By BBN Staff: Prime Minister Dean Barrow will introduce the budget for fiscal year 2017/2018 in the National Assembly on Monday on the heels of finalizing the terms of an unprecedented third restructuring of the country’s 2034 US dollar bonds. The government has tried its best to assure the Belizean public that they will not be saddled with the burden of rigid austerity measures to repay the bond, however, with the terms GOB has agreed to, the money obviously has to come from somewhere.
Under the terms of the newly restructured bond arrangement, Belize has undertaken to grow the country’s economy by at least 2 percent of GDP for three consecutive fiscal cycles starting 2018/2019. During his press conference last Wednesday, the Prime Minister acknowledged that there would be some spending cuts and other measures to ensure the country meet its 2 percent target. He said, though, that it would not come at the expense of public officers, who are due a salary increase plus interest this year for the deferral which resulted in an 11-day strike last October.
He also assured that there would be no retrenchment of any sort, and that public officers could rest assured that their jobs were secured. And while the PM has said it would not resort to retrenchment, Belize is on record as having the highest wage bill of any developing country in the region. Plus with wages for public officers set to increase this year, it is then likely that GOB would, at least to some degree, review its wage bill to see where it could make feasible cuts.
Original projections indicated that GOB may have been considering recommendations from the International Monetary Fund (IMF) to raise the General Sales Tax (GST) to 15 percent or higher. Barrow, however, has said this will not happen.
Still, under the new terms, GOB has undertaken to implement a fiscal consolidation equal to at least 3 percent of GDP in the 2017/2018 fiscal year. This means GOB must find a way to cut its spending while increasing its revenue in an attempt to bridge 100 million dollars in the fiscal deficit. It’s hard to imagine that this can be done without some sector of the public work force being negatively affected and without consumers and businesses feeling the pinch in their pockets at some level. Financial Secretary Joseph Waight acknowledged as much a few weeks ago when he confirmed to the media that some tax adjustments would most likely need to be made.
So then, how will GOB undertake to get this done? While we will know for sure when the Prime Minister reads his budget speech on Monday, the following are some tax measures and fiscal options that the GOB has already decided upon, or is contemplating:
10% of all revenues generated by statutory bodies in the 2017/2018 fiscal year must be given to GOB. Statutory bodies such as the Belize Tourism Board (BTB), National Institute of Culture and History (NICH), Belize Agricultural Health Authority (BAHA) etc. will be the principal institutions to be affected by this fiscal measure. Apart from the BTB, most statutory bodies depend on GOB for a subvention and implementing this measure may affect these statutory bodies ability to maintain the delivery of quality services to their stakeholders;
SIN taxes, meaning tax on products or services that are seen as vices such as alcohol, cigarettes and gambling, is no doubt going up. This is the first tax measure that governments contemplate in times of austerity;
Slight and additional increase in the duty on fuel imports will be tempting as last year GOB was able to raise 50 million dollars using this measure. This of course, will come at the expense of drivers, who have not enjoyed the global downfall in petroleum prices as other countries have in the past few years. It is expected that fuel prices, which have gone up at least three times over the last two months, will continue to increase.
And lastly, General Sales Tax (GST) will be the tax measure that GOB will hinge its bets on. Financial Secretary Joseph Waight has said the current 12.5 percent GST rate will not increase (to the 15% recommended by the IMF or to the 14% as speculated by some businesses). At last Wednesday’s press conference he noted: “Indeed there is some work needed to be done with the GST to widen its base…”. GOB has remained tight lipped on the GST measures, however, some suggestions point to the lowering of the GST threshold from $75,000 in annual revenues to $50,000 or thereabouts in order to capture more small businesses paying this tax. In addition, GOB intends to move certain services and non-essential products (eg. processed grocery items) from its zero rated list and make them pay GST in order to increase revenues.
Both PM Barrow and the Financial Secretary have indicated that GOB will look to making its revenue collecting measures more efficient to ensure that businesses who regularly evade paying taxes and fees, don’t get away. The GST department has already began to no longer allow for GST credits on past sales activity for newly registered businesses and are now taxing these businesses and charging penalty and interest on their full revenues prior to registration.
One thing is for sure, though, all Belizeans will have to play a role in the belt tightening measures and will bear a part of the tax burden in the next few years ahead.
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