Government changes tax concession rules
The Government of Barbados has issued new guidelines to investors and developers seeking tax waivers for projects here.
Minister of Finance Chris Sinckler today revealed that from this month, those obtaining such concessions must sell to the Central Bank of Barbados (CBB) at least one third of all foreign exchange brought on island through the projects.
In addition, he said upon completion “any foreign sales generated from unit within those developments and for which concessions are attached, no less than 50 percent of the sale proceeds must be brought onshore and half of which must be sold to the Central Bank of Barbados”.
Sinckler also disclosed that the Ministry of Finance was closely monitoring a developing situation where some local commercial banks were approaching foreign investors with offers to use Barbados dollars to finance their projects here.
He told a news conference at Government Headquarters that these banks were also offering to drawdown loan proceeds from domestically held foreign currency to fund these projects.
“While the Ministry of Finance cannot tell any investor where to source their financing from or indeed prevent any domestic bank from offering their liquidity to investors, what we can do however, is to ensure that where generous concessions are given on the basis that the country would get a net inflow of foreign exchange that all parties honour those commitments if the benefits are to continue,” he insisted.
Flanked by Minister of Commerce, International Business, Trade and Small Business Development Donville Inniss, Sinckler stressed that the developers with whom his office had interacted in the past weeks had given their full support to these measures.
Sinckler told reporters during the hour-long news conference that while Government sought to maximize inflows of revenue, it must urgently address the demand for foreign exchange so that the precious inflows were not drained back out.
“In this regard, we have to address the stubborn problem of our unsustainably high fiscal deficit, the slower than expected reduction and the less than acceptable method of financing it through so-called printing of money by our Central Bank,” the minister stressed.
He said despite registering some successes, it was clear the fiscal deficit and its financing continued to be a major challenge for the economy, adding that “we must find the most humane and least disruptive ways of further reducing the fiscal deficit”.
Sinckler said he was hoping to report during his presentation of the Estimates of Revenue and Expenditure that the revised debt target of 5.5 per cent of gross domestic product (GDP) had been met.
“We may even be able to report a small primary surplus as well,” he added.
While acknowledging that the fiscal deficit was still “too high”, Sinckler assured Barbadians there was no need to panic since the island was not facing a “doomsday” scenario.
He also assured that the Barbados dollar was not in any danger of devaluation, even in the face a “stubborn” fiscal deficit and dwindling foreign reserves.
“It is not going to happen at no time in the foreseeable future,” he told reporters. In response to recent concerns raised about the state of the island’s foreign reserves which have fallen below the 12 weeks standard cover, the Minister of Finance said it was not the first time that such had occurred, pointing out that in 1998 the reserves fell to 9.1 weeks and in 1999 to 9.9 weeks of imports.
However, he said Government was committed to restoring the reserves to a “comfortable” level. In this regard, he said a drawdown was expected on the Sam Lord’s development project any day now. Sinckler also said Government had settled a loan with First Citizens from which proceeds were expected to flow in the coming days.
The minister was also confident that final approval would be given to the deal to sell the Barbados National Terminal Company Limited to the Sol group, which, when taken with Sam Lord’s and First Citizens’ monies, are expected to rake in some $200 million, pushing the reserves “well above” the desired 12 weeks of imports. He also revealed that inflows in the amount of $30 million were expected from the Development Bank of Latin America, otherwise known as CAF, and a further US$35 million from the Caribbean Development Bank (CDB) to fund two water projects. Another $50 million in support is also due from the CDB for an education sector enhancement project.
He added that effective this month Government would be tightening up its foreign exchange monitoring.