‘New tax could wipe out pension increase’
The raise for pensioners which which Minister of Finance Chris Sinckler announced Tuesday evening is being taken from the senior citizens almost immediately by the very minister, some members of the private sector are suggesting.
At the same time, the members of the business community are doubting the new National Social Responsibility Levy will raise the amount that Sinckler projected when he presented the Financial Statement and Budgetary Proposals.
Outlining the budget Tuesday, the Minister of Finance announced that old age non-contributory pensions would rise by $10 a week or $40 a month beginning October 1, costing the Treasury $3.2 million a year.
The minister also announced a new National Social Responsibility Levy of two per cent on the custom value of all imports, effective September 1, in an effort to raise $142.1 million to finance health care through a national health insurance fund.
Private sector officials see this as counterproductive, expressing fear today that it would wipeout the increase in old age non-contributory pensions.
President of the Barbados Association of Retired Persons (BARP) Ed Bushell said he welcomed any increase to the pensioners. However, he told Barbados TODAY in a brief comment that he was worried that the benefits would be lost.
“We are glad that something could be offered to the pensioners at this time. Unfortunately . . . we are thinking that some of this could be taken away due to the two per cent imposition of tax. So we are looking at this as a mixed bag,” Bushell said.
Addressing a post-budget breakfast meeting organized by the Barbados Chamber of Commerce and Industry and PricewaterhouseCoopers at the Hilton Barbados Resort this morning, Chairman of the Barbados Private Sector Association (BPSA) Charles Herbert questioned the decision to fund health care via the tax.
He said while the establishment of a national health insurance fund was a “huge development in Barbados”, Government had to be careful that in the long-term Barbadian workers did not end up financing the nation’s health care.
“We have this levy based on imports and local production. It raises the question, if it ultimately is going to be funded by a payroll tax, presumably collected through the NIS [National Insurance Scheme] mechanism,” he said.
Herbert said he was also unclear how the tax would be implemented and if it would be applied to domestic production for local consumption only or also on local production for export – a move that would hurt manufacturers, he said.
“We certainly hope that the imposition of that levy on local inputs is done in a way that it’s conscious not to disadvantage against imports and not to disadvantage our local producers that export, because we can only assume that he meant local production for local consumption.
“So this is a new territory, and new territory is always dangerous. We don’t have details and we are very concerned about that,” the BPSA head said.
However, economist Winston Moore said while putting the tax on the payroll would be easy, this would have more far-reaching negative impacts, since residents were already finding it difficult to meet their monthly bills.
Moore added that as presented, the levy could have unintended consequences.
“If individuals respond to that said tax by purchasing less goods and services, then the revenue might not be as large as what is expected,” Moore said as he expressed disappointment that the financial statement did not address the alternative energy sector.
Although Sinckler said goods manufactured for the tourism sector would be exempted, the hospitality sector had questions about the implementation of the tax.
Chairman of the Barbados Hotel and Tourism Association Roseanne Myers stated she was unclear if it would apply to operators such as car rental companies and attractions that were not exempted under the Tourism Development Act.
She also saw the tax having a negative impact on senior citizens.
“That is one that will have a slightly dampening effect and certainly it will wipe out the $10 a week for pensioners because they are going to have to pay that two per cent at the supermarkets and retail,” Myers said.