A recent KPMG’s Individual Income Tax and Social Security Rate Survey 2010 Report exposes a reversal in a global seven year trend of decline in top personal income tax rates. Barbados was not part of the sample group of countries used in the survey but there is enough food for though tossed-up by the survey’s findings. Of interest in the survey is a review of social security contributions when combined with individual taxes collected.
Barbados along with many countries across the globe (developed and developing)continue to battle the issue of how to effectively allocate dwindling national resources in the face of a protracted global economic slowdown. Managing an economy which is dependant on tourism, offshore sector, inflows from remittances and foreign direct investment makes the task more difficult compared to other economies which own natural resources and are export oriented.
The recent announcement by the government to present the budget on Monday (22 November 2010) will be followed by all and sundry with a heightened interest for several reasons.
In the prevailing environment where countries have been running cap in hand to the international financial agencies, Barbados has resisted, but it has come at a price. The expanding deficit as a result of government’s policy of building a social safety nets while maintaining our army of occupation in central government and statutory corporations, has been reflected in a higher deficit than desirable. To be expected credit rating agencies have not reacted well to the current state of affairs and Barbados has suffered the indignity of a downgrade in our sovereign rating. One peg above junk status.
The budget will be presented by rookie Minister of Finance Christopher Sinckler. He will have to face off against former Prime Minster Owen Arthur who is an economist by training and was at the helm of government during the boom years. For many Barbadians there is a warm feeling which comes from the memory of the BLP years in government. Sinckler’s unenviable job to present what will have to be an austere budget will challenge the most loyal DLP supporter in the prevailing economic circumstances. His political stock is sure to rise or fall after Tuesday night.
Early in 2010 the embattled former Minister of Economic Affairs David Estwick went public with the view “the economic situation in Barbados is so bad that there is need for a wage freeze and the sale of state assets to help Dr. David Estwick the government ride out the situation.” Subsequent statements by Late Prime Minister David Thompson appear to distance himself from Estwick. His subsequent transfer to the Ministry of Agriculture confirmed what was leaked into the public domain, key stakeholders in government were (are?) not singing from the same song sheet on the appropriate economic policy to implement. Sinckler was anointed by late Prime Minister David Thompson and his economic pronouncements are likely to conflict with those held by Estwick. Of interest will be to what extent Prime Minister Fruendel Stuart has exerted a contrary view on the compilation of the budget now that he has the full reins of government. Only then will the public get a sense of whether David Estwick will assume greater influence in the financial decision making of a future Stuart cabinet.
On the other side of the divide independents will be listening to Arthur carefully to discern whether he offers an economic prescription relevant to the unprecedented times at hand. Some will evaluate how Mia Mottley, Cynthia Forde and Rawle Eastmond have assimilated into the Arthur regime. How quickly Arthur can give the appearance his team is a cohesive group two years from a constitutionally due election becomes critical if the BLP wants to be taken seriously as the government in waiting.
Will Barbadians see a government continuing to implement Thompson’s economic plan? Will we see Fruendel Stuart emerge as the Aristotle of his time? Appropriate given his penchant for the classics. It is noteworthy Aristotle is believed to be the one who discovered logic, a desirable characteristic to possess in troubled times.
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