THE CENTRAL BANK’S REPORT on the first quarter of the economy was notable mainly for its restraint.
While the economy had shown growth of about 1.5 per cent when compared to the same period last year, overall growth for the entire year was not even expected to reach 1 per cent.
As the Stuart Government continues to focus almost totally on austerity rather than incentive measures, the bank’s report shows their cumulative effect on the economy.
For some reason, that short stretch of fiscal roadway between the Finance Ministry on Bay Street and the Central Bank in Church Village causes many tax revenue estimates to change.
Recently, I reported in this column on the effect of the Minister of Finance’s heartless tax increases in one full fiscal year, as per the Estimates laid by the Government in Parliament.
Now I have to revise them based on the Central Bank’s provisional numbers, which show a lot more success of the measures in raising revenue. The one to make you gasp is the VAT: while the Estimates for the fiscal year just ended show this tax bringing $100 million more for the Treasury, the Central Bank’s numbers suggest that the increase by 2.5 per cent in one full fiscal year helped raise $187 million more in VAT over the past fiscal year, from $765 million to $952 million – a 25 per cent increase.
I say “helped” because inflation running at 9 per cent would also have done its bit.
Excise taxes, which were increased by 50 per cent, brought in 12 per cent more revenue, to reach $163 million, and personal (income) tax brought in 7 per cent more, to reach $422 million.
Corporation tax and land tax revenues were roughly the same as for the previous year, although down by small percentages, to $294 million and $117 million respectively.
Overall, the “big six” taxes brought in 12 per cent more revenue to the Treasury over the previous year, in which the draconian measures only affected the last four months.
These are the real sore points of this Administration, along with (and caused by) the Government’s desperate need for more revenue to continue its policy of not adjusting its labour force downwards or reducing its overall spending in light of the recession.
Instead, while loudly blaming the recession for everything negative happening to our economy, this Administration, which never had a creative idea it didn’t keep locked away in some dark cellar, decided to make the other stakeholders in the economy – households and the private sector – pay for its own inability to stop the spending spree.
The problem is that it will still have to be done, but that responsibility will now fall to whoever wins the coming elections.
Maybe it is time to bring Sir Lloyd back, so that if the Dems win they will have someone in their camp who at least knew when it was time to turn out the lights and tell the deejay to go home.
He paid the ultimate political price for it, as he will lose no time in telling you if you ask him, but somehow that old slogan Sandi Is Sound seems to have a lot more validity when you compare him to this current “our-nipples-are-so- sore” big spenders.
Before I close, I think it is worthy to take note of what seems to be a major new policy change in the Central Bank report.
The bank has given a prominent place to a quote from the International Monetary Fund’s (IMF) guidelines on debt to justify its change from including National Insurance Scheme- (NIS) held Government debt in its calculation of the total national public debt.
So whereas the IMF itself, in its staff report on Barbados issued last December, cites our total debt at 117 per cent of GDP, the Central Bank can now remove about 30 per cent of that, and state the debt at around 90 per cent.
NIS debt is now reduced to a “Memo” item, showing it as being $2.5 billion to the end of last year, most of it in Government debentures, and the remainder in Treasury bills.
We will all probably get used to talking about our national debt this way and no doubt forget about the NIS-held portion in time. However, I doubt the IMF and the ratings agencies will find it so easy to forget when looking at our economy.
