By: Kimberly Ramkhalawan
March 18, 2022
Coming not too long from her renewed mandate from the Barbados people, Prime Minister Mia Mottley presented her fiscal package to the nation this week, marking the first budget since the Barbados Labour Party swept the polls in January.
In what seems like some bold moves expected to herald change to the country’s trade and economic standing despite a lingering pandemic and not to mention a volatile oil and gas market due to the Russia-Ukraine war, the outcome following this week’s budget has been welcomed by the Barbados private sector. Building up the business sector on the island, Mottley assured that legislation will soon be introduced to create free zones.
Making sure to mention the hard hit impact the pandemic has had on the island, Mia noted in her introduction the fall in visitor arrivals within just ‘a little under two years ago, from almost seventy thousand in March 2020 to almost one thousand in April 2020’, while ‘By the end of May 2020, 32,000 individuals or 44 percent of the members of the National Insurance Scheme, had claimed against the Unemployment Fund’.
Topping the slew of fiscal measures announced by Prime Minister Mottley included capping the VAT payable for gasoline and diesel at the pumps 47 and 37 cents per litre for a period six months coming into effect March 16.
Apart from fuel getting capped, Mottley went further to seal freight costs at 2019 levels of US $7,350 per 20 foot container and US$8,000 per 40 foot container from March 15, 2022 until March 31, 2023 for the purpose of calculating customs duties.
In her words, the Barbadian Prime Minister said while these measures might appear to be short term, the aim was to shield her countrymen, and share the burden and benefits of the over the next twelve months, at a cost of $25.2m in lost revenue to the Barbados economy. She added that this is a lot of money and asked that it therefore be appreciated as a sacrifice to be made for our people.
The Barbados PM said “in this fiscal year they have deliberately chosen to spend almost $77m protecting Bajan families from the worst of the pandemic and the climate crisis. This. includes the $31m for the Welfare Department and the over $20m to provide the $600 per month grants to households with no income”.
As a result, her measures aimed at counteracting the effect of the COVID-19 pandemic, something she dubbed the “one off Pandemic Contribution Tax” of 15 percent putting it on the taxable income for 2020 and 2021 for the banking, insurance, telecoms and oil and gas wholesalers. While for a period of 12 months from April 1, 2022, a Pandemic Contribution Levy of 1 percent will be paid by individuals who earn a gross personal income above $75,000 for a period of 12 months.
Meanwhile, VAT on selected personal and critical care items will be zero-rated from April 1st, 2022.
Assistance to farmers with the aim of building up the agriculture sector, Mottley outlined a plan to increase the supply of water, for those in the agricultural sector, introducing a fixed rate for water of $1.80 per cubic metre across the agricultural sector effective May 1, 2022.
While Barbados is also known for the push of renewable energy, the Barbados PM offered the chance for home owners to come off the electric grid. She said “as part of our effort to use solar PV to spread the ownership of a home to 10,000 families and provide a basic income for 50,000 small homes we had mooted lifting the land tax threshold, so that more people would be outside the land tax net”.
The fiscal package did not go completely unhinged as Mottley offered a moratorium to National Insurance Scheme (NIS) three months to pay their arrears interest-free, and spoke of the proposed pension reform coming. The fiscal package outlined for all new employees to the public service the maximum pension will be attained after 40 years of service instead of 33 ⅓ years with contribution levels of between 2 percent and 3 percent below the NIS ceiling and 5 percent to 8 percent above. It is proposed that vesting for new employees be 3 years.
Other areas promised under the 2022 fiscal package, included the Excise tax on sweetened beverages will be increased from 10 percent to 20 percent with effect from April 1, 2022.
As toward steering Barbados into the future, its Prime Minister spoke of driving its FIN-TECH firms and digital economy through its cryptocurrency company in the world – Binance – the long awaited national payments ecosystem she assured will come to reality in October 2022. The last set of payment services providers are in the final round of testing so that we can have the widest possible participation from the outset. Its expected that the Barbados Ministry of Finance will proclaim the National Payments System legislation and the Fair Credit Reporting legislation on April 15, 2022 to provide sufficient lead time with respect to the introduction of appropriate regulations, while the National Payments Council will be set up by April 30, 2022 to oversee the roll out of the new payments ecosystem.
The Barbados PM who has been sure to capture the hearts of her fellow CARICOM citizens, made sure not to forget them too in her presentation mentioning the recent commitments for the allocation of hundreds of acres of land to Barbadian farmers who are willing to produce crops and rear Black Belly Sheep in these countries. A goal has been set – to have one million animals in 5 years’ time with Guyana and Suriname signing on to the promise of the allocation, aimed at reducing the regional food import bill.
In closing her budget presentation, Mottley told her fellow citizens that “that all our people must be owners and not tenants in their own land, there is nothing Barbados cannot overcome, we prepare together and journey together, we come through together, we arrive at our desired destination together”.