would lead to Barbadians paying more taxes.
The IMF recommendations included eliminating the existing VAT zero rating of food and consumer goods and converting any other items not taxed into VAT exempt items. This was expected to lead to increased food costs.
It also proposed the introduction of an excise tax for cellphone use, one for soft drinks, ending the discount for the early payment of land tax, increasing all vehicle registration, licence, inspection and other fees by 20 per cent. The IMF also recommended the imposition of excise taxes on alcohol, tobacco, and fuels.
There were other recommendations, including taxes on the sale of property, a proposal called “asinine” and “stupid” by Barbados Economic Society president Jeremy Stephen.
Minister of Finance and Economic Affairs Chris Sinckler, alluding to the IMF report, said VAT tax exemptions and zero rating, estimated to be worth at least $2 billion, was one of the areas Government was closely examining, hinting at measures in the upcoming Financial Statement and Budgetary Proposals.
“So we have to look very carefully to determine whether or not we need to have more new taxes, which nobody wants, or to make what we already have more effective, and that is what we are considering now,” Sinckler said during the People’s Business programme televised by the Caribbean Broadcasting Corporation.
His colleague, Minister of Industry, International Business, Commerce and Small Business Development, Donville Inniss, agreed there was a need for tax reform in Barbados.
Addressing an Institute of Chartered Accountants of Barbados public forum on the IMF recommendations issue last week, Inniss said:
“The truth of the matter is that there have been some structural deficiencies in the economy that we really need to address very frontally and the IMF was asked to look at our tax system and they made some recommendations.
“I think what has been missing in the last couple of days from this discussion is that Government has not accepted the IMF recommendations carte blanche. We have not even sat down and discussed them in any great detail at Cabinet level. We have not accepted yet, we are still as ministers deliberating over.”
Others like Stephen and Barbados Private Sector Association chairman Alex McDonald were hesitant to embrace the IMF proposals. They were concerned that the measures, if implemented by Government, would only be a short-term revenue-raising fix, while more critical fiscal and economic issues in need of remedy would continue to fester.