The Grenville Phillips Column – The Alternative to Austerity
On 21 April 2017, I attended a public meeting by the Barbados Private Sector Association and was disappointed by their austerity-based solutions to Barbados’ dire economic situation. The Government, private sector merchants, financial institutions and individual economists are warning us to brace for austerity. Eight years ago, austerity meant forcing most Barbadians to access their savings in order to survive. Today, it means to force most Barbadians into poverty.
Approximately 2 years ago, Solutions Barbados published a plan to bring Barbados back from the brink of economic ruin without the austerity promised by others. The plan is based on proven solutions and is still relevant. However, the Government continues to ignore this plan while stubbornly pursuing its strategy; while the IMF warns of devaluation.
We have shared our plan with anyone who will listen, including the NUPW and CTUSAB. It was also published in both print and on-line news media, and also on the radio. To-date, the responses have been overwhelmingly positive, because the plans are workable. The published plan consists of 4 main steps – none of which require laying-off civil servants, reducing their wages, incurring additional Government spending, or begging other countries to lend us money.
Step 1 is to increase Government’s local currency revenues to run the Government and pay local currency debts. This can be done by reducing taxes on personal and corporate revenues to 10% of gross revenues – with no deductions. This will make taxes easier to calculate, pay and audit. It is also fairer.
Currently, businesses pay taxes on net-profits. Therefore, it is possible to run a successful business for decades without paying any corporate taxes. However, since the Government must obtain revenue, the taxes that such businesses currently legally avoid paying are extracted from the rest of us. Well, not under a Solutions Barbados administration.
To facilitate the prompt payment of all taxes, all taxes previously owed to all Government departments will be forgiven and VAT will be abolished. Businesses are currently being forced to pay VAT when they issue an invoice, rather than when they receive payment. This is unfair, because businesses may not get their invoices paid until months later – or never. Taxing businesses before they receive payment is an insidious method of taxation that can both prevent businesses from growing, and reduce their competitiveness.
The forgiveness of debts to Government should have happened as part of our 50th anniversary jubilee celebrations. However, only a few select persons benefitted financially from those celebrations. Therefore, everyone will start with a ‘clean slate’. In exchange, all new non-payment of taxes will attract a penalty of 10 times the value of the outstanding amount for those who blatantly refuse to pay. Those who refuse to pay taxes under a Solutions Barbados administration will be competing unfairly in our economy, and that will not be encouraged.
Step 2 is to increase foreign currency revenues in order to pay for imports and foreign currency debts. This can be done by temporarily reducing taxes on all foreign currency earnings to zero.
Step 3 is to increase productivity in both the public and private sectors, and reduce wastage and unnecessary costs in the public sector. This can be done by managing all public services to the ISO 9001 Quality Management System. Parts of the ISO 9001 system can be implemented across the entire public service immediately, to the benefit (and relief) of those who deliver and receive Government services – at no additional cost to Government.
One low hanging wastage fruit is to stop public workers from paying income taxes. Currently, the private sector must pay additional taxes, which are then given to public sector workers, who then give it to the Government. The accounting bureaucracy and costs required to manage the taxation of the estimated 25,000 public workers can be easily avoided.
Step 4 is to depoliticize the public service. In a Solutions Barbados administration, public workers will be selected and promoted on merit alone.
Any of these steps taken by themselves will not pull Barbados back from the brink, because frustrated public services can frustrate the entire process. Therefore, they must all be taken together. We need an increase in local and foreign currency revenues, and a better managed and depoliticized public service. The Minister of Finance is strongly advised to examine our plan before we run out of viable options. We continue to be available to discuss it.