Minister in the Ministry of Finance Ryan Straughn has dismissed calls from an advocacy group to abolish Value Added Tax (VAT), warning that doing so would strip the government of a billion dollars in revenue and jeopardise funding for education, healthcare and other public services.
Straughn told reporters outside Parliament that the suggestion from the Friends of Democracy advocacy group lacks credibility when one considers the uphill challenges the government would face in finding alternative sources of financing to replace the many millions of dollars it would lose from VAT removal.
In seeking to place the discussion in context, Straughn said that the government has laid out a “very clear” path for achieving debt sustainability by 2035.
He said that within that path, there is a requirement for the administration to cover its public policy, and so the tax system had been structured to allow the government to move towards less direct taxation on individuals and more indirect taxes.
The minister said that this is the basis upon which the administration has been able to attain its economic achievements so far.
He said: “If you eliminate the VAT, then you are talking about a billion dollars in revenue, thereabouts, that you then have to find from somewhere. So, my question to the Friends of Democracy or anybody else is, you need to explain to Barbadians how you are going to fill that gap; what adjustments they would make within the budget, given that we have restored access to tertiary education, we have committed to be able to reform education, [and] we have invested in building out the health sector, which requires revenue.
“So, while I accept that their premise is to lower cost of living, the adjustments that could be occasioned by the elimination of VAT, as it stands, I think would cause a lot more harm than good…because, whether it is how do you fund education, how do you fund healthcare, public servants obviously have to do what they have to do every day and be paid on time.
“And so, I don’t think it is a credible proposal because, while it sounds good for Barbadians to say you are going to get rid of the VAT, the reality is that the provision of a number of public goods and public services requires financing, which the VAT actually helps to drive in the country,” he added.
Turning specifically to the cost of living, the finance minister said the government continues to work with the private sector, including sourcing new areas from which goods are imported.
“We have given directions to a number of our regulatory agencies, certainly within the Ministry of Agriculture and others, to ensure that they understand the standards that exist within Latin America, the standards that exist across Africa, and not to be so comfortable either with North American standards or European standards,” he said.
“And so, we have been working with the private sector to be able to source the items that Barbadians use at as much as 20 per cent cheaper than what we are getting them from in other jurisdictions, such that those savings can be passed through to the consumer at the final point of sale.”
He also suggested that consumers can work together to buy at reduced costs.
Straughn said costs have risen further because of the hike in tariffs imposed by US President Donald Trump on goods sold and consumed.
He cautioned Barbadians to be careful about what is being put out into the public at a time which some refer to as the “silly season”.
The minister said: “I would urge Barbadians to be very clear that we have gone down this road before, where parties, before an election, promise you milk and honey and all of the sweet things that might sound good, but when they try to implement them, you end up then in a situation that we found ourselves in 2018. So, my simple message to Bajans is you should really be very careful and wary as to what you hear.”
He urged Barbadians to consider the information the government puts out in collaboration with the Social Partnership concerning what is being done to address not only the cost of living, but also other issues affecting their lives and livelihoods.
emmanueljoseph@barbadostoday.bb
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