Leader of the Opposition Arnhim Eustace on Monday described as “serious level of taxation” the fiscal measures that were part of the 2016 Budget that Parliament approved last week without input from the opposition, which boycotted the debate.
“You hear them calling him ‘Dr. Salt’ now,” Eustace said of Prime Minister Ralph Gonsalves at the New Democratic Party’s “People’s Budget” in Kingstown.
He said the moniker came about because the Gonsalves Government has added cooking salt to the items on which 15 per cent value added tax (VAT) is to be charged, beginning this year.
Eustace told the gathering at Frenches House and media audiences that by imposing VAT on the 10 or so new items, the Government “is going to take eight million dollars or so out of your pocket.
“So this year, you are going to pay eight million dollars more in VAT just for those items there alone,” he reiterated, adding that previously, the Government collected about EC$75 million in VAT, annually.
“So, this is not a joke you know. This is serious level of taxation,” he said, adding that he does not know that VAT on the new items will do to the price of bread.
Eustace pointed out that his New Democratic Party had promised before the Dec. 9 general elections that it would have removed VAT from a number of items.
But Gonsalves, in presenting the EC$912 million budget in Parliament last week, announced a new 2 per cent tax on cellphone calls in addition to increases in property tax on commercial buildings, driver’s licenses, and gun licenses.
The Finance Minister also announced the introduction of VAT on packaged rice for retail sale; table and cooking butter; brown sugar; and whole chicken and chicken parts, except chicken back, neck and wings.
Some previously VAT exempted items were made taxable, namely, lentil and pigeon peas; cooking oil, except coconut oil; shortenings; salt; yeast; and baking powder.
Gonsalves said the new measures are intended to widen the tax base and improve buoyancy.
They were coming at a time when the Budget included an EC$151 million deficit.
Eustace also pointed out that the fiscal package included excise taxes on some beverages and increases in driver’s licence and property tax.
He spelt out, in monetary terms, the implications of the increases in motor vehicle licences.
Eustace explained that the licence fee for a private motorcar not exceeding 2,000 pounds tare will move from EC$315 to EC$400 annually while those 2,000 to 3,000 pounds will increase from EC$410 to EC$520.
“They gone up a hundred, a hundred and fifty, two hundred dollars in some cases,” he said, adding, “And that is a whole long list of things here.”
The annual license fee for private motorcycle has been increased from EC$190 to EC$250; the fee on goods vehicles of less than two tonnes have been increased from EC$700 to EC$875; those less than 2 tonnes but less than three tonnes have increased from EC$875 to EC$1,100 and those five tonnes and over have moved from EC$1,200 to EC$1,500.
“You don’t hear about those, because they are in an appendix in the back and they are not read out. But I am reading them out now. This is part of the budget. And there are many others,” Eustace said.
He said that omnibuses of three tonnes licenced to carry passengers only used to pay an annual licence fee of EC$425, but will now pay EC$575.
“And let me tell you, all these rates include the minibuses also. So we have to wait and see what happens when people start to ask for fare increase.”
Eustace noted that driver’s licences have been increased, and added that a learner’s permit has increased from EC$65 to EC$100.
“You want to change the ownership of your vehicle, you used to pay 100, [now] you pay 150. The fee for inspection used to be 65; it has gone to 90. International drivers permit used to 100, it gone to 150.
“Conductor for minibuses used to be 10 dollars, now it gone to 15. What you move it for?” Eustace said.
The fee for a personalised number plate has been increased by $1,000 to $2,500.
“So what I am trying to show you, a lot of other taxes have been increased in this budget. So far, I have counted about 14-15 million dollars in other taxes,” said Eustace, an economist and former finance minister.
The government has also increased the environmental tax on the importation of vehicles that are more than four years old.
“That tax has now got another tax on it,” Eustace said.
For coaches, buses and minibuses which carry fewer than 21 persons, the tax was EC$3,500. It has been increased by EC$500.
For those that carry more than 21 passengers but fewer than 29, the tax has been increased from EC$4,000 to EC$4,600.
For coaches, buses and minibuses of a seating capacity exceeding 29 persons and including the driver, the tax has been increased from EC$4,500 to EC$5,200.
“So you have a whole list, a long list of items, that have been here for motorcars and other items and they have gone up by significant prices. Even the trucks that carry the cement, those are taxed also with an addition 5,700 dollars. Those things add up to cost for people who are doing business. It is going to cost you, the taxpayers, more,” Eustace said.
“We can’t just let these things past. We have to understand that is what we are dealing with. And I am saying to you, I do not believe that this budget can meet its target of increasing economic growth or increasing job or doing anything for our fiscal situation, except making it worse.”
‘errors and difficulties’
Eustace said there were a number of “errors and difficulties” which would make the budget “much less than meaningful”.
He noted that Gonsalves had said that the central themes of the 2016 Budget are economic growth, job creation, zero hunger and fiscal consolidation.
Eustace, however, noted that the budget has an EC$151 million deficit, with projections of EC$168 million in deficit for 2017 and EC$205 million in 2018.
“Now, if you are in fact moving to fiscal consolidation, which he says is one of the main aspects to be covered, then you are starting off on the same old foot that you had before. It is getting worse, not better,” Eustace said.
He said that to make up for the shortfall, the government has to borrow, get grants or “pretend that certain things can give you increased revenue.
“And I want to say a word about that now. I have said it now consecutively for ten years. And that’s why I don’t miss talking in the Parliament because these points have been made in the Parliament over and over every year in the case of the Budget. The government does not ever listen, nor does it make any effort to deal with this issue,” he said.
Eustace said that to cover the deficit, the government inserts a figure under “Other Capital Receipts”, but always fails to raise the amount, and, therefore, cuts back on the Capital Budget.
“So when you look at the estimates for 2016, the amount of money remaining for doing projects, including building roads and so on, is 100 million less than the year you had before. So how [are] you going to do it?
“How is this going to increase jobs?” he said, noting that Gonsalves had said that a main aspect of the budget is job creation.
“But the shortage of the finances is constraining your ability to create job, so unemployment continues to grow,” Eustace said.
Opposition lawmakers stayed away from last week’s Budget Debate as part of their on-going protest of the result of the Dec. 9 general elections, which they claim that Gonsalves’ Unity Labour Party stole.
The NDP is contesting the results in court.
The two-day “People’s Budget” ends on Tuesday (today).
As I have always said, Gonsalves believes he can tax the country into wealth. Eustace is very correct. to put Eustace and O’neal’s thoughts in better understood words: “You can tax a country into poverty but you can’t tax it into prosperity”. Gonsalves is very lost when it comes to economics. His problem is that he is an extreme believer in Keynesian Economics (John Maynard Keynes was a socialist). All Keynesian economies in the world are bankrupt and drowning in debt. This budget will further accelerate our problems. More people will lose their jobs in the private sector and over the mid-to-long-range decrease the governments ability to create revenue. More of our people will become dependent on the crumbs from our government.
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