WHAT WILL HAPPEN to the profits and foreign exchange made by hotels such as Hilton, Sandals and the proposed Four Seasons, Sam Lord’s Castle and the Hyatt? What will happen to the profits of the Trinidadian supermarkets and stores that must be repatriated to their respective head offices? And those are just a few entities that could be hammering at the gates of the Central Bank for permission to export their profits and thereby reduce the US$500 million that we have, not to mention outstanding property sales.
The daily impact of the usage of credit cards on the foreign exchange is an unknown factor that can cause us grief. Even before the Budget, merchants have been stocking up in the hope of Christmas sales. Once those goods land at the port or even before, foreign exchange in our tail.
This foolishness of encouraging tourism entities to come to Barbados, agree not to employ our people (60 per cent Chinese labour), not to pay taxes, causes confusion among our Barbadian hoteliers so that they question the levelness of the playing field. At least our Revenue Authority will be able to examine our Barbadian hoteliers and be satisfied with the manner of how they arrive at profit and how foreign exchange is managed. But what can they say of Sandals?
The money that Sandals uses to increase its present extension has to come from somewhere. Most of that money has already come in and paid for work done. That somewhere has to be repaid. The repayment has to come from the bookings for the hotel. Those bookings and payment for all-inclusive rooms and services are made abroad. Since no taxes are payable for the next umpteen years, no money comes for taxation. Regularly we would have charged up to 20 per cent or more in various taxes (profit, electricity, gas, telephone and staff salaries). Since the business in Barbados is all-inclusive, no money is spent here except to pay workers at the hotel and little money comes into the Central Bank to service present or future foreign debt.
Should we be boasting about increased airlift then? Did not Cain kill Abel for his birthright and the consequences are felt even today? Go ask the Palestinians or try to get a bath on the virtually exclusive beach. Wake up, Barbadians.
The Wild Coot takes issue with the Central Bank on the way it has handled the commercial banks. How can you deprive citizens of any benefits from their savings? Savings that are put aside for future needs or for old age. In fact, banks are charging for being a safety depository and at the same time using the money placed with them to make profit. A double whammy! Then when our minister decides to increase the charge on assets by 1.5 per cent, they hollow, “we will not pass on the increase”. Their head office should fire them all for saying that.
Well, well, all my years in banking says that the commercial banker will find ways of recovering that increase in asset tax. His obligation is to his head office and his promotion depends on his turning a profit. My boss in Jamaica used to visit my branch every three months. After exchanging pleasantries he would ask: “How is your bottom line?” Of course I would know what he was referring to as he also had a boss and a bottom line.
What is more, the commercial banks will not respond to the silent urgings of the Central Bank once they are comfortable making profit from an extraordinary spread of interest in a market deprived of spending power. Indeed, to a limited degree, people are gravitating towards the credit unions as their windows for both savings and loans are more sympathetic. They should be encouraged.
So Central Bank, that is one point. You proclaim that there is no problem with foreign exchange and no need for some sort of control. Local institutions may be taking advantage of current policies or lack thereof. Not only are commercial banks freely issuing credit cards that may be used even in Moscow, but we see quasi financial institutions crawling into this domain. Where is the control and supervision? Furthermore, there is a threat faced by credit unions that they will be roped into that asset tax despite the fact that we know (a) that profits made are distributed to the members in Barbados, and (b) do not impact on the foreign exchange. Reminds me of La Fontaine’s ‘La poule aux oeufs d’or’ (The goose that laid the golden egg).
• Harry Russell is a banker. Email: [email protected]
