Barbados: Prime Minister Mia Amor Mottley has assured Barbadians that Government will not be raising taxes to bridge the gap between projected revenue and expenditure during the 2021-22 fiscal year.
The Minister of Finance told the House of Assembly yesterday morning that Cabinet had taken a deliberate decision that even though there has been a notable decline in income tax revenue, the current tax structure will remain in place.
Instead, the administration intends to accelerate its measures to stimulate the economy rather than impose new taxes on Barbados when they can’t absorb it. If there is any modification to the tax structure, she said, it will be for the expressed purpose of improving efficiency.
According to the Prime Minister, Value Added Tax receipts will drop to $700 million from $1 billion last year. In comparison, income tax is projected to drop from $492.9 million in the fiscal year 2019-20 to $303.7 million by the end of the current fiscal year.
Even with this level of decline staring it in the face, the administration still kept its commitment to pay out $62.6 million in tax refunds to Barbadians.
The biggest economic decline since World War
The Government’s approach to budgeting for the fiscal year 2021-22 has been based on a three-pronged approach: 1) The most vulnerable in the population must be protected in the face of the current challenges; 2) with the massive decline in the private economy, Government must step up to the plate with a vigorous capital works programme to keep the economy ticking; and 3) the country cannot take its hands off the wheel in significantly improving competitiveness.
Speaking on the 2021-22 Estimates of Revenue and Expenditure in the House of Assembly this morning, Prime Minister Mia Amor Mottley explained that the regime had a constitutional obligation to prepare and present the annual “budget” by March 31 — and the fight against COVID-19 did not absolve it of that duty.
The Government’s approach, she stated, would not be just simply to rebuild, but to “build forward better”, noting that it is only because of the priority given to the restructuring of the country’s local and foreign debt within days of taking office that it now has the fiscal space to tackle this crisis.
In highlighting the extent of the challenge, the country is fighting, and the Prime Minister explained that while the country’s nominal GDP in the previous Estimates was $10.5 billion, in the current Estimates, it is set at $8.5 billion — an unprecedented drop of almost $2 billion.
In a similar vein, while last year the Government raised $2.93 billion in taxes and $627.4 million in non-tax revenue, this year it is projecting $2.2 billion in tax earnings and $140.6 million under the non-tax heading. The road forward, she warned, will not be easy — but the goal is attainable.