IT IS WIDELY KNOWN that the Cabinet is the body responsible for the management of the country. This is achieved by giving the Cabinet the responsibility for the general administration of the Government.
Therefore, all major decisions affecting the country are made by the Cabinet and the members have collective responsibility for their decisions.
The responsibility is enshrined in the Constitution at Sections 64 and 65. In particular, Section 64(2) states: “The Cabinet shall be the principal instrument of policy and shall be charged with the general direction and control of the Government of Barbados and shall be collectively responsible therefore to Parliament.”
It has become necessary in light of some of the stories being attributed to the Barbados Revenue Authority (BRA) to remind the public that the Cabinet of Barbados is responsible for policy formulation used in the management of this country.
In the Budget of June 2015, the Minister of Finance, Christopher Sinckler, clearly stated that the removal of income tax allowances and deductions and the lowering of the two marginal income tax rates “will result in a reduction of approximately 60 per cent of tax refunds being processed and be relatively revenue neutral, netting the Government $9 million in additional revenue”.
Remove confusion
Since the Budget, there has been all kinds of confusion surrounding when the removal of the allowances and deductions will take effect. Given that allowances and deductions are typically applied to an income year, the timing of their removal must be explicitly stated so as to remove doubt and confusion.
In all fairness to the minister of finance, he stated: “Therefore, it is proposed that with effect from Income Tax Year 2015 . . . .” Since the Budget was delivered in June, effectively six months of the income year had already gone. It was obvious that the minister was therefore proposing to take away any benefits from the allowances and deductions enjoyed by the taxpayers between January and June 2015.
The optimists among us continue to hope for a favourable interpretation of the Cabinet’s policy. Wake up – the Government has emasculated our income tax system that was designed to help Barbadians invest in vital areas of housing, health and pensions among others.
The genesis of the Cabinet’s policy was to get rid of having to look for around $68 million on a yearly basis to refund approximately 62 100 taxpayers. These figures caused my eyes to open even more widely than usual, given that the minister of finance suggested that the policy will net additional revenue of $9 million. The question is, why go through all this difficulty for such small gain?
In essence, if one gives the minister the benefit of the doubt with respect to the numbers, the Cabinet’s tax policy will still mean that the Government has to look for almost $60 million in refunds every year. This does not make sense however analysed.
Misleading
The thousands of taxpayers who benefited from the allowances and deductions are literally going to have to repay the Government for the benefits enjoyed between January and June 2015. In short, in the last six months of 2015 they will pay their entire year’s new portion of income taxes or pay at the time of submission of the income tax return.
The new portion is not $9 million but more in the region of $33 million, given the data used in the Tax Review Study done by the International Monetary Fund. In the circumstances, it is misleading for anyone to suggest that Barbadian taxpayers are going to take home more income effective this month without giving the overall context. Such narrow analysis ignores the full nature of the tax policy.
Of course, any reduction in the marginal income tax rates ceteris paribus will increase take-home pay. But the bigger part of the tax policy was the removal of allowances and deductions.
Time has proven to be my ever-constant companion in verifying my analysis. BRA, your role is not to publicly support anyone’s breasts while they suck on other people’s nipples! Let the responsible minister speak to issues of policy and their effect.
Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: mascoll_clyde@hotmail.com
