ALL NEW TAXES or levies need a settling-in period during which any kinks can be ironed out and the new imposition can be calculated and collected in a smooth and efficient manner.
Yet the new National Social Responsibility Levy imposed in the Budget on August 16 seems to be having more than the usual share of initial problems. Local businessmen were so concerned about its implementation that a meeting between technocrats from the Barbados Revenue Authority and corporate executives was described as contentious as they tried without success to iron out some of these problems.
The gravity of issues involved caused Minister of Commerce Donville Inniss to make an unscheduled appearance and attempt to throw some oil on the very troubled waters that flowed at that session. Conceding that there was quite a bit of confusion, Mr Inniss pledged to sit down with Minister Sinckler and to “go back to the drawing table” and iron out any discrepancies.
It is unfortunate to say the least that this situation has developed, because clarity of purpose and meaning, and precision of operating procedures are as essential for the ministry of finance as they are for businesses who have to pay the levy and do their forward planning in order to keep their businesses afloat so that they can pay the levy and keep their workers employed.
The last thing any Ministry of Finance would want is for a new tax to cause unemployment and as Mr Inniss conceded, the way the levy was being interpreted could affect the ability of manufacturers to maintain employment. The stakes are that high, and it was clear that corporate Bridgetown was not crying wolf but had genuine concerns.
The major issue of uncertainty raised at the meeting related mainly to the likely increase in the cost of imported inputs to manufacturing, since this could have led to local products being placed at a disadvantage vis-a-vis imported versions of the same product. The problem is that an imported finished product for one manufacturer may be raw material inputs for another.
Fortunately, the Minister of Finance has now made it clear in a call to Brass Tacks that the levy is to be applied to the local finished product. This will avoid any double charging of the levy on the inputs for local manufacturing, and is welcome news since it will mean smaller increases in final costs of local products. But why was this not made clear right from the start?
At the meeting Mr Inniss is reported as saying that he understood the measure was aimed at dampening the outflow of foreign exchange being spent on imported goods.
But this levy has been sold to the public as a specific revenue measure designed specifically to ease the strain of financing the health care costs associated with the Queen Elizabeth Hospital, and one wonders if the removal of part of the base of the levy by the minister’s latest statement may now render it difficult to reach the estimated revenue announced in the Budget.
All is well that ends well, but there is bound to be an increase in the cost of business, and that is likely to inhibit the effort to generate badly needed growth.
In the last resort, revenue will be raised and foreign imports and local goods will be made more expensive, and some foreign exchange will be saved. But these benefits will inevitably mean increased costs to hard-pressed consumers.
Was the choice really between a rock and a hard place? And how did we get here?
