Barbados PM announces new tax measures
The Barbados government Monday said it is prepared to implement “tough decisions” to revitalise an ailing economy as it announced a series of new tax measures as part new fiscal policies.
Prime Minister Mia Mottley, whose Barbados Labour Party (BLP) came to office following the May 24 general election, said that she is determined that the island would not be regarded as a “failed state” under her administration.
In her lengthy statement, punctuated by criticism of the policies of the former Freundel Stuart government, Prime Minister Mottley said the Barbados Economic Recovery and Transformation plan is carefully balanced and is in keeping with campaign promises to abolish the controversial National Social Responsibility Levy (NSRL) as well as the road tax.
She described the NSRL, which was applied to the production cost of locally produced goods, as ‘distortionary” saying while it “led to a revenue gain of BDS$145 million when it was out on many prices across Barbados rose by double digits, depressing retail sales and …economic activity generally”.
She said the government expects the removal of the NSRL “will lead within two months to a reduction in prices for the average Barbadian” defending also the removal of the road tax and replacing it with a “more efficient fuel tax.
“The fuel tax will be levied at a rate of BDS$0. 40 cents per litre of petrol…diesel and five cents per litre of kerosene,” Prime Minister Mottley said, telling legislators that the public must be told that the NRSL was levied to the tune of 12 cents on each litre of petrol.
She said effective from July 1, the government will introduce a new upper-income tax band of 40 per cent.
Accordingly, the first BDS$25,000 will remain tax free, with income reaching BDS$60,000 attracting a rate of 16 per cent with assessable income of BDS$75,000 attracting a rate of 33 and a half per cent.
Prime Minister Mottley, who announced a tax write off for the period 1968 to 2,000, said the new tax band of 40 per cent will be on income in excess of BDS$75,001.
“These new tax rates are expected to raise BDS$41 million in a full tax year,” she said, adding that once the debt to gross domestic product (GDP) falls “to our target I would like to think that we can anticipate returning to the old rates, but we need to get out of this situation”.
Mottley said announced a tax waiver for persons who reach an agreement with the Barbados Revenue Authority for outstanding taxes for the period 2001 to 2017.
Regarding corporation tax, Mottley said it would increase from 25 to 30 per cent effective October 1, raising an estimated BDS$57 million in a full financial year.
The value-added tax (VAT) will be imposed on Barbadians engaged in online transactions for goods and services.
“We currently do not pay VAT on these transactions. I am advised that the technology now exists for us to capture these transactions for the purpose of taxation,” she said, noting that effective October 1, “we intend to make all online transactions for the purchase of goods and services by Barbadian residents subject to the value-added tax” promising to provide further details later.
The government has also announced plans to introduce a 2.5 per cent Health Service contribution with 1.5 per cent of insurable earnings being paid by employers and one per cent by workers.
“This measure will come into effect on October 1st and is expected to raise BDS$50 million in a full fiscal year. This will meet more than 25 per cent of the budget of the Queen Elizabeth Hospital and we will make amendments to the appropriate legislation to ensure that the National insurance Scheme may forward the collected funds to the hospital directly for the purpose for which it has been collected.”
Prime Minister Mottley said that there would also be increases in departure taxes to offset the collective marketing and product development of the tourism sector estimated at an average BDS$96 million annually.
“Accordingly, my government has decided from October 1st, 2018 to introduce an Airline Travel and Tourism Development fee. This fee will be paid by passengers flying outside of CARICOM will be US$70.00 and for those within CARICOM US$35.00. This fee will be in addition to the Departure Tax.”
In addition, the government is also introducing new VAT fees for hotel accommodation in keeping with the cost of maintaining the infrastructure.
Mottley told legislators that the new revenue measures will raise approximately BDS$303 million in a full fiscal year.