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Barbados Revenues Hit By Lower Tourist Spend

by Amanda Banks,, London

22 July 2011

Barbados's latest economic performance figures show that total tax revenues fell year-on-year, with issues in the tourism industry and a lack of business profitability making it hard for the government to meet its fiscal targets.

The statistics, released by the Central Bank, relate to the first six months of 2011. They show that while tourist arrivals picked up after a prolonged decline, the average tourist spend while on the island fell, meaning there has been no build up in foreign exchange reserves. Business profitability has also not recovered, and corporate tax receipts fell short of expectations. It has therefore been difficult for the government to meet its fiscal targets, in spite of the value-added tax (VAT) hike brought in last November.

Barbados's rate of VAT was increased from 15% to 17.5%, but total receipts actually fell by 2%. Provisional figures for April-May, 2011 show that they dropped from BBD127.7m (USD63.9m) to BBD124.m. Total tax revenues were BBD309.5m, down from BBD317.4m in the same period last year.

This year's total was composed of BBD112.9 in direct tax receipts, of which BBD94m was from personal taxes, BBD6.4m from corporate tax and BBD4m from property taxes. In April-May, 2010, the government collected BBD106.6m in direct taxes, of which BBD85.m was composed of personal taxes, BBD13.6m corporate tax, and BBD3.4m in property taxes. The indirect tax total for the first two months of this financial year was BBD196.7m, down from the BBD210.8m recorded this time last year.

Other key figures include a 4% increase in the number of international business companies operating in Barbados, from January to May this year. This takes the total number of such companies to 3,126. Net capital inflows for the first half of 2011 were worth BBD319m, bolstered by major inflows from the sale of Barbados Light and Power Company shares to Emera Inc (BBD188m), financing to tourism and private projects (BBD70m) and real estate flows (BBD44m).

Nonetheless, in the first two months of the 2011/12 financial year, external inflows have been negligible and the government has relied almost exclusively on domestic entities, and, in particular, commercial banks, to fulfill its financing requirements. Debt as at June, 2010 was equivalent to 54% of GDP. GDP growth is expected at approximately 2% this year.

TAGS: tax | economics | business | value added tax (VAT) | gross domestic product (GDP) | budget | corporation tax | offshore | revenue statistics | individual income tax | Barbados

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