Reduce the VAT, suggests Arthur

No more tax please!

Former Prime Minister Owen Arthur has come out in full support of an International Monetary Fund (IMF) recommendation that this country’s rate of Value Added Tax (VAT) be lowered from 17.5 per cent to 16 per cent.

Addressing a meeting of the Institute of Chartered Accountants of Barbados here on Tuesday night, the former minister of finance also warned Government against going the route of increased domestic taxation, saying any further reduction in the disposable income of Barbadians was bound to affect the performance of the VAT.

“So there is much merit in the proposal contained in the IMF report to lower the rate to 16 per cent, broaden the base by reducing the wide array of zero-rated and exempted transactions and hence let the VAT do the work that it was intended to do,” he said.

The VAT was introduced here back in January 1995 replacing a system with 11 taxes with a total yield of $416.32 million, or 14.25 per cent of nominal Gross Domestic Product.

Arthur also recalled that in the first six months of its implementation, the VAT yielded $560 million, which was considerably more than the revenue-neutral target of $492 million.

“This explains the immediate adjustment that was made to trim the base of the VAT by zero rating a basket of food items to allow it to be revenue neutral as intended,” he said.

However, in assessing the performance of the VAT over the past 20-plus years, he complained that since then too many items have been either zero-rated or exempted from the tax on consumption.

A similar concern was raised by the Fiscal Affairs Division of the IMF in a 2014 study, which concluded that the VAT architecture of Barbados has deteriorated significantly since its inception.

The study also asserted that the numerous instances of zero-rating of domestic supplies as well as imports of inputs goods, export waivers of VAT, and overly generous refund provisions had undermined the VAT.

In support of the IMF’s position, Arthur, who is a trained economist, pointed out that over the years the list of zero-rated domestic supplies had grown to nearly 20 broad categories of goods and services.

“The bottom line in all of this is that the VAT regime was intended to be a regime characterized by a broad base, a low rate, few exemptions and simplicity in its operational features and its administration,” he told the ICAB meeting at the Lloyd Erskine Sandiford Centre on Tuesday night.

However, he supports recent amendments to the operational structure of the VAT, as outlined by the current Minister of Finance Chris Sinckler in his 2015 Budget presentation. The independent Member of Parliament for St Peter said the changes should help to mitigate some of the effects of its weakening foundations.

“It is also good that the reverse tax credit has been retained as one of the chief means by which the potentially regressive effects of the VAT on low income citizens can be mitigated,” he said in further support of Government’s efforts to restructure the VAT.

“The raising of the threshold at which entities become eligible to pay the tax to $200,000 also makes complete good sense,” Arthur said, adding that “the broadening of the base to include gaming and lotteries, cell phones and the likes are also justified”.

However, with Sinckler currently preparing for the annual Estimates of Revenue and Expenditure parliamentary exercise, Arthur said “the core of the recommendations which may yet have to be acted upon are that most of the exemptions and zero ratings may have to be eliminated, the standard rate reduced to 16 per cent, the reverse tax credit should be continually adjusted and the rate on tourism supplies should be raised to the standard rate over a three to five year period”.

He stressed the importance of having the standard VAT rate for the vital tourism sector, especially given the Government’s recent difficulty in meeting tax refunds.

“It arises not just from the cash flow problems facing the Treasury, but from some of the structural features of the VAT itself including the differential between the tax on inputs and the tax on outputs applied to the sector,” Arthur explained, adding that the situation was made worse because the difference between the 7.5 per cent output tax and the 17.5 per cent tax on inputs had made tourism enterprises eligible for larger refunds.

“In the final analysis it may have to be resolved by subjecting both outputs and inputs to the standard rate, as proposed,” he stressed.

The former minister of finance also suggested that Government’s decision to increase the VAT to 17.5 per cent came as a result of a steep fall in revenues, especially corporation taxes earned by the International Business and Financial Sector.

However, he warned that the plunge in the revenue from $356 million to $93 million was not due only to the migration of companies, but also to the fact that the rate of tax had been cut by 50 per cent.

“It would therefore have been better for Barbados to fix the conditions for doing business and for facilitating investment than fiddling with the tax rate,” he said, while stressing that any further attempts to increase the domestic tax rate in a shrinking economy would be counterproductive.

The former prime minister also did not resist the urge to take a jab at the outgoing Governor of the Central Bank Dr DeLisle Worrell on account of the VAT, saying that by way of interesting historical footnote, his was the most powerful and influential voice raised against the introduction of a VAT in Barbados.

“Happily, there will be finer things for which he will be remembered,” Arthur quipped. 

51 Responses to Reduce the VAT, suggests Arthur

  1. Greg Albert
    Greg Albert February 24, 2017 at 12:32 am

    I think we need you back in power sir i said it to my friends lately the reduction in vat would be an ease for all hence creating more spending if you get the drift all them DLP ministers want firing not jus worrel but them all …..Maybe i should run cause them got so much “CENTS” yet cant make no dollars

    Reply
    • Joel C. Payne
      Joel C. Payne February 24, 2017 at 2:56 am

      ONLY if that doesn’t translate to more importation.

      Reply
    • Pat BB
      Pat BB February 24, 2017 at 8:25 am

      Not only firing….locking to hell up

      Reply
  2. Adam Tyler Mallett
    Adam Tyler Mallett February 24, 2017 at 2:23 am

    Exactly sir

    Reply
  3. Hal Austin February 24, 2017 at 4:23 am

    No. One aa again Arthur is off message. There are a number of weapons in the minister of finance’s armoury: stop 100 per cent sub-prime lending for auto vehicles; collect outstanding taxation (NIS, income tax and VAT) or put the enterprise out of business; stop using taxpayers money to subsidise private businesses, especially small and badly-managed family-owned hotels; it is the mot disgraceful transfer of wealth from the poor to the well off in our history since the abolition of slavery.
    Introduce a job-share for all entry-level public sector jobs and incentivise the private sector to do the same; get rid of the defence force and transfer the present members to the police and Coastguard; tax motorists heavily and improve public transport. They will squeal, but ignore them. A policy of one car per household should be introduced.
    A to spend about 12 per cent of GDP on education and training and diversify the economy away from tourism.
    All these and more are ideas that have been on the table for over eight years and the government has ignored them. They are now paying the price.

    Reply
    • Mr. E February 24, 2017 at 9:25 am

      Were you under the influence of drugs or alcohol this morning at 4:23 a.m when you found the time to write this nonsense?

      Reply
  4. Mhizz Kelly P Forde
    Mhizz Kelly P Forde February 24, 2017 at 4:42 am

    PREACH ME.AUTHUR . That VAT licking up ppls pockets ,people spending power in a choke hold. I’m young but when you give ppl spending power money does circulate in the country .

    Reply
  5. Kenrick Purcell
    Kenrick Purcell February 24, 2017 at 4:50 am

    Preach

    Reply
  6. Dale Black
    Dale Black February 24, 2017 at 5:06 am

    Saids the man the put it there in the 1st place

    Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 5:43 am

      Vat took the place of other taxes and significantly brought down certain prices especially on electronics . Vat that the party you support obviously raised to 17.5% for a trial and despite it never once collecting anywhere near what it did at 15% (93 million short of the expected amount at the last estimates alone ) the man that’s playing the role of mof never lowered it . He won’t know any better anyway seeing as he is nowhere near an economist . Party of dishonest lawyers running a country . Barbados is no longer the gem of the Caribbean but rather the joke of the Caribbean .

      Reply
    • Sabrina Brathwaite
      Sabrina Brathwaite February 24, 2017 at 6:03 am

      That’s the same thing I said. It’s not a matter if who he supports but the truth. When era line sandiford wanted to do 8% nobody saw the vision. I will agree that vat was a must but he only hollering hard. He know it don’t work so too

      Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 6:30 am

      Sabrina I honestly feel lower vat means lower prices and in the end ppl will spend more . Even the IMF that we followed their every command recently said drop it to 16% and put more spending money in the ppl hands . Don’t you think it’s worth a try at a lower rate . 93 million short of the estimated take in says a change must be worth considering . After all it was only an 18 month experiment that’s way pass that time now . It failed . Let’s change and move on. Can’t be any worst

      Reply
    • Phia Cumberbatch
      Phia Cumberbatch February 24, 2017 at 7:16 am

      VAT did replace the other taxes and lowered the cost of appliances and other electronics. A fridge that you may have bought for say $900.00 back in the day you would have had to pay $1800.00 plus the hire purchase interest. So by removing those other taxes and applying VAT across the population. It enabled cheaper prices on appliances and electronics.

      Reply
      • Carson C Cadogan February 24, 2017 at 7:58 am

        Not true.

        Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 8:32 am

      Thank you Phia. I remember that a 32 ” tv I was admiring at Mannings was almost $4000 and then came down to $2600 after vat came on board and replaced the others . Younger ppl won’t remember such so I don’t blame them for misunderstanding the vat thing.

      Reply
    • Pat BB
      Pat BB February 24, 2017 at 8:43 am

      Danny Colombian Clarke vat needs to come down to 15% and not 16% but the arrogance have these jokers, it seems like they working for some outside force and on a mission to completely destroy Barbados….
      U mean to tell me ppl saw the attitudes of these idiots in their first term and gone and give them a second term? Owen offered to help before things got to this stage, he still offering to help….oh gosh man

      Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 8:51 am

      Pat I could feel your pain just by your comment . Most of us feeling it . They refuse the advise of every single noted economist that offer to work unbiased with them. A party of lawyers . The track record of Thompson and the Speaker says how good they are leading a country . Got the drain pipe run straight in their pocket

      Reply
  7. Angus Benn
    Angus Benn February 24, 2017 at 5:21 am

    When you greedy. You does end up losing every thing. He think more taxes more money. A store owner was selling some T-shirt at$5 in one week he sell 5 dozens. The next week he put them for $8 he only sell one dozen.

    Reply
    • Pat BB
      Pat BB February 24, 2017 at 8:29 am

      Thank u, Dem too damn greedy..

      Reply
  8. Sabrina Brathwaite
    Sabrina Brathwaite February 24, 2017 at 6:04 am

    Wait…. That ain’t the person that put in there in the first place. Well well well. Wow he know full well it don’t work so too.

    Reply
    • Dave Felix
      Dave Felix February 24, 2017 at 6:22 am

      Yes he put it there but it wasn’t him who places it at 17.25%

      Reply
    • Sunil Brome
      Sunil Brome February 24, 2017 at 8:00 am

      Exactly Dave Felix, if read properly one would notice that he is not speaking against vat. Vat has been a useful tool in our economy.

      Reply
    • Amber Blackman
      Amber Blackman February 24, 2017 at 8:11 am

      Silly comment

      Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 8:20 am

      Sabrina is lost unfortunately. I explained to her in detail that vat replaced other taxes and significantly benefited us poor ppl in the line of fridges / stoves etc that in some cases came down by as much as 100% . However when you bewitch and foolish behind any organization even the church you will never see reality . I also told her that last estimates alone at 17.5 % it took in 93 million less than projected . MOF words not mine . You won’t know the days that a cornbeef cost $6 you too young . . I do . Not being disrespectful to you but do you have any economic experience ???

      Reply
    • Mazie Taylor
      Mazie Taylor February 24, 2017 at 8:52 am
      Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 8:59 am

      Mazie I going listen to you. I got nothing personal against Sabrina but I was around when vat was added and other taxes removed and I know how much the prices of appliances dropped .As much as 100 % in some cases . I also know about price fixing under Branford Taitt when cornbeef cost $6 a tin and saltfish was $20+ a pound . Don’t get me started .

      Reply
    • Carisma Amor
      Carisma Amor February 24, 2017 at 9:30 am

      Danny Colombian Clarke preach mah brother

      Reply
  9. Heath Hazell
    Heath Hazell February 24, 2017 at 6:27 am

    Vat should be put on everything and get rid of all other taxes. That way all those who don’t pay their taxes will be contributing.

    Reply
    • Nico HL Beckles
      Nico HL Beckles February 24, 2017 at 9:13 am

      VAT is put on everything minus educational equipment

      Reply
  10. Christopher Donawa
    Christopher Donawa February 24, 2017 at 7:00 am

    Is there a statistic which shows the total incoming of VAT at 15% for the last 12 month period of its existence at that rate vs the last 12 Month period at 17.5% ?

    Reply
    • Mario Andrew Williams
      Mario Andrew Williams February 24, 2017 at 7:14 am

      That is a very good question and I would risk to bet that the total income was greater when it was at 15%! Higher taxes always lead to people dodging the tax net while it kills business! Stop the free bus fairs!!!!

      Reply
    • Sunil Brome
      Sunil Brome February 24, 2017 at 8:09 am

      Without the stats im willing to bet the income was more in the 15% era.

      Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 8:24 am

      Sunil it has never never never never never ever collected more at 17.5 than at 15. Last report was 93 million less than antisipated . Chris words not mine

      Reply
  11. Lionel Gittens
    Lionel Gittens February 24, 2017 at 7:14 am

    My wife said the same thing yesterday. Reduce it.

    Reply
  12. Ras Small
    Ras Small February 24, 2017 at 7:31 am

    You OA ain’t even shame saying lower de VAT!!!..

    Reply
    • Danny Colombian Clarke
      Danny Colombian Clarke February 24, 2017 at 8:35 am

      I agree. I hope Sinclair raise it to 50% just for you. You getting on like you wasn’t born when vat came on board and replaced other taxes and lower fridges and stoves by half so poor ppl like me and you could actually buy them. Or you too young to remember to days of price fixing when in the 70’s things that cost $6 then cost $3 now . Ask Branford Taitt if you doubt me

      Reply
  13. Carson C Cadogan February 24, 2017 at 7:55 am

    Is this the same man whose economic advice landed the Country of Jamaica in the hands of the IMF?

    As a result Jamaica is in the IMF hands nearly FORTY (40) YEARS. Now he is suggesting that we do the same?

    Is this the same man who said that he came to power he found the IMF with a office at Govt. headquarters and he chased them out?

    Is this the same man who boasted that VAT brought in $13 billion in revenue for his Govt.? Why didnt he reduce it when he noticed that it was gouging the public?

    These Barbados Labour Party politicians really believe that Bajans have short memories.

    Reply
  14. Mark Adamson February 24, 2017 at 7:55 am

    The VAT MUST go completely.

    And, yes, this was the view of Dr. Delisle Worrell.

    Mr. Arthur – as Prime Minister and Minister of Finance at the time – made a colassal error by introducing it.

    Even before its introduction in 1997, I was predicting that the so-called VAT will help to destroy much of the commercial business sector of Barbados.

    And the evidence of such destruction is there for many people in Barbados to see.

    There can be no argument by any one that a reduction in the VAT rate will bring about greater business in this country. And this is what Barbados Today journalists ought to be focussed on. Did Arthur say it will?? The truth is that the so-called VAT and wider TAXATION does not create any commercial business though it helps to prevent greater commercial business from coming about.

    TAXATION is evil, wicked, fascist, unconstitutional, unproductive and uncooperative.

    In the event that the rate of VAT is reduced to the said 16%, the receipts that are NOT stolen, may lead to the creation of greater receipts elsewhere which later on, in turn, may be subject to greater TAXATION elsewhere.

    Reply
  15. Oats Walton
    Oats Walton February 24, 2017 at 8:04 am

    Owen making some good points. Please work with him and work as a team to avoid the Sinkingship

    Reply
  16. Sunil Brome
    Sunil Brome February 24, 2017 at 8:06 am

    VAT is a useful tool in maintaining an economy like ours. It however must be applied in a way that makes it beneficial. VAT replaced other taxes and then Govt made items across the board exempt from the only tax, which was counter productive. VAT works.

    Reply
  17. Rick Vonde February 24, 2017 at 8:17 am

    I find it interesting that the 2% Social Responsibility Levy, aka False VAT is not mentioned in any comments nor the article. Essentially the VAT in Barbados is currently 19.5% since the SRL is put onto everything the carries VAT.

    Reply
  18. Pat BB
    Pat BB February 24, 2017 at 8:23 am

    Owen boy u wasting ur breath,
    When u offered to help d big head ignorant arrogant @&$€#, Dem didn’t want to hear, I would b very surprise if they listen to u now

    Reply
  19. Kina February 24, 2017 at 8:35 am

    But in the last budget when they taxed the juices and soft drinks in an attempt to make ppl stop using them which may i add was just a smart way to add tax to a product which is used regularly wasnt the proposal to drop VAT from 17.5% to 16%

    Reply
  20. Joan Worrell February 24, 2017 at 8:58 am

    Talk your talk Owen. At least Bajans know what are your solutions to the problem . Still waiting to hear what are the BLP solutions so that John Public would know if they are fit to return to power. All they do is criticize criticize criticize. The majority of the Party supporters would like to see you return to Roebuck Street but they don’t know how to tell Miss Gadaffi to step aside. lol

    Reply
  21. Vishal Ramai
    Vishal Ramai February 24, 2017 at 9:05 am

    Mr Arthur will always be the best primer minister bdos ever had

    Reply
  22. kathy-Ann Clarke February 24, 2017 at 1:53 pm

    It should come down to 15%.

    Reply
  23. Greengiant February 24, 2017 at 2:17 pm

    Vat is a luxury tax so rather than a reduction, there is need to stagger the vat from zero to seventeen and a half percent.
    Arthur himself, during his first financial report on the floor of the house after Vat implementation was so overwhelmed by the actual collection figure he promised that from the following fiscal year the Vat would have been staggered. I guess his economic advisers brought the idea of a zero rated basket of good then.

    That basket of goods principle has been continued by this administration as well, but with an increase in Vat this has significantly reduced spending power. The better system to regenerate spending would be to stagger the Vat and of course reduce the quantity of goods in the basket, with nothing zero rated. There should also be an additional tax on tobacco, alcohol, sugary products and others that lead to hazardous health issues with which we currently struggle as a nation. This additional revenue should be totally allocated to the treatment of chronic
    noncommunicable diseases. We should continue to have persons pay for their tertiary education, while encouraging the involvement of local agencies to assist with the drafting of relevant legislation. An example of which can be to refund in full students who work hard to acquire honor degrees. This can be the catalyst by which we aim for excellence within our education system. Children who work towards achieving grade ones in as many as eight C X C general subjects should be fast tracked to university level studies thereby easing the six form, and B C C expenditure. We should also be getting the secondary school boards to work with overseas institutions in acquiring full scholarships for top students, while developing programs to keep the eyes of students on this possible target. There is so much we can do as a nation to stretch our spending, and reduce operational expenditure, but we need new brains, new courage, new energy. In other words not just an alternative energy sector, but alternative energy within our house of parliament. The old ways simply need to be sent directly to
    S B R C, Jose Y Jose or Barbados Recycling for organized disposal. The old way may be fit for other purposes as i’m sure once new things begin to happen, those fellows will suddenly see a way to contribute.

    Reply
  24. Hal Austin February 24, 2017 at 2:19 pm

    Give the BLP an ultimatum: tell us what you will do in government or we will not vote for you.
    This tactic of keeping your powder dry is ancient. Don’ vote for a pig in a poke.

    Reply
  25. sunshinecanada February 24, 2017 at 4:23 pm

    if all you stress pigs, like Owen,why did u let him down?

    Reply
  26. Harry February 24, 2017 at 9:45 pm

    This Govt imposed more taxes than any other Govt and collects less money…… in addition has had 17 downgrades imposed on it. Interestingly the last two occasions that the DLP were in power this country was brought to the brink of financial disaster that is a fact. I am not a member of any Political party just someone who has always taken pride in voting.

    Reply
  27. John A. Moore February 25, 2017 at 9:42 am

    The imports monster is still being ignored. Cut this monster down to size and you will see daylight and improved finance balances. I wish the Hon Owen Arthur had lent his considerable knowledge to tackling the monster.

    Reply

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