Chris sees light
. . . but admits deficit is off mark
Government’s 19-month Fiscal Consolidation Programme has been extended by one year until April 2016.
Minister of Finance Chris Sinckler made the announcement in the House of Assembly this morning, where he reported that even though the economy was showing “its strongest signs of recovery since 2009”, it was not yet out of the woods.
In fact, he also suggested that while Government’s expenditure targets remained on track, it might have been too “ambitious” in setting the fiscal deficit target for the current fiscal year ended March 2015.
While the projection was for 6.6 per cent of GDP, he said the economy was currently on course to achieve a reduction of between 5.5 to 5.6 per cent of GDP.
“We now have to stay the course with the fiscal consolidation programme and do what is necessary to protect the gains we have made over the last 16 months,” said Sinckler, in announcing that Government had decided to extend the existing revenue measures that formed part of the 19-month programme for another financial year, or until April 2016.
By April next year he is also due to present his much anticipated budget, which was due this month but today the Minister delivered a 30 minute ministerial statement instead, in which he said that the Municipal Solid Waste Tax (MSWT), the Consolidated Tax and the Bank Asset tax would remain in place for the time being.
However, Sinckler did promise that the controversial MSWT, which was the subject of public protests, including by the Opposition earlier this year, would be reviewed to determine if is justified in its current form.
In the meantime, the three taxes are projected to yield a combined $91.2 million during the current fiscal year.
At the same time, a short-term amnesty is being offered to delinquent taxpayers.
“We have also decided to offer a short term amnesty to all taxpayers across all tax categories on the interest and penalty accrued on taxes owed at December 31, 2014. Access to this facility will be on the basis that the taxpayer pays their total outstanding principal owed to the BRA (Barbados Revenue Authority) on or before March 15th, 2015,” Sinckler informed the sitting.
However, Government has decided to delay the introduction of tax reform initiatives. Sinckler explained that while the Washington-based International Monetary Fund had conducted a study on the issue, Government was “not satisfied that the necessary impact analyses of any proposed adjustments to the structure of our tax system on our key growth sectors and vulnerable groups in our society are complete”.
Nonetheless, he is confident that with the extension of the revenue measures, the island may not only meet, but surpass its deficit target.
“It means that with no additional tax impositions in the current fiscal year a new revised deficit target of between 6.8% and 7.2% of GDP, instead of the original 6.6% of GDP, is more realistic and likely. We are nonetheless therefore on course to effect a reduction in the fiscal deficit by between 5.3% or 5.6% of GDP for 2014-15,” he acknowledged.
However, an upbeat Sinckler, insisted that the Government’s Fiscal Consolidation Programme was working, even as he appealed for Barbadians to “stay the course”.
He reported that Government was on track to record savings of $68.5 million from reductions in salaries and wages, and $229 million from transfers and subsidies. And that it was also set to spend $290.8 million less.
“The fiscal adjustment measures currently in place are now projected to yield a reduction of $452 million in the deficit or a reduction of 5.32 per cent of GDP. Containing supplementaries to state institutions to a maximum of one per cent of GDP instead of the 4.2 per cent of GDP recorded last year is absolutely critical if our projections are to be met,” Sinckler said.
Stating that all signs point to economic recovery around the corner, the minister said growth of up to 0.3 per cent was now projected for this year, and could jump to 1.5 to two per cent in 2015.
Tourism and hospitality were the main drivers, he indicated, led by Canada, the United Kingdom and Germany. Investments in the sector, including by Sandals, were anticipated to generate more that $1.5 billion in foreign direct investment over the next two years.
Noting that the country was not out of the woods yet, the Minister of Finance insisted that Barbados “needs to continue to be resolute and finish the job of stabilizing the public finances in 2014 and moved to effect a further reduction in the 2015/2016 financial year below five per cent of GDP.”