Business

Latest budget proposes austerity measures and cost cuts

By Marion Ali
Assistant Editor

Prime Minister Dean Barrow said prior to presenting his 2018 budget that he would not introduce any new taxes, but he did say there would be some tweaking of existing taxes, chief among which is a 12.5 percent charge to now be levied on mobile data, among other measures. The details are in the 2018-2019 Budget entitled, “Maintaining Steadiness; Consolidating Stability; Advancing Growth”, that Prime Minister Dean Barrow presented last Friday at the House of Representatives in Belmopan.

In order to increase its revenues by another $20 Million this year, government proposes to also apply GST of 12.5 percent to the operating expenses of Business Process Outsourcing (call centre) companies; as well as adding excise tax to jet fuel and lubricating oils; eliminating subsidies on some agricultural activities. This means that the cost of clearing land, conducting aerial crop spraying, as well as spraying from tractors and by other means, and using equipment to harvest crops will now carry a 12.5 percent tax. This new tax measure is expected to have a rippling effect on the consumer on basic food items such as rice, corn, chicken, eggs, beans, soybeans and sorghum for animal feed, and cattle farmers.
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Government will also increase the social fee charged on free zone trade on goods aside from cigarettes, liquor and fuel from 2 to 3 percent; making government contracts, imports and purchases GST-rated instead of exempt; and adding an undetermined fee on duty free merchandise arriving at the Philip Goldson International Airport. The GOB proposes to increase taxation estimated at an additional $20.5 million from these new measures.

Barrow did promise, however, that the pro-poor programs will remain as they are: “BOOST and Food Pantry; the Apprenticeship Program; the High School Subsidies; the Payment by GOB for students’ CXC exams; Funding of the Second Chance Opportunities; Tuition Assistance and a plethora of Full Scholarships; Construction of New Classrooms, Rural Water Supply Systems, Health Posts and Hospitals certainly in San Pedro (from public/private funding currently being pursued) and PG” will continue as planned.

For the year just past, government’s revenues were not as robust as were projected at 3.1 percent of GDP (Gross Domestic Product); instead, it recorded a primary surplus of about 1.8 percent of GDP. In the fiscal year just past, government had projected revenues and grants to be $1.187 Billion, but fell short by $80.2 million, which prompted a decrease in expenditures by $36.4 million, the bulk of which came from cutting capital II and capital III projects.

There were three main sources where actual revenues fell below the projected amounts: taxes on International Trade and Transactions, projected at $204 Million but recorded at $161 Million; taxes on Goods and Services, which was projected at at $551.9 Million but recorded $535 Million; and taxes on Income and Profits, which had a projection of $270.8 Million but recorded $267 Million.

The 2018-2019 budget is set at $1.183 Billion, with total expenditures at $1.209 Billion, and Belize’s external deficit of the balance of payments went up from 8.1 to percent of GDP in 2016 to 8.9 percent of GDP in 2017, caused by fewer grant funding, increased profit payments to foreign shareholders, and interest payments for the Superbond.

The national debt stood at about $3.535 billion (93.8 percent of estimated 2017 GDP) at the end of the 2017 fiscal year, Barrow said. Of the debts that require foreign currency repayments, $1.055 billion is owed to commercial bondholders; while $400 million is owing to the PetroCaribe Loan Program. Another $305.3 million is owed to the Caribbean Development Bank (CDB); $242 million to Taiwan; and $227 million to the Inter American Development Bank (IDB). Barrow explained that this translates to 41 percent or 4 of every 10 dollars of the national debt being payable to these concessionary lenders.

Some 40 percent of our domestic debt is currently held by the commercial banks, while 38 percent by the CBB and the remaining 22 percent by other creditors. A quarter of this debt consists of short-term Treasury Bills, and 62 percent of which is longer-term Treasury Notes, but the Central Bank projects a growth in economy of between 1.5 percent and 2.0 percent over this fiscal year.

The budget will be debated on Thursday and Friday, March 22 and 23, when both sides will have a chance to dissect it. Already the Opposition Leader, John Briceno has described it as “lifeless” and having “no glitter and no substance”.

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