The Cabinet of Barbados has already agreed to a programme of reform.
During his presentation of the 2015/2016 Estimates in Parliament yesterday, Minister of Finance Chris Sinckler zeroed in on the reform agenda.
He also broadly outlined plans for achieving a further reduction in the country’s overall fiscal deficit.
Following is an edited version of the minister’s presentation.
Minister of Finance Chris Sinckler
This coming financial year we expect to push forward with this reform agenda in many areas. We expect that during the financial year 2015-2016 that new National Procurement Authority will be established, following the expected passage of a new Procurement Act in Parliament in the next few months.
This, we are expecting, will bring major savings in Government’s expenditure on goods and services going forward, simply by making the system more standards-driven, predictable, efficient and value-driven.
Additionally, we fully expect that the second and third phases of the buildout of the Barbados Revenue Authority process will be completed with the integration of the revenue functions of Customs & Excise into the BRA establishment, as well as the full integration of the authority’s tax collection processes on a common ICT platform.
This is equally expected to increase the BRA’s operational effectiveness and lead to a far better tax administration, assessment and collection system . . . .
But over and above these ongoing efforts will be a special effort to forge ahead with the reform of state-owned enterprises initiative which I first alerted the House last year was being contemplated by Government, for which Cabinet made definitive decisions last December.
I believe that I gave the country a general outline of those decisions in my last Ministerial Statement to the House and so would not go over that today. What I will say however is that it is our expectation and intention to initiate the execution of that process this calendar year, and so discussions as to shape, form and process of implementation of it will start in another few months with all critical stakeholders.
This reform work we expect to dovetail neatly with the current process of financial and operational restructuring, which is currently ongoing with selected statutory entities through the work with CARTAC, the Oversight Committee I appointed more than six months ago to work with the SoEs and with a much improved and better staffed Management Accounting Unit in the Ministry of Finance.
Finally in this regard, sir, as everyone is by now aware, it is Government’s intention to move ahead in the next financial year with several reforms to the overall tax policy system in Barbados. This will be based not only on the recommendations coming out of the IMF Tax Reform Study, but also on the submissions by several critical players and stakeholders from a cross section of sectors in Barbados. Of course, we are still hoping to receive the input of the Official Opposition whom we wrote some months ago seeking a response and are yet to receive it, but trust it is on its way.
Nonetheless, it is our intention to move forward with this very important piece of work which we expect will not only give a much needed boost to Central Government tax revenues, but also lower the tax burden on many critical sectors, [and] contribute to greater levels of transparency, certainty and fairness in the tax code.
I will have more to say about this in a few weeks when I present the Financial Statement And Budgetary Proposals.
All of these initiatives, plus others that I have not mentioned, when taken together with greater efforts to discipline expenditure incurrence, we confidently expect will so condition the operating environment going forward, that it will have a net positive impact on our efforts to push the macrofiscal consolidation effort deeper into the levels of structural reform within our economy.
It is therefore our firm believe that by the close of the next financial year we will be able to bring our operating deficit set out in these Estimates at six per cent of GDP on the accrued basis to below five per cent.
Against this backdrop, Mr Speaker, I therefore move to lay out the 2015-2016 revenue and expenditure programme
of the Government of Barbados:
Fiscal framework for 2015-2016 financial year. The fiscal framework has been formulated to attain the following:
1. Reduce the level of tax arrears outstanding by major revenue agencies, and enhance collections.
2. Continue our efforts at fiscal consolidation, which will involve reducing discretionary expenditure in order to attain and maintain a net operating balance and put the debt to GDP ratio on a downward trajectory.
3. Link strategically the public investment programme and Government’s current spending needs with the availability of revenue and the achievement of the fiscal objective.
4. Continue to introduce measures to reduce costs and enhance revenues, which will include:
(a) Use of alternative measures –– for example, joint public/private sector arrangements, and/or alternative sources of financing to support public sector investment initiatives, where Government will realize savings and earn additional revenues to support projects during execution and after completion.
(b) Encouragement of state enterprises to implement measures to enhance their revenue generation and expenditure reduction efforts, so as to better match revenue with expenditures.
5. Developing and implementing strategies to deal with the arrears of Government, particularly those of statutory entities.
The fiscal programme for 2015-2016 is projected to generate a negative operating balance of $535.3 million on the accrual basis or a deficit of six per cent of nominal GDP at market prices estimated at $8,852 million.
Minister of Finance Chris Sinckler
Current revenue 2015-2016. Current revenue is projected to increase by $105 million or 4.3 per cent over
the revised 2014-2015 level to $2,539.2 million.
Taxes on incomes and profits are projected at $768.2 million on the accrual basis. When bad debts are taken into account, the amount to be collected on the cash basis is expected to be $761.3 million, an increase of $43.6 million or 6.1 per cent above the amount projected to be collected in 2014-2015.
Income tax is expected to increase by $38.4 million or 8.8 per cent to $475.5 million. Corporation Tax is projected
to increase by $5.5 million or 3.1 per cent to $184.8 million. The Consolidation Tax is expected to yield $30.2 million.
Taxes on property are expected to realize $134.6 million, an amount of $3.8 million more than the amount projected to be collected during 2014-2015.
On the accrual basis, taxes on goods and services are projected at $1,224.9 million. On the cash basis, taxes to be collected on goods and services during the year are expected to increase by $34.1 million or 2.9 per cent to $1,215.5 million. This tax category receives its principal impetus from receipts of VAT and Excise duties, which are expected to contribute $944.2 million and $132.6 million respectively to the Treasury in the fiscal year.
Additionally, an amount of $18.7 million is expected to be received from the tax on bank assets while $6.4 million is expected from the Asset Tax on other financial institutions.
Import duties are projected at $211.6 million, increasing by $2.2 million over the projected amount for fiscal year 2014-2015.
Special receipts are expected to increase by $3.6 (33.6) million to $65.5 (95.5) million. The Municipal Solid Waste Tax is expected to yield $35.0 million.
Non-tax revenue is expected to increase by $3.7 million over the revised amount for 2014-2015.
The Government of Barbados is expected to receive grant income of $34.8 million and $3.2 million from the European Development Fund and USAID respectively.
Current expenditure 2015-2016. Current expenditure on the accrual basis, exclusive of amortization of $837.7 million, is projected at $3,090.8 million. When converted to the cash basis, and bad debts and depreciation expenses are excluded, current expenditure is expected to increase by $72.3 million or 2.4 per cent over the 2014-2015 revised figure to $3,027.3 million.
Wages and salaries are expected to increase from the revised amount in 2014-2015 by $20.2 million or 2.7 per cent to $763.3 million.
Expenditure on goods and services is expected to increase by $58.2 million from the revised figure for 2014-2015 to $446.5 million due to counterpart financing for a number of foreign-funded projects. Increases were included for the following projects:
Barbados Competitive Programme (IDB-funded) –– $3.8 million.
Road And Bridge Improvement Project (CDB-funded) –– $4.8 million.
Coastal Risk Assessment Programme (IDB-funded) –– $3 million.
Storm Water Management Plan (USAID-funded) –– $4 million.
Skills For The Future (IDB-funded) –– $11.3 million.
Public Sector Smart Energy Fund (IDB-funded) –– $2.2 million
Current transfers are projected to decrease from the revised amount in 2014-2015 by $39.8 million or 3.6 per cent to $1,054.4 million. It should be noted that the Ministry of Finance and Economic Affairs anticipates that during the 2015-2016 financial year it will have to provide supplementaries to the Queen Elizabeth Hospital, UWI to cover economic costs, and the Transport Board.
Bad debt and depreciation expense are projected to be $8.8 million and $54.0 million respectively.
Non-capital assets consisting of repayment of loans to Government are projected at $700,000, the same amount as that approved for 2014-2015.
Interest payments in 2015-2016 are expected to increase over the 2014-2015 revised figure by $28.1 million or 4.2 per cent to $698.3 million.
Amortization of $985.7 million is projected, increasing by $174.9 million or 21.6 per cent over the 2014-2015 revised figure.
Capital expenditure 2015-2016. Capital expenditure is projected to increase from the amount approved for 2014-2015 by $67.9 million or 20.3 per cent to $401.4 million on the accrual basis.
Capital assets are projected to increase over the revised 2014-2015 figure by $37.5 million to $101.5 million. The amount is expected to be $12.9 million less than the amount approved in 2014-2015.
Capital transfers are projected at $133.2 million, $29.0 million more than the revised figure for 2014-2015, due to additional funding to the Barbados Water Authority.
Fiscal balance 2015-2016. As indicated previously, current revenue of $2,539.2 (2.569.2) million is expected to be collected, of which $2,403.5 million is tax revenue and $135.6 (165.6) million is non-tax revenue and grant income. Total expenditure of $4,258.9 million consists of current expenditure of $4,013.0 million and capital expenditure of $245.8 million on the cash basis. On an accrued basis, the negative net operating balance is $535.3 million representing 6.0 per cent (5.8 per cent) of GDP.
Deficit financing 2015-2016. In 2015-2016 it is expected that $1,293.0 million or 75.2 per cent of the fiscal deficit on the Accountant General’s basis will be financed by domestic sources. The balance of $426.7 million will be foreign-financed in the form of capital project inflows and a policy-based loan from CAF.
Major activities during 2015-2016. The major activities that will be financed during the 2015-2016 financial year are as follows:
(1) A current subvention of $150 million is being provided to the Queen Elizabeth Hospital.
(2) A subvention of $87.7 million and $9.1 million has been provided to the Barbados Tourism Marketing Inc. and the Barbados Tourism Product Authority respectively.
(3) Invest Barbados has been allocated the sum of $10.5 million to carry out its operations.
(4) $8.5 million has been provided to the Barbados Tourism Investment Inc. to carry out work on capital projects;
(5) Grant funding of $38.0 million is expected to be received as budgetary support and also to assist in carrying out the following programmes:
Human resource sector strategy and
skills development;
Storm water management plan.
(6) A current subvention of $26.6 million and a capital subvention of $2.4 million have been provided to the Sanitation Service Authority.
(7) An amount of $12.0 million has been provided to the Barbados Drug Service for the purchase of drugs;
(8) A current subvention of $71.3 million has been provided to the University of the West Indies.
(9) A current subvention of $19.0 million has been provided to the Welfare Department.
(10) Skills For The Future programme under the Ministry of Education, Science, Technology and Innovation has been provided with an amount of $15.5 million.
(11) The Low Income Housing Project under the Ministry of Housing, Lands and Rural Development has been provided with $4.5 million.
(12) $8 million for enhanced access to credit for small and medium-sized enterprises.
(13) $5 million for the redevelopment of Sam Lord’s Castle.
(14) $17.4 million and $63.0 million to bring to account projects of the Barbados Water Authority’s funded by the IDB and the Canadian Commercial Corporation respectively.
(15) $5.5 million to complete the Lodge School under the Edutech programme.
Concluding remarks. From the foregoing, Mr Speaker, it would only be the most closeted and bias anti-Government critic to deny that this past year the Government has stabilized this economy, as evidenced by the settling of our FX market, the significant reduction in our fiscal deficit, and the initiation of a new period of growth in our economy.
Sir the macro signs of a turnaround are there for all to see, and is evidenced by the now repeated public observations of genuinely independent operators on the economy of Barbados.
Where we are today is a far cry from where we were a year ago this time, but based on the trends that are clearly emerging we will be a far cry from where we will be a year from now.
Our economic fortunes are finally beginning to change for the positive behind an appropriately designed, efficiently implemented and adequate policy response from your Government. Many, Sir, counted on this administration to fall and fail, indeed many still predict the decimation of Barbados. Indeed, Sir, they are still counting and predicting the demise of Team Barbados.
But I tell you this, Sir; they counted wrong. Barbados is going nowhere other than up and on, to use a now popular saying, because as we work together to promote all aspects of our growth as a nation and a people, we are confident in the victory of positivity over negativity, industry over recalcitrance, good over evil.
Our mission is not yet over, our course not yet complete. But with faith in God, confidence in our own abilities and the will to achieve our goals, we will surely rebuild, restructure and reposition Barbados on its march to be a country that is socially balanced, economically viable, environmentally sound and characterized by good governance.
And with those words I beg to move that this bill be read a second time.