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Jun 29, 2012

Barrow’s slim budget and tax reforms

The delayed national budget was tabled in the House of Representatives this morning. The forty two page document delivered by the Prime Minister is themed “Exercising Discipline while Preserving Growth.” On the expenditure side, the P.M. says there will be no increase over last year which means that we will generally see a continuation of projects from his last term and there is very little to celebrate. Security is outlined as a top priority and education holds its own. The Barrow administration is also continuing with its populist pro poor policies of poverty reduction and social protection.  But there will be tax reform for tourism, electricity and fuel. News Five’s Jose Sanchez reports.

 

Jose Sanchez, Reporting

At the end of April 2012, the recorded public debt stood at U.S. one billion, one hundred and eighty-two million or eighty-one percent of G.D.P. Of this stock of debt, almost half—forty-seven cents of every dollar—is the external commercial debt or Super bond. Barrow initially touted that there would be no new taxes. And though there were no new taxes, tax structures including the GST refund system and the Income and Business Tax Act were amended to suit the growing demands.

 

Dean Barrow

Dean Barrow

“One of the reasons we have constructed our budget with such discipline and expenditure restraint, is precisely to avoid the need for any new taxes. We have made clear our conviction that revenue raising measures, as they describe it, would in our view  be anti-growth. So there will be no new taxes. However, Mr. Speaker, we will introduce a couple of administrative amendments that are aimed at improving the overall efficiency and equity of the tax system. While it has achieved the objective of completely stabilizing all taxes on fuel, we have seen unanticipated distortions in the GST refund system; and we have now received a number of requests from businesses to revert to the former regime that consisted of a combination of GST and Import Taxes. This is also made desirable by the precipitous drop in imported oil prices. We are therefore receptive to the requests and have taken the decision to reintroduce the GST on Fuel, lower Import Duty in a commensurate amount, and remove the GST Special Credit (as this would no longer be relevant).”

 

These measures would be introduced via a statutory instrument by the time of the next fuel shipment in July. The Income and Business Tax Act will also be amended to suit B.E.L.

 

Dean Barrow

“We will be introducing a bill to amend the Income and Business Tax Act to lower the rate of business tax on entities licensed to provide electricity, taking it down from six point five percent to one point seven five percent. Through this amendment, we propose to revert to the rate that was in effect prior to April 2010. This is deemed appropriate as Belize Electricity Limited, now under national ownership and management, is no longer extracting excessive profits from its operations. Rather, the people-owned B.E.L. has instead managed to lower rates across the board to Belizeans and still generate a small surplus. All this while “keeping the lights on” and saving us from the rolling blackouts that under Fortis seemed not so much a threat as a promise. The impact to revenue of this decrease is estimated to be in the region of six million dollars on an annual basis. On the other side of the coin, we anticipate this would increase the net income of B.E.L. which would therefore pass through as an increase in dividends to shareholders.”

 

Barrow also introduced the reform of the Tourism tax sector which came after an IDB sponsored study of the industry’s taxation regime.

 

Dean Barrow

“The idea is to increase the equity and efficiency of the taxes currently applied to this sector, and to provide incentives for further investment and growth. One key recommendation that the Government has accepted in principle and expects to adopt in the coming months, is to bring the hotel and accommodation sector wholly into the GST net while at the same time repealing the nine percent Hotel and Tourist Accommodation Taxes. This will have the effect of making hotel accommodation services fully taxable at the standard GST rate while removing the hotel tax that is being charged. We will then put in place a mechanism to transfer a portion of the revenue collected from the GST to the B.T.B. because currently they use all the nine percent of the collection of the hotel taxes. This measure will address a long-standing complaint from the hotel and tourist accommodation providers that they are unable to claim refunds for GST paid on their inputs.”

 

For 2012/2013 the Draft Estimates in Revenue and Grants are comprised of eight hundred and nineteen point four million in Recurrent Revenue, eight point one million in Capital Revenue and thirty-five point two million in Grants.  Recurrent Revenue is made up of six hundred and eighty-three point three million in Tax Revenue and one hundred and thirty-six point one million in Non-Tax Revenue. In his presentation, the P.M. said there will be no increase in real terms in the wage bill. However, Draft Estimates of Recurrent Expenditure is proposing a total of seven hundred and seventy-seven point seven million dollars in recurrent expenditure up from an outturn of seven hundred and twenty-four point five million the year before. The proposed increase of fifty-three point two million is explained as an increase in the wage bill and salary increments of public officers. Reporting for News Five, Jose Sanchez.

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6 Responses for “Barrow’s slim budget and tax reforms”

  1. KINGSHIT says:

    HE STILL THE TEK ALL DEH MONEY

  2. Lucas says:

    KEEPING THE LIGHTS ON. It seems Barrow has selective amnesia. It looks as if he has forgotten that just last week the entire country suffered a BLOCK-OUT. Moreover, there is a lot much more than just a couple of administrative amendments aimed at increasing the equity and efficeincy of collecting taxes. For example: The value of properties should from time to time be revisited. Let say every 5 to 10 years. His Lordship the Mayor of Belize City was the other day lamenting the fact that there are individual property owners in Belize City who pay $200.00 and less for local taxes. I own a 60ft. by 75ft. house lot in the outside perimeter of O.W. and pay $220.00 per yr to Town Hall. On the other hand, I own some land and pay a meager $10.00 in property taxes per acre to Lands Dept. The other day, the Honorable Mayor of O.W. was strongly resisted by some of his people and I tend to think they were UDPs, when he tried to collect a meager $25.00 per month from people who use O.W. public land to conduct their business. Central govt. should learn to fully cooperate with local govts. when it comes to collecting taxes. The people of Belize need to understand or be made to understand that there will be no more free lunch and that God has commanded to give Cesear what belongs to Cesear and must start to crowfoot the properties of owners who are slow to learn or do not want to learn at all. The govt. can offer incentives to those who whistle on tax-evaders. Let say a 20% of monies collected. The people of Belize need to learn to buy in Belize. If not, govt. should start collecting 50% on all those Melchor and Chetumal shoppers but give $5.00 cuppons for every $100.00 spend in Belize. All sized contraband should be sold including licor and tobacco. No construction should be allowed, not a cement block laid without a permit for a fee. Govt. should vigorously conduct tax auditing on corporations suspected of tax evasion and that include the religious missions for thy are the worst. Man, the list can go on and on. There are a lot of ways to skin the cat without the need of raising the percentage of tax.

  3. Rod says:

    But all ministers get raise nobody else o except the pm.

  4. Storm says:

    Let’s face it, our leaders just don’t know how to save the Jewel from sinking into bankruptcy. UDP and PUP have both proved themselves inept, to put it charitably.

    Economics are fundamentally simple: if you spend more than you have, you will go broke. When an individual does that, atleast his children are not responsible for the debts. When a nation overspends, the next generation IS saddled with the accumulated debt of all that has gone before.

    Someday — hopefully before all hope is gone — we need to elect enlightened and honest leaders who will say, “If we don’t have it, we won’t spend it. And what we do have, we will spend carefully, because it is the people’s money, not the government’s.”

    I STRONGLY think we should look overseas and hire some accomplished foreign economists to consult with us and find a path out of our downward economic spiral. I am not aware of any homegrown economists with the experience and training to figure it out, and the stakes are too important to fail.

  5. Seletar says:

    Good idea.

    Check out Dr. Art Laffer at University of Southern California, who was key economic adviser to Ronald Reagan in the States — he turned a disastrous economy around in about 2 years.

    Another is Dr. Lee Ohanian, at University of California, Los Angeles [UCLA]. He is the philosophic heir to Dr. Milton Friedman, who is the “father” of how to make a private enterprise-based economy thrive and support a reasonable government.

    Both of them are still alive, well, and kicking.

  6. Ricky Malthus says:

    I agree that that idea has some merit but be careful that you don’t anger some fine local talents trained, not in the Caribbean, but in USA who will give Friedman, Stiglitz, Krugman,Laffer(he is considered a joke, a flash in the pan), Mansfield, Schumpeter, to name a few luminaries in Economics, a run for their money. There are a few good , enlightened Belizeans who just don’t want to wallow in the mud because they have seen how cruel you can be as a prophet is never welcome in his country. Look around you will find them. Word of advice, they are better by a long shot than anything you have at UB.

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