A kinder budget – Stephen
President of the Barbados Economics Society Jeremy Stephen wants to know how Government plans to implement some of the measures in the 2016 Financial Statement and Budgetary Proposals presented by Minister of Finance Chris Sinckler on Tuesday, even as he praised the monetary package as “one of the kinder budgets” presented by the minister.
Sinckler announced several revenue-generating and cost-cutting measures for this year, including the introduction of a new two per cent levy on imports to finance health care services and an increase in bank asset tax from 0.2 to 0.35 percent.
“The main issue with the budget is one of where’s the implementation for most of these proposals, especially with respect to the cuts in expenditure and heightening in taxation.
“So for instance no one will know right away how that $50 million that’s expected to be shared by all ministries is going to be allocated. Will it be that the less vulnerable ministries or those with actual cash piles in the bank if there are such, if they would be expected to take a bigger hit? Is it going to be based on impact on the economy or impact on Government’s provision of vital services,” Stephen said.
He also knocked the increase in the bank tax, saying he was not pleased that Government had “once again decided to go after excess liquidity within the banking sector”.
“More than likely this will be passed on to consumers, and as such you can expect even further interest rate cuts, unless customers decide to move their money out of that liquid banking system and into, say, Government debt, which is really what I believe is the attempt here,” he said.
Stephen did not believe the level of confidence in the economy allowed for this additional levy “to really make the money that they’re expecting to make, at least within the first year of its implementation”.
The economist added that Government might be “grossly underestimating” the impact of the duties, given the confidence in the economy. However he recognized that the administration was aiming to protect the vulnerable and assist small businesses.
However, he said while Sinckler stressed that the foreign reserve stock was strong, “it is still worrisome, especially with the amount of debt as he admitted we’ve racked up as an economy”.
The BES head charged that the budget was not friendly toward the middle class, especially in light of the two per cent levy imposed on imports to finance health care.
“I am rather troubled by the fact that although we’ve got a levy on fuel costs in the country already, which still makes our fuel costs uncompetitive, and the notion behind that is that people should be expected to be funding health care through their consumption of fuel. The same thing is being said about general imports altogether. So going back to the point of implementation, does it mean that the levy of which people pay now on fuel, will they have to pay an additional amount?”
Stephen added one of the most interesting proposals was the provision for individuals to withdraw from their registered retirement plans for an amount not exceeding 15 per cent of the total value of savings.
“It’s almost like a recognition that people are short on cash or short on expendable cash. But what it does is if someone is savvy enough… they may be incentivized [to] moving their assets … into some other assets, say using it to put a down payment on a home, as opposed to having it locked up for many years as a form of security; or they may just re-divert it into the same Government debt or some other kind of asset,” Stephen said.