In an address at the monthly business luncheon of the Grand Bahama Chamber of Commerce, Mr. Owen Arthur, former prime minister of Barbados, spoke on "The Value Added Tax, Its Impact Of The Bahamas: A Caribbean Perspective". I must admit it galls me a bit a politician that has left his country and citizens with debt and taxes up the wazoo would consider giving advice that we should follow his lead for the most part.
Read his presentation here…(pdf)
Here's some economic data on Barbados
Budget revenues: $1.3 billion (2012 est.) expenditures: $1.5 billion (2012 est.)
Taxes and other revenues 28.7% of GDP (2012 est.)
Budget surplus (+) or deficit (-) -4.4% of GDP (2012 est.)
Public debt 83.1% of GDP (2012 est.)
Inflation rate (consumer prices) 6.1% (2012 est.)
Here's some information on the tax burden there.
VAT 17.5% from December 2011
Corporations
The tax payable by a company upon its taxable income is
For income year 2006 and hence 25.0%
Corporations
The income tax rate payable by a company upon its taxable income is
For income year 2006 to 2012 33 1/3%
For 2013, the income tax rate for regulated companies – 33 1/3%
For 2013, the income tax rate for non-regulated companies – 25%
Individuals
The tax payable by an individual on his taxable income for an income year is as follows:
From August 1 of income year 2012, 17.5% of every complete dollar of taxable income up to and including $35,000; and 35.0% of excess;
Duties Charged on Select Imports
Generally most items are subject rate of duty of 20%. Below are a few examples that are exceptions to this:
Product Rate of Duty
Agriculture 40%
Commercial and New Furniture 60%
Clothing 60%
Jewelry 60%
Motor Cars 45% plus a 100% Consumption Tax and 17.5% VAT
T-Shirts 115%
With all those taxes and the Barbados dollar equal to fifty cents US, life cannot be easy in Barbados. All due to government spending and borrowing but not once in his presentation did he mention that government policy was the problem of course.
Now really, should we be seeking his advice?
Let me get this straight. He should not be giving us advice because..?
1. …he left his country with debt and taxes?
2….the Barbadian dollar is equal to fifty cents?
3. .. Life is not easy in Barbados?
4 …he did not mention in his presentation that government policy was the problem?
1. Owen Arthur, served as Prime Minister of Barbados from 1994–2008 His economic policies during this time significantly cut unemployment – from 20% to 9%. His administration boosted the agricultural and tourism industries. He has been the longest serving Barbadian PM. All-in-all a productive series of terms in office.
The slight down-turn started after his last term in office – post 2008
.
2. Naive to imply that that figure correlates exactly with standard of living. The Euro is worth more than the dollar. In fact the Japanese yen is about 100 to 1.
3. Barbados is described as the “wealthiest” economy of the Eastern Caribbean. It joins Trinidad and Tobago to represent a duo of Caribbean countries that have been on top of their game. Even now, with some amount of down-turn largely due to the recent world-wide recession, it is still described having “one of the highest standards of living in the world, ranking 38st on the global Human Development Index” The Bahamas is 49th.
4. Not his government policies. Presumably, he stood in “opposition” to policies subsequent to his relinquishing office.
In addition, someone here must have invited him to speak in GB,or at least accepted his proposal to address us.
Arthur acknowledges that the tax burden of this country will not be as onerous, since no income tax is being considered here in the Bahamas.
Obviously we in the Bahamas will decide on our own tax structure. And obviously Arthur has his own agenda. And obviously I’m rooting for my Bahamaland above all others. But my question is: why dismiss what Owen Arthur has to say based on the “colour” of his nationality rather than the “content” of his presentation?. That doesn’t make sense. I say just consider what he says. What he says will have it’s own internal consistency or lack thereof, it’s own external verifiability or lack thereof. If what he says gives us valuable insights and better prepares us to make our own decision, what’s the harm? I don’t know if this assessment is biased, but Barbados’ implementation of VAT is regarded as successful by international standards. But even if someone comes out of burning building and advises us not to go in, are you going to say “Who is he to give us advice, he went and got all burnt.”
I’m too old to brook fallacy wherever it comes from, so I had to say all this.
No harm here, the hard has already been done to Barbados and Jamaica and we could be next in line.. It is more of a case of the “blind following the blind”.. Yes, we can always learn from another country’s political stupidity, but successive governments of the Bahamas are blind when it comes to benefiting from the known lessons of economic experience..
Bigger governments, growing confiscatory tax rates and fees, greater wasteful deficit spending and excessive and unnecessary regulations combined with a bloated bureaucracy is crushing the Bahamian public driving us down the road to economic self-destruction.. This is what has happened to Barbados and is happening today to the United States and our beloved Bahamas as well..
For what little it may be worth, the words of Ronald Reagan, spoken during his first Inaugural Address in 1981, when the United States was in the middle of the worst recession since the Great Depression, always come to mind.. “In this present crisis, the Government is not the solution to our problems, the Government is the problem”..
Not much has changed since then, as today bloated governments around the world are spending their way into the void of economic bankruptcy with no painless way out.. The absence of government leadership is the real problem, leadership which lacks the necessary courage and integrity to do the right thing for their respective peoples.. Who would have ever guessed in 1981 the hidden truths in President Reagan’s words which were soon to be forgotten in America and perhaps never heard in the Bahamas.. The government is not a meaningful answer to the economic mess we find ourselves in and will never be the meaningful solution..
Thanks for stopping by and commenting MM.
Let me clarify.
He can give the advice of course, but we should not take the advice he has provided. This might help clarify my position a bit further: http://bit.ly/158Zdiy
The Central Bank of Barbados forbids publishing their data in this forum, but this IDB paper http://www.iadb.org/intal/intalcdi/PE/2012/11223.pdf shows debt levels doubling (approximatley 1.5 billion to 3.0 billion) under Mr. Arthur’s reign as PM from 1994 to 2008.
He also implemented VAT and increased other taxes.
Maybe you have some data on Debt to GDP and tax levels for his tenure as PM from 1994 to 2008 that you can share that would help the discussion?
I would not expect Mr. Arthur to consider our tax levels onerous compared to Barbados. Maybe his predisposition is governments should tax citizens whatever they prefer and we should accept it?
My naïveté regarding standards of living, as you suggest, may or may not apply. The Bahamas is ranked third in the region (not just the Eastern Caribbean) and we have rather dramatic poverty levels. My friends in Barbados tell me their cost of living is very high and there is lots of poverty as well.
Is the cost of living in Barbados less than here?
Is there more disposable income in Barbados than here?
Is there less poverty in Barbados than here?
I submit Mr. Arthur’s comments gave no valuable insights into the reality of the Barbados economy as you seem to suggest. He merely encouraged higher taxation here without once mentioning the effect of excessive government spending, deficits debt and taxes.
The implementation of a tax can be successful – like VAT in Barbados. That’s not the issue. The problem is the effect of higher taxes on an economy and the damper it places on economic growth – even just in the short term.
Without economic growth the prospects for everyone worsens.
Instead of looking at places like Barbados as an example & it is not a good one at that,we need to look at states in the US like Texas that have CUT taxes & seen a dramatic increase in money coming in & the unemployment rate has dropped way down.Why use a country like Barbados that has failed ? Common sense would tell you to stay away from anything close to what they are doing,where is the common sense Mr.Christie ? It is down right stupid in my book to look to a failed country as an example.
There is a bigger issue here.. Individual States are nothing more than add-on tax obligations to their State’s citizens Federal income tax burden.. Florida, for example, has no income tax but has 6.5 percent sales tax, a dual property tax for homestead residents and non-residents and a personal property tax.. When taken together they really cut into an individual’s discretionary income.. With few exceptions, the same can be said for the Lone Star State..
The bigger issue is that few countries have a fair and balanced tax system.. With few exceptions, the nation’s of the world are on a similar path to economic failure.. VAT, that Very Awful Tax, has been a failure where ever in the world it has been applied.. Read the statistics on Barbados and you wonder who the hell would ever want to live in that place.. They are taxing themselves into economic bankruptcy thanks to foolish politicians who still cannot understand that their Keynesian policies are driving their once proud countries to the financial graveyard..
If nothing else Mr. Owen Arthur’s address is a check list of advise describing what should NOT be done.. Failed leadership/policies, whether in the Bahamas or from Barbados, should be avoided at all costs.. If not, the Bahamian people will soon have a Barbados-style economy on their hands.. Hopefully Mr. Arthur’s hollow and futile advise will be an important wake up call, but our politicians seem to be in a deep slumber when it comes to rational economic thought..
What I do know about government here is that they are double dipping & killing business,maybe that’s their plan.It is very unfair to pay all these taxes & then get hit with one hell of a license fee all while the lawyers & doctors do not pay anything close to what business has to pay & their margins are much,much higher.(I wonder if its because that’s who parliament consists of)There is no incentive for business to grow at all.I really think its time to take to tell them where to get off at because we have had enough & enough is enough.Were in the world to they get these stupid idiot ideas from & can they think at all ?
You are absolutely correct Overtaxed; stupid ideas from dumb, dumber and dumbest minds..
The other day a good friend told me that he is closing his establishment after twenty years as his increased costs are driving his business deeper into the red.. He is sick and tired of having to competing with stolen grocery pushcart vendors on the sidewalk outside his tore that have no overhead, no National Insurance burden and no business licenses or fees.. Add in rent, water and power as well as import duties and there is just no way he continue to make his payroll never mind a meager profit..
I did the the same thing a few years ago and believe me I don’t miss the headaches of running a business.. With the VAT time bomb on the government’s drawing board, more and more business establishments will be forced out of business as Bahamian consumers will not have the necessary income to pay the increased VAT costs that government is forcing on private businesses and subsequently will be passed on to the consumers.. Businesses are now cutting back on inventory stocks and will only order goods and parts as needed.. This has to hurt government revenues as duty paid on inventories declines as inventories are only replaced when needed.. This is going to be a big nail in the government’s financial coffin as our country moves to potential insolvency..
Perhaps Mr. Arthur was brought in to speak as no one from our Government is speaking on topic!
Apparently the Q&A was better than the written text,
perhaps a video will surface.
Come on, this is right out of the nursery rhyme “Three Blind Mice”– Owen Arthur, Perry Christie and the Bahamian people.. Soon we shall “see how they run” as economic ruination will “cut off their tails with carving knife”..
Barbados is an economic basket case as they are taxing themselves into depression thanks to the policies started by Owen Arthur.. Perry Christie seems to have no idea as to financial dangers which will result from unsound fiscal policies.. Lastly, the Bahamian people are totally in the dark as to the financial crisis that will confront them..
So there you have it, three blind mice running down the path to get their tails chopped off by the knife of rising inflation, higher unemployment and stagnate economic growth.. Lets hope that the light of economic wisdom restores their vision before we reach the edge of the economic cliff..
The Bahamas does not want to be like Texas. The job numbers look good – but the jobs created are low wage positions that are not generating significant revenue. Thirty percent of the state’s population has no health insurance. The highest percentage in the US. The state has been cutting funding to schools – no investment in infrastructure.
Thanks for stopping by and commenting aM Carmel.
There is nothing wrong with low wage jobs. Everyone has to start somewhere. The important thing is whether folks start there and eventually move up if they are educated and work hard enough to be promoted. Can you confirm what is happening in that regard?
And why doesn’t the 30% of the those without insurance buy a policy if it’s that important to them?
I think the state should privatise public schools frankly. Children will receive a better education. They can start by issuing vouchers for parents to enroll their kids wherever they like.
And I can’t resist this. Wasn’t the US Federal Government taking care of all the infrastructure etc with all the borrowing they wanted approved?
What US State or country should The Bahamas want to emulate?
I think you got your wires crossed.. Texas does not want in any way to be like the Bahamas.. The commentator only suggested that if we are going to listen to Owen Arthur we might look at the experience of Texas as well..
The only problem Texas has is that it is an individual State within the United States.. Take the Federal government out of the picture then Texas would become a thriving country.. As for the Bahamas, Texas doesn’t want our massive per capita deficits, irresponsible fiscal policies, our failing school system and stagflation economy.. Yes they have problems but the Federal government’s continuous interference impedes the State from solving its problems.. Once again it may be cited that to much government is in actually a bad think.. Don’t believe me; just ask any Texan and you will get an ear full…