Prices will rise by more than two per cent from new levy - Lorde
Not only will Barbadians be paying more for goods when the National Social Responsibility Levy takes effect on Thursday, they can also expect to see more than a two per cent hike in costs, University of the West Indies economist Dr Troy Lorde has cautioned.
“The two per cent tax of course will naturally filter down to consumers. It is not going to be absorbed by businesses. We’re talking about imports – food, appliances, consumables, it is going to be coming to the consumer,” he told Barbados TODAY in an interview.
The tax, which was announced by Minister of Finance Chris Sinckler as he delivered the 2016 Financial Statement and Budgetary Proposals earlier this month, is intended to offset the spiralling cost of health care and help the Sanitation Service Authority to restock its deteriorating fleet.
It is projected to raise an additional $142 million in Government revenue.
Lorde explained that like all taxes, the levy is compounded, so wholesalers and retailers have to apply a range of additional costs, including the Value Added Tax (VAT). As a result, he said consumers would have to dig even deeper into their pockets.
“So something that imports for a dollar, you can add the duty, you can add the VAT, you can add the two per cent levy . . . the final thing to the consumer will be certainly greater. By the time two per cent comes through in the final retail price it will be more than the two per cent increase. So whatever that calculation is, it could be four per cent, five per cent depending on the various mark ups by wholesalers and retailers.”
The economist said businesses had little choice but to pass on the costs to consumers, though he anticipated that some would try to maintain current prices for as long as possible.
“The sectors that sell to the public at this stage really have no wriggle room in their finances,” he said.
Lorde said while he accepted that Government was cash-strapped and needed to raise revenue, additional taxes were not the answer in an already over-taxed economy.
Moeover, he challenged the Freundel Stuart administration to ensure the tax is used for the intended purpose.
“If you raised $140 million in taxes and we are saying it should be used for health care, then all of it or most of it has to be used to fund health care,” Lorde said, insisting that Barbadians should get the commensurate services being funded by their taxes.
“Eventually we should reach a stage where we are no longer hearing that there are shortages at hospital or that you can’t fund this or that.
“If this is what the tax is intended to be used for, let it be used for that. Don’t use the money to plug other holes,” he advised.