Business climate ‘grim’ says private sector
The “architects” of Barbados’ fiscal policy have come in for severe criticism from the representative body of small enterprises, the Small Business Association (SBA), which has described some of Government’s recent revenue raising measures as “a psychological whip” which has created an environment in which small businesses “continue to suffer severely.”
And Chief Executive Officer Lynette Holder told Barbados TODAY in an exclusive interview yesterday, that some SBA members considered some of the measures announced in the June 15 Financial Statement and Budgetary Proposals to be “draconian”.
Minister of Finance Chris Sinckler announced in his budget speech that, “effective immediately all individual professional operators provided for under the registration regime of the Profession, Trade, and Business Registration Act” would need to produce a valid tax clearance certificate from the Barbados Revenue Authority (BRA) in order to renew their respective licenses to practice here.
Noting that the island had seen a decline in the level of revenue from corporation taxes since 2007, Sinckler also announced adjustments to the corporate tax regime, including a reduction in the refundable rate.
In addition, the minister said that effective January 1, 2016 the value added tax (VAT) registration threshold would rise from the current level of $80,000 to $200,000. This last measure is sure to hurt about 80 per cent of they SBA’s membership since, up to a month ago, the were earning under $200, 000 per year, Holder told Barbados TODAY.
“You now have a significant number of small business persons who will be doing business in this country, who are unable to claim back that VAT,” said Holder.
She explained that it would put more pressure on the small business owners given high input costs, which they were not able to pass on to customers.
“You might be producing one or two little items. So when your input cost increases it makes it more challenging for you to be competitive because you are unable to pass on that cost to your customer because then you would price yourself out of the market,” she complained
She also expressed concern about the requirement for professionals to have a tax clearance certificate in order to operate here, pointing out that small business operators were not willfully dodging paying their share of taxes.
Holder said based on qualitative discussions at the last SBA meeting, the business operators felt Government had introduced “another draconian measure to say ‘well, if you are hiding we are coming after you.’
“But the fact is, small businesses want to be able to earn and do business. That is why they go into business in the first place. So to now say you must ensure you have these [tax] clearance certificates in place before you can do business, it begs the question, in my view, the architects of these policies really have a clue about what is really going on and what is required to run a business,” said Holder.
“Barbadians have a reputation . . . of paying their taxes . . . So when you see these draconian measures it makes you wonder what country we are in. Government’s effort in trying to raise revenue through taxes and using this psychological whip to try to convey a message that ‘Barbadians are defaulting in their taxes’. But we don’t intentionally do that,” said Holder.
“But if it is that a small firm is unable to meet NIS [National Insurance Scheme] obligations or whatever the case is, it is genuinely because more often than not, they are just fighting to keep their heads above water. That is the reality in the marketplace. So I call it a psychological whip that they are using”.
In relation to the current business climate, Holder said while there were no statistics to back her claim, interaction with members revealed that small businesses “continue to suffer severely in this country”.
“They are unable to maintain their [sales] margins. They are unable to maintain their operations vis-à-vis getting the financing to
fund the purchase of raw materials and other inputs,” she said.
Meantime, in a separate interview, chairman of the umbrella Barbados Private Sector Association Alex McDonald told Barbados TODAY “the business environment is still very grim”.
“We do have some businesses that are doing better. But overall our businesses are at the same level if not, worse than a year ago based on conversational data. We do not have the hard data in terms of ultimate effect but we do see year on year corporation tax declining,” said McDonald.
He said he was aware that job growth in the private sector was also “not good”, explaining that companies continued to put staff on short- time or part-time, and in some cases, terminate them.
“We are very concerned. I think that there are a lot more people also who have been out of work for a long time who are now trying to be self-employed, which is to be encouraged. But people should do the self-employed route and the entrepreneurial route not only out of necessity but because of their passion,” he said.
“So that too we have to be concerned about because they then get into selling and doing anything to make ends meet, suffering with low quality production and lack of engagement even in their own business,” said McDonald.