GOVERNMENT revenues took a hard hit when there was a shortfall from the International Business and Financial Services Sector as a result of policy changes in Canada.
Christopher Sinckler, the Minister of Finance and Economic Affairs said as much yesterday while explaining the reasons why government had to increase taxes in recent times.
The Minister who spoke for a lengthy period in Parliament during the introduction to the Appropriations Bill, said that sector which gets most of its business from Canada, was contributing more than $300 million in revenues when the recession hit and changes to the Canadian tax laws.
According to him in 2007 Corporation taxes realised $531 million. However, it went as low as $175 in 2013 and $156 million the following year. It rose to $234 last year.
In any case, he stated, Barbados lost lost $1.2 billion which worked out at about $200 million a year.
“Could you believe a $9 billion economy losing that amount of money. You do not find that money lying around and we had to shift the tax burden from foreign business persons to local sources,” he explained.
He said that was the reason for raising the Value Added Tax,why they introduced the Consolidation Tax, Cell Phone Tax and to find a way to get back some of that revenue. Apart from the fall in revenues from the International Business sector, foreign direct investment was not coming in.
Some investors have also told Barbadians to hold on in terns of investing here, although Sinckler said the situation has not bottomed out.
“When that happened we lost that value and we lost revenue which we have to find elsewhere. We try to find ways around it, and we have to get behind the numbers to understand the decisions we took,” he explained.
The Minister said that increasing taxes was not done to inflict pain especially when attempts were made to get professionals to pay their taxes.
“We are not doing it to harass people. If the Barbados Revenue Authority (BRA) cannot get the revenues from taxes it cannot pay tax refunds, and we have to understand what society we are living in,” he pointed out.
Sinckler said that Government has given support to the accommodation sector even though VAT was increased to 17.5 per cent.
That support also included the 7.5 per cent sub par rate, help with land taxes, grants totalling $25 million, while $50 million was set aside for assisting small businesses, with $10 million already disbursed.
Government will also be coming with a comprehensive development strategy on behalf of small businesses.