THE MAJOR CHANGES to Barbados’ income tax system in the June Budget came from a request of the Minister of Finance Christopher Sinckler to the International Monetary Fund (IMF) to conduct a review of the domestic tax policy framework. It is clear that the major reason for the request was to make the system a “more efficient revenue raiser”.
In the spirit of the theme of the Budget, Mr Sinckler “completed the job” of emasculating an income tax system that was designed not only to raise revenue for the Government, but to assist in allocating income in areas that facilitated the social and economic advancement of Barbadians.
In a country where investing is not a natural part of our make-up, the income tax system encouraged us to save with credit unions, invest in mutual funds and pension schemes among others. The current Government has succeeded in taking away all of the encouragement that we enjoyed in the past.
It is inconceivable that there is no longer a provision in our tax system that allows a young man/woman or couple to invest in a home with the understanding that the mortgage interest could be claimed for tax purposes. The policy to remove such a benefit was simply backward and short-sighted.
Within the last nine years, Barbados’ national income (GDP) was revised, because a way was found to add home ownership to the numbers. The concept is a little technical but suffice it to say that rental income was being accounted for in our GDP but not imputed rent for homeowners. In essence, if Barbadians continued to own homes, the GDP of the past would not have reflected this good. In fact, for purposes of the GDP, it was better to rent.
Poor policy choices
Quite frankly, it does seem that the current Government is ignorant to some very basic facts about the economy. It is the only logical conclusion for their continued poor policy choices.
In his attempt to grab as much revenue as he can from the public, the minister grabbed more than even the IMF intended. This is obvious from the costing of the policy to remove most of the income tax allowances and deductions and the marginal lowering of the tax rates.
No one has responded to the charge in public. However, it will not stop me from repeating the facts. For most Barbadians, the reality of the damage done to their incomes will be become fully known when their income tax forms are completed next year. In fact, the Government is not yet sure when or how the measures will take effect.
Given that several income tax payers had to wait an inordinately long time for income tax returns in 2014 for the income year 2013, they made adjustments to their income tax bands in 2014. The intention was to request more benefits up front rather than wait until the end the income year. Unfortunately, they never expected the tax allowances and deductions to be viciously removed.
Tax burden
As a result, several income taxpayers now find themselves unsure about whether or not the tax measures took effect from August or will take effect at the end of the income year. This is unbelievable given that the minister of finance delivered a near four-hour Budget.
What is certain is that the timing of the measures does not change the facts that Barbadian taxpayers will pay much more income taxes for the year. Contrary to the estimate provided by Mr Sinckler in the Budget, the amount is considerably more on the tax groups that have been impacted by the measures.
Using the numbers provided in the IMF tax study that was the source of the Mr Sinckler’s estimate, it was found that the tax burden is in excess of $30 million, not the $9 million suggested by him, with respect to the removal of the tax allowances and deductions in the June Budget.
There is a Barbadian saying that “one-one blow does kill old cow”, which seems rather appropriate in describing what taxpayers have had to bear over the last seven years. The burden has been compounded by a growing lack of uncertainty that attends each and every Budget presentation of the minister of finance.
As usual it takes time to verify the veracity of a charge, but rest assured that my record for accuracy will remain fully intact in the fullness of time. There is only one truth and it is that Barbadians continue to be abused by the Government’s tax policies.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: [email protected]
