We are now approaching the third anniversary of the largest economic recession since the great depression of the 1930’s and there seems to be no clear end in sight. While it is important to maintain a positive outlook and to focus on problem solving, we must do so in the context of a hard headed assessment of the challenges that we face without sugar coating the bitter realities of the day. Rising energy and food cost; steadily increasing unemployment and accelerating levels of under employment; declining revenues for the hospitality industry and a sugar industry is a state of collapse.
Barbadians need to be told the truth about the global and regional economic environment if we are to weather this storm so that we may sail into a brighter future some day. We need to cut our consumption and waste at all levels and to rely more heavily on our own resources. We need to examine needless expenditures that are linked to cultural extravagances imported in recent years, like the graduation ceremonies for primary and secondary school students.
As we exhort private citizens to do more with less, the government should set an example by eliminating unessential activities and ensuring that they get value for money in those projects or activities that continue. Increased taxation that fuels fiscal irresponsibility in the public sector is not the answer. Not only has the rate of taxation increased by the elimination of travel and entertainment benefits and the increase of VAT from 15% to 17.5%, but the rising tide of inflation has lifted the VAT boat to unimaginable heights.
Let me explain and do the math. An electric bill of $460 a year ago is now $700 due to the increase in the cost of energy. At a VAT rate of 15% the VAT would have increased from $69 a year ago to $105 today or an increase of $36. However with the VAT rate being increased to 17.5% the VAT on the electric bill today is $122.50 for a total increase of $53.50. That translates to three whole chickens that will not grace the dining table. The same is true for every item that attracts value added tax that you have purchased that has increased in price over the past year. Little wonder many have taken to designing menus at home around VAT free products.
As the rising tide of VAT swamps the efforts of the Barbadian consumer to stay afloat it floods the public coffers to ensure the expanding burden of bloated government. It is past time for a reality check and for government to take the lead in reducing expenditure, blow out the cobwebs of bureaucratic entanglement to stimulate investment and encourage self reliance, expansion and innovation in private economic activities. All Barbadians should be encouraged to participate in a national drive to increase productivity and highlight the many examples that we have today of successful companies that generate foreign exchange earning that is so vital to the growth of our economy.
It is a time for the unvarnished truth and not for political spin. There is just no way one can continue to gild the lily in a time of significant economic stress that is indicated by the large decline in corporate tax revenue. We could start with some believable statistics on our economic performance.
It is a time for strong and articulate leadership to pull our society together and navigate the perils that we face with a confidence in the belief of our own abilities. Thus far we have seen little to encourage us.
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