PM: VAT cut would not have brought masses relief

There would have been no real relief from a reduction in value added tax (VAT).

That was made clear in the House of Assembly on Tuesday by Prime Minister Mia Amor Mottley, as she sought to explain the Barbados Labour Party’s (BLP) decision to not pursue a reduction in VAT, arguing that such a move would disproportionately benefit businesses and higher-income earners rather than deliver real relief to ordinary Barbadians.

Speaking on the issue in the Lower House while introducing the Constitution (Amendment) Bill, 2026, Mottley drew a distinction between the fiscal approach of the Democratic Labour Party and that of the governing BLP, saying the administration fundamentally disagreed with calls to amend VAT down from 17.5 per cent to 15 per cent.

She cautioned that a VAT cut would likely have resulted in a consolidation of wealth, with savings retained by sellers rather than passed on to consumers. While admitting that Government revenues would fall, she said there was no guarantee that prices would decrease accordingly, leaving households with little tangible benefit.

Instead, Mottley said the Government has opted for a more targeted strategy aimed at putting money directly into people’s pockets. This included expanding eligibility for the reverse tax credit and the compensatory income credit, measures she described during the election campaign as a “Government meeting turn”, where taxpayers receive a refund of their income taxes at the end of the tax year.

The Prime Minister also outlined plans for a cost-of-living cash credit for pensioners, welfare recipients and individuals receiving special needs grants, including members of the disabled community, both adults and children. Together, these initiatives are expected to total $142 million.

Mottley expressed confidence that the Government would honour these commitments when Parliament debates the Appropriations Bill, with the budget presentation scheduled for mid-March. She added that further consideration would be given to adjustments in tax rates and bands affecting the middle class.

According to the Prime Minister, the approach underscored a clear policy divide on fiscal management, with the Government favouring direct income support over broad-based tax cuts that may not reach those most in need. (BA)