Slash the VAT to under 15 per cent – Government told

An across-the-board 10-15 per cent rate of Value Added Tax (VAT) with no exemptions, concessions or zero ratings for any industry or sector is among sweeping tax changes under consideration by Minister of Finance Chris Sinckler as he prepares to make his much-anticipated Budget presentation next month.

The proposal is among the major recommendations contained in a 30-page document produced by a triparite committee, comprising representatives of Government, the private sector and labour, mandated by Prime Minister Freundel Stuart on March 3 to look at ways of reducing the country’s worrying fiscal deficit, with the island’s 2-to-1 peg with the US dollar already showing cracks, and an all-out balance of payments crisis now a possibility given that Government’s debt rose above 110 per cent of gross domestic product at the end of last year while international reserves fell to $682 million, the lowest level since 2009.

Barbados TODAY has obtained a copy of the detailed report, which sets out four areas for immediate action in order for the island to achieve a balanced budget by way of savings in the amount of $750 million.

In addition to lowering the current domestic rate of VAT from 17.5 per cent, which is proposed for implementation over the next nine to 12 months as a means of eliminating revenue leakage and bringing targeted relief to the poor and the vulnerable, the Patrick McCaskie-led committee recommends implementation of a withholding tax on the non-hotel hospitality sector as a means of bringing them into the tax net.

“Today, VAT collected from the non-hotel hospitality sector is not significant,” the committee notes, while recommending a withholding tax with an equal rate to the VAT on hotels (7.5 per cent).

It also suggests that the Ministry of Finance engages Airbnb and other non hotel players to seize the opportunity and put a process in place to collect the needed revenues.

The committee also endorsed recommendations contained in the International Monetary Fund’s 2016 Article 1V Consultation on Barbados which includes completion of the merger of Customs & Excise into the umbrella Barbados Revenue Authority (BRA). In fact, the report specifically recommends that the complete merger, including personnel elements, should take place within three months, as a first step to strengthening the overall tax administration system and yield savings of between $19 million and $40 million over the next two to three years.

On the heels of the recent tax amnesty and in a further crackdown on defaulters, the report also calls for the immediate establishment of a “self funding” revenue court within the next six months. This is expected to accelerate the collection of arrears and to act as an incentive for delinquents to negotiate in good faith and avoid court action.

The report also speaks to the need for greater efficiency in the public sector as a whole and recommends not only major reform of state-owned enterprises, but the elimination of waste throrugh the closure of inactive projects; greater incorporation of technology and the offer of targeted voluntary separation packages.

As a means of controlling wages, the report suggests that as staff leave through attrition, replacements should be limited to one for every five and not one for one as has traditionally been the case.

It also speaks to the need for energy saving given that energy costs are one of Government’s highest forms of recurrent expenditures. The simple recommendations are that lights in Government buildings be turned off at night and that it seeks to expedite implementation of the IDB-financed Sustainable Energy Investment Programme.

11 Responses to Slash the VAT to under 15 per cent – Government told

  1. Peter April 22, 2017 at 12:06 am

    I smell another election promise being orchestrated from within. We need it non-the-less. If or when that comes in the budget, know elections are definitely within striking distance.

  2. Leroy April 22, 2017 at 3:46 am

    Dropping vat will hv no meaningful effect in the shortterm than to narrowly drop vat receipts bc sellers will not pass on the savings in the short term, but for long term 3yrs+ its necessary.

    As it relates to no new hiring or hiring 1 person for every 5 persons retiring, that is nonsense, what gov needs to do is have an across the board assessment of all gov functions to determine what staff is needed and where fat needs to be trimmed(i.e retrenchment).

    Collect rd tax at the pump, and have a small fee to sibsidize public transport at the pump.

    Implement all sin taxes.

    Increase taxes on insurance companies by a 5% levy on all policies.

    Fix nis by increasing rates based on analysis(job for adjusters and not necessarily min of finance)

    Implement prescription fee for each presription of persons excluding senior citizens, dependents and welfare/disability persons.

    Reduce the printing of $ gradually.

    Hold businessmens feet to fire who owe gov vat.

  3. Kevin April 22, 2017 at 7:03 am

    The lowering of vat would further erode the exchange $$. Increase the tariff on goods that are imported, things that we can grow here at the same quality should be subsidize or incentives

  4. harry turnover April 22, 2017 at 7:37 am

    ….and also REINTRODUCE School fees.When I first started at the University of Waterford my parents had to pay School fees ,after the Dipper was elected could remember my mum gladly saying that she would no longer have to pay….times were different then and up to about 10 years ago…BUT times have changed now and since EVERY child is NOW sporting a cell phone with all the features let their parents pay School fees…but of course consideration will have to be given to those who just cannot afford.
    Back in those days I had an interview at Harrison College but ended up at Combermere because my father was a Tailor and my mum a housewife as the fees at College were higher and the white man that interviewed me thought that my parents couldn’t afford Harrison College fees.

  5. Saga Boy April 22, 2017 at 8:27 am

    Dropping VAT will not help. Those selfish, mindless private sector businesses will not pass on any savings to the consumer in the short term. In a matter of months prices will be back up.

    Why is it that no one is telling the private sector that they need to reduce their prices?

    • Peter April 22, 2017 at 11:54 am

      Saga boy You got to be an idiot. Business people are in business for a reason. Don’t you pay your attorney and doctor for their professional services? How will Private sector businesses still charge the same after VAT prices and not declare it? how will they hide it on their official invoices and receipts? It is not that easy when their accountants and auditors do their tax and after sales profit declarations. You and Leroy are writing in full spirits. The kind that intoxicates. You guys see private enterprise as either a stubborn horse to be ridden and flogged, a fattened cow to be milked. But not one of you see it as the strong ox pulling the weight of the whole cart or in this case, the country.

  6. Milli Watt April 22, 2017 at 8:39 am

    the tape worms in the hotel industry will fund their own marketing, will taxi drivers finally start to fund their own vehicles instead of the hobby they get to ride bout outside women and men in big rides at tax payers expense, will the private sector move away from buying low and selling high using foreign exchange to fund the lavish lifestyles of a few, will the government collect the tax from its friends and families of politicians, will the politicians declare OUR assets THEY OWN, will the auditor general get a direct line to the director of public prosecutions, will the private sector invest in manufacturing in this country making and building quality goods that reflect the level of education and skill on the island instead of the excuse of economies of scale, will men and women stop breeding and getting undesirables who become a drain, will teachers who don’t want to teach find another job, will political party finance be regulated, will the entities suggested to be sold be better run by a parasite for a private sector. I will answer this last one NO because within 3 years the tax payer will have to bail their incompetent a$$@$ out.

  7. Alex Alleyne April 22, 2017 at 8:49 am

    Paragraph 8 set out by the IMF is to put more (small) people in DODDS.

  8. Alex Alleyne April 22, 2017 at 9:01 am

    The “free bus fares” system should be looked at. Screen the parents and who can pay make them pay. Most of the children move about with “high tech top of the line cell phones” and loaded with minutes on them every day. On top of that they pay to ride the “ghetto style ZR vans” where they have to pay.

  9. Peter Thompson April 22, 2017 at 12:08 pm

    Publish the whole report Barbados Today!

  10. Donild Trimp April 22, 2017 at 3:59 pm

    I see a number of the things i called for in the past coming to fruition.

    I also want to see the businesses who owe the Government treasury over $600 million pay up.

    I want to see the entitlement mentality eradicated completely.

    Houses built on Gov’t lands without permission should be bulldozed.

    A means test should be established to determine who pays school fees. Cut out the free bus fare foolishness.

    No more free water or free bus fares


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