Barbados Senate Passes Tax Increases

by Mike Godfrey, Tax-News.com, Washington

15 March 2011

Barbados's Senate has passed a bill officially raising the country's value-added tax (VAT) from 15% to 17.5%, as part of a series of Budget 2010 measures designed to tackle the country's record deficit.

The VAT rise, first introduced in December 2010, was confirmed as having been passed on March 11 by Minister of Finance Stephen Sinckler, along with measures to remove tax free allowances for travel and entertainment granted to employees.

Speaking at an event on March 10, Sinckler said that, according to provisional and revised figures for 2010 from the Ministry of Finance and Economic Affairs and the Central Bank: "At the worst, we have halted the decline we saw in 2009 of 4.7% and at best, we will record a small increase in output in 2010 of 0.3% of GDP". According to him, the government's goals are to halt the decline in the economy by reversing negative trends in GDP output in the shortest possible time frame and return the country to positive economic growth; reduce the fiscal deficit to a sustainable level and achieve a small surplus by 2015; shrink the country's debt to deficit ratio to below 100%, and reposition Barbados as a major foreign direct investment hub.

Sinckler also released Barbados's estimates of expenditure and revenue for the 2011-12 fiscal year to parliament on March 8. Total expenditure on a cash basis is to be BBD3.5bn (USD1.75bn), an increase of BBD304.3m or 8.0% below the revised figure for 2010-2011, with the revenue intake currently projected at BBD2,489.3m on the cash basis, an increase of 5.7% over the revised revenue of BBD2,354.7m for the financial year ending March 2011. This will see an expected deficit of BBD$583.2m, or 6.8% of GDP.

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