LAST WEEK, I had the unenviable task of demonstrating that the Government’s devastation of the country’s income tax system comes at a much higher cost to the taxpayers than the minister of finance estimated in the recent Budget. As usual, there will be no reaction to such a serious charge.
However, it is hard to react to a charge when the prosecutor has used your own evidence to convict you. The attitude to such charges makes one wonder whether or not the Government is simply indifferent or totally ignorant of what damage is being done to households and businesses and by extension the economy.
Having spent the last seven years inflicting the same medicine on an ailing economy with the same poor results, one would have thought that the Government has learnt from its mistakes. Instead, there is a callousness to the taxpaying public that begs the questions: in whose interest is the Government acting?
For sure, it cannot be in the interest of the average Barbadian, the taxpaying Barbadian or Barbadian businesses. Each of these categories of Barbadians is worse off as a result of Government’s policies since 2008. If such a statement cannot be refuted, then what is the relevance of the current Government?
Even the poor man that the worst governments profess to defend is being cruelly treated by the Freundel Stuart-led administration. In the most recent Budget co-authored by the International Monetary Fund (IMF), given the extent to which its tax study was utilised, the IMF recommended a “restoration in the reverse tax credit to BDS$1 300 annually for 15 000 recipient households”.
The IMF recommendation was totally ignored, even though the Government is proposing to raise much more revenue than the study suggested. Furthermore, the Government imposed VAT on food items that were previously zero-rated. This policy, along with the failure to restore the reverse tax credit, is the most recent indicator from a tax policy perspective that the Freundel Stuart administration has abandoned the poor man.
Perhaps as the election approaches, there will be a rush to do something for the poor man and middle income Barbadians. The game plan is easy to read from a distance. Just as recovery is the buzz word for the economy in 2015, restoration will be the buzz word for the households in 2016.
Even where the Government pretended to be helping affected university students with the granting of scholarships, its income eligibility leaves a lot to be desired. A maid working in the public service for $1 900 per month with a child working as a gas attendant, will be unable to qualify for such a grant in the event that there is a university student in the household. This makes a mockery of the proposal.
While it is politically appropriate to talk about the plight of the poor man, there is a group called the working poor that demands serious attention. Given the structure of Barbados’ income tax system, payment of income tax starts after the first $25 000 of income earned per annum.
Above and beyond those who receive the reverse tax credit, there is little doubt that all income earning groups have been under severe pressure in the last seven years. However, the income tax data suggest that persons earning between $50 000 and $75 000 per annum have been especially hard hit in recent times.
In fact, the same group is expected to pay almost 45 per cent of the revenue to be generated from the income tax measures in the recent Budget. This income group has become the most vulnerable to tax policy as the Government continues its single-minded purpose of raising revenue. The consolidated tax started at the bottom of the income group. The assault continued with the removal of allowances and deductions.
It is inconceivable that a government would take away almost all allowances and deductions that taxpayers enjoyed for years in one fell swoop. Such behaviour on the part of the Government shows an absolute lack of understanding of an income tax system other than its capacity to raise revenue.
After years of persistently increasing taxes under the guise that the Government’s fiscal strategy was ultimately about protecting the country’s foreign reserves, the governor of the Central Bank recently announced that more foreign reserves are not necessarily better.
Were Barbadians asked to pay substantially more taxes based on a hoax? The answer raises several more questions about the deteriorating condition of the poor man, the working poor and middle income earners; indeed all Barbadian households and businesses with very few exceptions.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email mascoll_clyde@hotmail.com.