Call for tax policy debate duly welcome
Barbados Private Sector Association (BPSA) president Alex McDonald called recently for a serious debate on taxation policy in light of a fundamental shift in the Government’s traditional approach towards funding key social services, especially education and health care.
Last September, the five-decade-old policy of 100 per cent state-funded education from primary to tertiary level came to an end when the Freundel Stuart administration, in response to budgetary challenges, introduced tuition fees for Barbadians attending the University of the West Indies (UWI).
Recent pronouncements by Government officials suggest a similar policy change is also coming in relation to health care. As a result, Barbadians face the real possibility in the near future of having to pay user fees of one kind or another to access medical care, currently available free of cost, at the state-run Queen Elizabeth Hospital (QEH).
Coming after the recent Estimates Debate and ahead of the Minister of Finance’s annual presentation of the Budgetary Proposals, Mr McDonald’s call is not only timely but also worthy of serious consideration, especially in light of suggestions that more taxes may be necessary to fix the Government’s financing problems.
This “very philosophical dialogue”, as Mr McDonald described the proposed taxation debate, can serve a most useful purpose at this time of economic and fiscal adjustment. It cannot only help to bring clarity on a number of key issues, but also serve to forge a much needed consensus at the level of the Social Partnership on the way forward.
As the private sector and the average working Barbadian already feel they are overtaxed and, in several instances, are not getting value for their tax dollar, the imposition of more taxation is likely to be counterproductive. At a time when boosting productivity is required to improve the performance of the economy, especially from the standpoint of competitiveness, more taxation can only undermine this objective.
What Government ought to be paying more attention to is the question of improving efficiency. As the Auditor General confirms year after year, there is a lot of wastage in Government. Reducing or, better yet, eliminating such wastage can save the taxpayer millions of dollars. Unfortunately, there exists in Government a tax and spend culture where imposing additional taxes is seen as the solution to almost every financing need.
In proposing the taxation policy debate, Mr McDonald emphasized the need for Government to tackle the “root and stem issues” at the heart of many inefficiencies in the public sector. He also raised another pertinent point –– consideration of a reduction in taxation if Government is going to ask Barbadians to pay for services now fully financed using their tax dollars. This, in our view, is a reasonable request.
He said: “We are not hearing . . . that if we do introduce fees, that we will reduce corporation tax and income tax, or if we decide we are going to have a low tax regime, we are going to pay for everything, or we are going to have a high tax regime and we pay for nothing, or we have a moderate tax regime and we choose what we pay for. Those are philosophical decisions we need to get into to see how our funds are spent.”
In relation to suggestions that Barbadians who are better off should be asked to shoulder a heavier tax burden to support, for example, health care, Mr McDonald said there was an important consideration here which was being overlooked.
“We also have to remember that those people who have private insurance also pay taxes which also go towards the monies that are allocated to the Ministry of Health,” he said.
He added: “. . . We have to have a very philosophical dialogue among our stakeholders about what we are being taxed for. Where is that money being spent? If you are asking for higher levels, what are the efficiencies that will be guaranteed to make sure that our hard-earned money is being spent in the right way?”
Mr McDonald’s proposal for a national taxation debate could take the form of a high-level conference involving the Government, private sector, trade unions, and other major stakeholder interests. An opportunity should be provided before the conference for ordinary Barbadians to contribute to shaping the position to be articulated by their representative stakeholder group, for example the labour movement.
Let’s hope the political leadership of Government is listening and will embrace the proposal. Out of the debate can come some novel ideas that can contribute to an improved relationship between Government and other stakeholder interests for a better Barbados in the future.