Delivering the 2015 Financial Statement and Budgetary Proposals in the House of Assembly this evening, Minister of Finance Chris Sinckler announced that effective September 1, there will be a new and smaller basket of basic food items to which full exemption from the standard VAT rate of 17.5% will be applied.
“All other food items in the original [400-item zero-rated] VAT Basket, [which included Frozen spare ribs, tenderloin and sirloin steak, ham shoulders, Pacific salmon, snapper, croaker, grouper and sea trout] will be subject to the standard rate of the VAT of 17.5%,” he said.
In a near four-hour presentation, Sinckler also announced the imposition of a new cess on milk and milk substitutes, along with a new sweet drinks tax, which takes effect from
In light of an increasing incidence of Non-Communicable Chronic Diseases (NCDs) which are wreaking havoc on the Barbadian population and contributing to mounting health costs, Sinckler said: “Cabinet has decided that in order to encourage healthier consumption patterns of our people as it relates to the consumption of sweetened beverages such as carbonated soft drinks, juice drinks, sports drinks, fruit
juices and others, particularly those which fall under tariff headings 20.09 and 22.02 on the import side, and similar products of like standing produced within Barbados that contain added high calorie sweeteners, (these) will now attract a 10% excise tax levied on the value of the product before
VAT is applied.”
He added: “This policy, which is expected to generate in excess of $10 million in revenue this fiscal year, will be reviewed in two years’ time to determine how effective it has been in shifting the behaviours of both producers, importers and consumers as whether it should be extended or intensified.”
Cellphone users will also have to pay a new mobile airtime excise tax. In making the announcement, Sinckler revealed that based on information gathered from the Telecommunications Unit of the Division of Energy and Telecommunications, the total minutes used by LIME subscribers last year was approximately 575.9 million compared to 514.5 minutes for Digicel subscribers.
“Therefore, with effect from August 1, 2015, a mobile airtime excise duty on cellular phones will be imposed at a nominal rate of three cents per minute for both service providers LIME and Digicel. On current times, it is expected that this imposition will generate a total of approximately $32.7 million in revenue on an annual basis for the Treasury,” the Minister of Finance said.
Part of the proceeds from the mobile airtime excise duty in the amount of $2,500,000 will go towards the establishment of a scholarships and grants programme. Beneficiaries will be low-income Barbadian students enrolled at the University of the West Indies (UWI) who are in need of financial support, following the introduction of tuition fees from last September.
Altogether, Government is projecting to raise an additional $200 million, in net terms, as a result of the new revenue measures, including $20 million from the removal of VAT exemptions for all betting and gaming services and supplies, effective September 1.
At the same time, Government is proposing to raise the current VAT registration threshold from $80,000 to $200,000, effective January 1, 2016, while lowering a number of the deductions under Section 12 of the Income Tax Act.
He explained: “This would mean that businesses which would have spent $32 million on special funds and were allowed to claim an amount of $48 million representing between 120 and 150% of expenditure will have this refundable rate reduced to 100%,” said Sinckler, while noting that “in this particular case, Government is expected to yield an additional $4 million of tax revenue based on the current applicable corporate tax rate of 25%.”
“This is expected to result in additional income of approximately $15 million using the current tax rate of 25%.
In terms of Personal Income Taxes, Sinckler said, “it is proposed that with effect from Income Tax Year 2015 that only the following deductions will be allowed, along with the existing personal allowances; contributions to trade unions and statutory associations, donations to charities including the church, and energy audit retrofits. Other special credits such as foreign currency earnings allowance and double taxation relief will also remain in keeping with Treaty arrangements.
“In addition and in an effort to ensure that taxpayers are not unduly disadvantaged by these changes, I now propose that the current tax rate of 17.5% will be reduced to 16% and the higher rate of 35% to 33.5%.This will result in a reduction of approximately 60% of tax refunds being processed and be relatively revenue neutral netting the Government $9 million in additional revenue.
Sinckler went on: “I therefore propose that effective immediately, all those individual professional operators provided for under the Registration Regime of the Profession, Trade, and Business Registration Act, shall be required to produce a valid tax clearance certificate from the BRA in order to renew their respective licenses to practise in this jurisdiction.”
A new structure is also to be introduced for land tax, which would see a residential property owner with a property valued at $150,000 or less, remaining exempt. However, a homeowner with a property valued at $250,000 would now be required to pay $100.00 per annum, an increase of $40; a property valued at $450,000 would now attract a charge of $300, an increase of $40 from $260.00 per annum; aproperty valued at $600,000 would now result in a tax of $975.00, up from $760.00; and a property valued at $1,000,000 would now be required to pay an additional $215, moving from $2560 to $2775.
Several user fees are also due to take effect.
The Minister of Finance did not provide all the details. However, he said “during the coming financial year adjustments will be necessary across a number of areas including: agriculture service fees, the Barbados Fire Service fees, Government Day Care Centre fees, Immigration services fees and the general user fees for Corporate Affairs and Registry Services to name a few.
“Overall, a general assessment of all Government user fees will be conducted and adjustments made to create a more efficient system of doing business.At minimum, these adjustments are expected to generate approximately $6 million in revenue,” Sinckler said.
In addition to its net revenue gain of $200 million, Government is projecting “additional expenditure savings of $30 million from reductions in supplementaries, savings from public sector job attrition, and smaller gains from enterprise reform efforts during the course of this fiscal year”.
These are expected to redound to an end of year fiscal deficit of between 3.5 – 4 per cent of GDP on an accrual basis, which means “a shaving of two percentage points of the projected deficit in the 2015-2016 Estimates of Revenue and Expenditure of 6% on an accrual basis”, Sinckler said.