MINISTER OF FINANCE Christopher Sinckler is at it again. On this occasion, he is proclaiming that for the first time in Barbados’ history, there will be a mid-financial year review. Perhaps, the minister is not aware of the “mini-budgets” presented by previous ministers of finance.
On the other hand, the finance minister may be aware, but is attempting to market the obvious fiscal difficulties that are to be addressed as an innovation. This is typical of the current administration, which finds ways to present “old soup” in a new bowl.
It is evident that notwithstanding the posturing of the Government, the use of excessive taxation has not cured the fiscal problem that has been lingering for the last eight years in the Barbados economy. In fact, the strategy has turned out to be a major cause of the lack of economic recovery.
In recent weeks, both the governor of the Central Bank and the minister of finance have hinted at the need for additional taxation to narrow the fiscal gap. This comes after last year’s imposition of additional taxation that wiped out the income tax allowances and deductions, enjoyed by Barbadians taxpayers for decades, in one financial statement. It is a travesty of justice that was immediately recognised by the country’s tax experts.
However, it took the taxpayers some seven months to recognise the full pain of the tax measures introduced in the Budget of June 2015. In spite of the early warnings given, the impact was truly felt in the aftershocks, similar to the damage inflicted by a strong earthquake.
Unlike an earthquake, the author and co-author of the excessive taxation imposed on Barbadians get an opportunity to report on the effects. They sing the same old chorus from the same hymn book: “The taxes are insufficient”. By now, the taxpayers show no surprise, as the chorus has become as familiar as “in plenty and in time of need”.
It is truly ironic that in the year of the 50th anniversary of Independence, when so much fuss is being made by the Government, its management of the country’s economic and social circumstances has instilled the least confidence since 1966. The people of Barbados have been less “in plenty” and more “in need”, as a result of the poor performance of the Government.
The attitude of camouflaging the country’s real economic condition has persisted. The country’s national debt is presented in a way that confuses rather than clarifies. This is achieved by presenting at least five different definitions of the national debt. Today, it is said that the foreign reserves are adequate; by tomorrow, they have to be protected.
The economy is recording growth, but businesses and households are earning less. The unemployment rate fell in the first quarter of this year but there are less people in the labour force than ten years ago. The employed persons have not had an increase in salary for about seven years but they have paid more taxes and higher prices over the same period. Yet, it is being preached that they are better off.
The concept of a mini-budget mentioned above was introduced to deal with any unanticipated worsening of the Government’s fiscal condition during the course of the year. The proposed mid-financial year review is intended to deal with the worsening fiscal condition that was revealed in the recent economic review of the Central Bank of Barbados.
This attitude of camouflage worked in the past, especially prior to the last general election, and perhaps it is perceived to be a winning strategy for the Government. Unfortunately, the country lost then and is still losing. The time has come to truly level with Barbadians.
The Central Bank cannot be asked to print money continuously with the severe ramifications that will come in the medium-term. Unfortunately, it is possible to camouflage the ramifications but not forever. In the absence of the earning of adequate levels of foreign exchange, the Government is going to borrow from the foreign market at whatever rate in an attempt to cover some of the printing of money.
Apparently, the private sector is surprised to hear of the need to protect the foreign reserves. But the performance of the tourism sector has not been accompanied by the accumulation of foreign reserves. Furthermore, all of the talk about celebrating Independence will be overshadowed by a Christmas season that does not live up to the expectation of businesses and households.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email: clyde_mascoll@hotmail.com
