As this was written before Duty Free Day in Bridgetown, I will assume that The City was jam-packed with shoppers last Friday as they rushed to max out their purchases to the $1 000 limit, and perhaps dragged along a few passport-toting relatives as well to help them “purchase” well beyond that limit.
One would have thought, however, that for any Government faced with the dire fiscal imbalance now threatening this country’s economic future, the idea of giving up any taxes at all would be unpalatable.
But according to Minister of Finance Chris Sinckler, this will not be the case.
Mr Sinckler told the DAILY?NATION that he was not expecting any significant loss of revenue to the state.
“We don’t anticipate there will be a revenue loss. And any loss, we believe, will be limited and should be balanced off by the increased volumes and receipts from value added tax.”
Really? Well, since that is the case, why weren’t those duties removed a long time ago in order to boost the economy?
It gets even better. Mr Sinckler cast Friday’s tax-free initiative as one which could actually save – yes, my friends, you read that right – save the country foreign exchange. According to THE NATION, he said, “. . . as money that might have left the island for purchases overseas would be used at home and in local currency.”
Excuse me, but as far as the country is concerned it is still a foreign exchange expense whether you buy it at Cave Shepherd on Broad Street or Macy’s in New York, because the item is purchased in foreign exchange at source.
But what might be meant between the lines, and what I suspect this exercise is partially about, is that so many of these items covered by heavy duties are sitting there in the duty free bonds unsold, and it is better to let the locals have at them than take up more foreign exchange to go away and buy similar items.
Removing ridiculously high duties on “luxury” goods is a great idea which has unfortunately been ignored by successive Governments and is only now being tried – for one day – as a desperate measure to help the merchants get rid of slow-selling stock as well as to jump-start the Christmas shopping season.
Of course, another reason why Mr Sinckler is probably right about Government not feeling any real loss of revenue from duty free sales to locals is that the system is already in operation, except that it is technically not legitimate. However, have you ever, ever heard of anyone being hauled before the courts for buying an item duty-free while being Barbadian?
There are people who earn steady money (I am told) by standing up in stores, foreign passport and return airline ticket at the ready, to answer the call of the locals who really need to get that item duty free today.
The system is so porous that you could not stop boulders from passing through it. It even made a Budget speech by a former prime minister, who proposed that stores add five per cent of the wholesale price to the retail price of the item which they would then hand over to Government to help repay the Treasury for the “leakage” in the system.
Apparently that proposal never went anywhere, thanks to successful lobbying by the merchants.
Foreign items of clothing (by that I mean garments imported from outside of CARICOM) still carry the burden of heavy duties in order to “protect” local and regional garment manufacturers, who either don’t make the items at all or only make far inferior versions. The main beneficiary of this tax policy is Trinidad and Tobago. The main loser is the Barbadian consumer.
Garments, along with several other items you won’t find in duty free stores, like pasta and sweet biscuits, are also over-burdened with duties which should have been abolished years ago, but were only kept in place by successive governments for (a) the money and (b) bargaining chips in the Economic Partnership Agreement (EPA) negotiations.
These taxes are now supposed to be in their final days but who knows under what pretext they may be kept on?
Perhaps this Government will realize, as Mr Sinckler said about Duty Free Day, that any direct losses from those high taxes would be offset by increased revenue from VAT due to higher sales of the items.
It was easier to police this highly discriminatory duty free system when locals generally travelled less and had less foreign exchange at their disposal with which to buy consumer items abroad.
Mr Sinckler did mention the ease with which people are travelling abroad as one underminer of the system, and lately there is another: the Internet.
Yes, you still have the dreaded maximum foreign exchange allowable on your passport, but that does not deter either travellers or Internet purchasers, because once your bank gives you the foreign exchange limit on your card (for whatever reason) and allows you to repay in local currency, who needs to worry?
Government and the private sector also know all about the joys of per diems for overseas travel and what they are really used for – wink wink, nudge nudge.
Everybody knows how to beat the system, so why not just abolish it altogether and make every day Duty Free Day on those items, not only in Bridgetown but all over Barbados?
We could promote Barbados as a duty free shopping paradise for everybody including the locals, who could buy their brand name items at the same prices they now pay for them in New York.
What Government loses from those taxes, it would get back in VAT. The stores would be busy all year round (well, maybe that’s going too far), more people would be employed, more tourists would come from all over the region and wider world, spending more foreign exchange. We hope.
Since under the rules of the EPA most of those taxes have to go anyway, why not let them do so with a bang, not a whimper?
And instead of having a gimmick for a day out of sheer desperation, this Government, which has done everything it can think of to dry up consumer spending short of taxing the sunshine, could take credit for actually doing something to lower, not raise, the cost of living.
Seems too good to be true, doesn’t it?
