Business leaders worried about cess effect

To increase taxes at this time could have a negative effect on businesses.

Furthermore, chairman of the Barbados Private Sector Association (BPSA) Alex McDonald told Barbados TODAY there were mainly two options left for businesses, either to pass on the increase to consumers or absorb it and experience a loss.

Alex Mcdonald
Chairman of the Barbados Private Sector Association, Alex McDonald

McDonald’s comments came against the background of recently proposed energy taxes as well as the recently released Government and the Global CEO: Fit for the Future PricewaterhouseCoopers report.

Leading off debate on the 2014-2015 Appropriations Bill on Monday, Minister of Finance Chris Sinckler announced new energy taxes, comprising the removal of the subsidies on diesel and a 20 cent tax on gasoline from April 1.

Meanwhile, the global report showed that CEOs around the world had major concerns regarding governments’ response to fiscal deficits as well as increased taxation.

McDonald questioned “As we come into a new Estimates period the concerns about new taxation [is] how will that affect us as we go forward?”

He told Barbados TODAY: “We are concerned that if we wish to grow and to move forward more cost conscious we have to be getting less tax. The more tax we get obviously the less cash we can put into our businesses”.

And while he was not prepared to say if residents should expect increase in consumer prices following the introduction of any new taxes, McDonald said passing on the price to consumer was always an option.

“We have always said that whenever petrol prices go up those increases usually are absorbed by the businesses resulting in less profit or they pass them on to the consumer. So in terms of freighting and all the other extended things that happen with it. It is not only on an individual level but it goes into the entire business structure whenever you have those types of energy costs,” he explained.

“What I can say is they would have to consider how they would apply those increases to their top line. One way is to [absorb it], the other thing is to pass on the increases, or some companies may say they will have to adjust the way they do business. So it is going to be a set of business decisions that is going to drive it but I don’t think it is going to be positive. Increasing taxes is not going to have a positive effect on business,” added McDonald.

He stated that while various taxes have increased over the past couple of years, businesses have not seen increases in their revenues.

“So obviously there is an inverse relationship between an increase in tax and an increase in revenues. So it is actually causing the economy to dampen with increased taxation,” he said.

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