The broader your tax base, the lower your rate of tax can be, so they are trying to say reduce your exemptions, eliminate your zero ratings for VAT, avoid giving tax concessions wherever possible and tax holidays, and by so doing then you will be able to charge a lower rate, whether it’s for your customs duties, your excise taxes, your corporation tax or your income tax.
There are a few of their recommendations I do strongly support, one of which was increasing the VAT threshold from $80 000 per annum to $200 000 or $300 000. I think 2 300 VAT registrants pay 3.8 per cent of the VAT that is contributed to the Government’s coffers. By my rough calculation I estimated if a VAT registrant took ten hours over a two-month period to do their accounting for the VAT and do their returns then it would save maybe a 100 000 hours a year.
Imagine how much more productive you could be saving 100 000 hours a year. So it’s not only the revenue authorities who will have a lesser administrative burden in trying to review those VAT returns but also the small business people who will have a much less burden in terms of complying with VAT.
I think of excise taxes as sin taxes. So if you like to smoke and you like to drink presumably it might have some effect on your health and somebody has to pay for the health care costs. So if the theory is that the consumer should bear the burden, then the person who smokes and the person who drinks should contribute to those health care costs, in my opinion.
In 2008, the Government did propose a monthly subscription on post and pre paid mobile phone use, which proved I think almost impossible to implement so we will see if the excise taxes could be implemented on airtime, or maybe the International Monetary Fund (IMF) can show us how to do it.
I do believe that there are some allowances and deductions in the Income Tax Act that could be eliminated, so there is some rationale I think for simplifying the income tax.
There are some concessions in there in my experience that have never been used or haven’t really been used. I also believe that there should be some transparency in the entire process.
Under the [World Trade Organisation] rules we do have to look at a lot of our taxes to make sure that they are compliant.
I think that Barbados had agreed to do so by 2015 so the Fiscal Incentives Act I believe will be phased out, which is the legislation that grants certain concessions to manufacturers.
The concept of converting allowances to a tax credit if you want to know how much that would hurt your pocket it will be $4 375 so this will be a burden on the middle class who are already bearing the brunt of the Consolidation Tax. Speaking of the Consolidation Tax, the IMF did allude to the fact that this has some severe weakness in the way in which it was applied, in that the rate of tax is applied to the entire band. It’s not a scale. So people who are on the boundaries of one band could be disadvantaged considerably and it has led to some anomalies for those tax payers.
But all in all there are some proposals I do believe that the Government should consider taking into account.
• Gloria Eduardo shared these views at last week’s Institute of Chartered Accountants of Barbados’ public forum. Gloria Eduardo is tax engagement leader of PricewaterhouseCoopers.