THE delay in the implementation of the foreign exchange fee (FXF) does not necessarily mean government will not be able to meet its expected tax take.
Word of this from outspoken Agriculture Minister Dr. David Estwick while speaking to members of the media recently. Some social commentators have argued that the delay would lead to prolonged austerity.
Dr. Estwick stressed that his position on the Budget presented by Finance Minister Christopher Sinckler remains consistent with the likes of KPMG, PWC and Deloitte, as it relates to the likely impact of the measures to be implemented. However, with respect to the deficit as a result of shortening the time for roll out of the fee, the former Minister of Economic Affairs said this situation would have to be monitored and managed.
“If it were linear, that is, that the activities that are being taxed, the transactions, if they were all linear every month, at the end of the day you get a quantum. However, you have a situation where you have a lot of festivals, which means there are going to be clumped and enhanced transactional activities between Carifesta, Crop Over....so basically your evaluation mathematically has to take these things into consideration.”
“I don’t deal with these matters any longer but I still follow some of them. My understanding tells me therefore that one can still achieve the goals even though you have shorter tenure because you now have clumped transactional activity coming on stream coming very soon.”
“Maybe the Minister of Finance and the Central Bank Governor were considering those types of activities when they agreed to have the roll out pushed back a little bit,” he told the media.
On June 27 in a press release from Central Bank Governor (Ag) Cleviston Haynes, it was revealed that the two percent fee on purchases of foreign currency will now go into effect for cash, bank drafts and wire transfers on Monday, July 17, 2017 as opposed to July 1.
Credit, debit and travel cards will become subject to the fee from September 1.
According to Haynes, the delay is to allow the public to become familiar with the new fee. “These additional two weeks will give us the opportunity to educate Barbadians about the FXF so that they are clear on what types of transactions it relates to and how it will be applied. This will help to ensure that there is a smooth and orderly introduction of the FXF.”
Haynes revealed that the extended lead time for credit, debit and travel cards is to allow commercial banks and other credit card providers a longer window to adjust their computer systems. “We have been in consultation with The Barbados Bankers Association and, based on their feedback, we will provide them with additional time to complete the work that needs to be done so that cardholders will be able to clearly identify what portion of their payment for foreign purchases is due to the FXF,” he said.
All persons conducting purchases of foreign currency will be required to pay the FXF, except residents and non-residents making payments from their foreign currency accounts, including entities in the International Business and Financial Services (IBFS) sector. The FXF is also not applicable to foreign currency sales related to the settlement of transactions for the bulk purchase of petroleum, diesel or jet fuel, where documentary evidence has been provided to the authorised dealer.
A public education campaign will be rolled out to explain the changes to the general public. (JH)