Barbados Hopes To Balance Its Books In 2005

by Jason Gorringe, Tax-News.com, London

21 March 2005

Barbadian Prime Minister Owen Arthur introduced financial legislation to parliament last week which aims to cut the country's budget deficit below last year's 2.5%.

Spending will rise by 1.6% to BDS$2.4 billion, including investment to prepare for the country's hosting of the 2007 Cricket World Cup; but revenue is estimated to rise by 9% to produce a primary surplus, helped by an increase in VAT receipts to more than BDS900m, and sales of government assets including BDS66m from the sale of shares in the Insurance Corporation of Barbados and BDS100m from the sale of the government's interest in the GEMS hotel project.

Mr Arthur said that the economy out-performed its targets last year, growing by 3.7%, although this led to increased imports. Corporation tax is being reduced to 30% in 2005 and 25% in 2006, while personal income tax is also being cut, and allowances increased.

"For the first time in this country, a government is doing two things that have tremendous fiscal implications - raising the income threshold below which people do not pay tax from $15,000 to $25,000 and cutting the rate of tax," said the Prime Minister, "And while we're doing that, we are also seeking to bring the taxes paid by companies in Barbados down to the most competitive level in CARICOM, from 40% to 25% to give Barbados a chance in the new single market and economy to be the preferred location for doing business."

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