BRIDGETOWN, Barbados, CMC—Prime Minister Mia Mottley said Monday that no new taxes would be in the 2024 national budget she presented to Parliament. However, she indicated that the tax structures would be reviewed, and access to financing for the private and public sectors would be increased.
“It is a budget that will secure our Barbados of today and our Barbados for tomorrow. That security is anchored on our achievements against many odds so far, on the clear improvements we are seeing, and on the bright light of our rising star, which is the result of our joint effort,” Mottley told legislators.
The government had early presented to Parliament the estimates for total expenditure for the financial year 2024-2025, on an accrual basis, at BDS $4,667.7 million. (One BDS$ = US0.50 cents), with BDS$3,422.9 million representing current expenditure and BDS$1,244.8 million representing capital expenditure and amortization.
She said the fiscal package illuminates future prosperity that all Barbadians can share and “a country in which our pride remains fully justified, because…it is built on our industry.
She said that in the fiscal package, all Barbadians, whether at home or abroad, will see how their efforts can further contribute to the shared national prosperity and how all of us can benefit from our labor to enjoy our share.
“The Barbados star will continue to rise through the collective effort of all of our people, and together, sir, we will fully emerge from the period of deep economic and financial abyss, with its political origins, of course, in the lost decade of 2008 to 2018, from the social and economic tentacles of COVID-19 pandemic, and the supply chain shackled by the Russia-Ukraine war, and its consequences and now compounded by the war in Gaza.”
She said Barbados can now enter a period of increased social stability and heightened and sustainable growth but insisted, “We must work together, and we must plan together.”
But she told Parliament that while “there will be no new taxes…I am telling you upfront that I will warn you that there will be some adjustments during this year that we will need the public to bear if our services that depend on those rates are to keep up with the kind of service that Barbadians want.
“Let me also make the point…I know that some issues are of further concern to the country. I hear you, and I see you, and I feel you. The allegation of the unsustainable national debt, the cost of living, the healthcare system, and more specifically, the Queen Elizabeth Hospital, the state of the roads, particularly the pothole repair, the access to jobs, especially for our young people, and, of course, the management of the education transformation effort.”
Mottley said she intends to address these issues, but she wanted to give the country the facts and assurance about the national debt,” adding, “I do not take these things lightly.”
She insisted, however, that “Barbados’ debt is not galloping out of control,” adding the debt-to-gross domestic product (GDP) ratio is not “precarious” and that her administration “has not increased the national debt to unmanageable levels.
She told legislators the national debt was lower than when her government came to office in 2018.
“When we came to the office…the debt was 178.9 percent of our GDP. At the end of February last month, 2024, it was 114.6 percent,” she said, recalling that in 2018, “when we came to office, debt cost this country 68 cents out of every dollar of revenue.
“Today, we are paying 30 cents out of every dollar to service debt,” she said, adding that the reduction in the national debt has been achieved despite Barbados’s experiencing the worst pandemic in 100 years, extreme weather events, the worst hurricane in 65 years, the worst freak storm in the country’s memory, and an ashfall that was the worst since the 1902 volcanic eruption of Soufriere in St. Vincent.
“Mr. Speaker, despite all the things that required citizens’ support and occasioned high expenditures against shrinking government revenues in those days, our debt has been lower despite war-caused supply chain disruptions and price increases. “
Given the discussion on the national debt, Mottley said, in absolute numbers,” Our debt at the end of this month, February, that was just gone, BDS$12.859 billion down.
“In almost six years, we have only increased this country’s debt by two billion dollars despite facing all of the challenges that…this country did not face in 65 years and 100 years.
“These are the facts. And I want to remind you… that this government remains fixed on our determination to reduce our debt to 60 percent, and we hope to do so by 2035 or, if we negotiate with our international partners, soon.”
Mottley said that after years of downgrades, the economy is now growing, registering 11 consecutive quarters of growth, “and we’re about to see the 12th one by the end of this month.
“It is amazing. In addition, unemployment is back down to about eight percent, well below this country’s historical average of 10.3 percent. And Mr. Speaker, the economy is expected to grow four percent this year,” she said, adding, “and the outlook for 2024 remains optimistic.”
“I want to say that we can remain comfortable at our previous rates of growth, which have been two and a half to three percent, more or less, before the last decade, of course, of 2008 to 18, when they were zero.
“We can set our sights on achieving four to five percent growth in the medium term. Mr. Speaker, if we do this, we can enhance the prosperity of as many Bajans as possible and for as many future generations as possible. To change our trajectory to higher levels of growth will require effort and investment from all sectors, with many individuals and entities playing their part, not just the government,” she added.
She said that in order to grow the economy to greater heights, the government must pursue a few strategies with the public and private sectors to remove blockages and propel the pace and scope of growth.
She said this would include creating Business Barbados, increasing public and private sector partnerships, reviewing tax structures and new investment funds, further modernizing the tax system, and digitization and re-engineering business processes;
She said it would include unlocking the mortgage market, increasing access to financing for the private and public sectors, unblocking renewable energy investment, addressing the demographic challenges by population and skills management, monetizing illiquid and derelict assets in the public and private sectors, and exporting capital to diversify investments given Barbados’ limited size and vulnerability, starting of course with the Caribbean Community (CARICOM) Single Market and Economy (CSME) and the wider Caribbean and Central and Latin America basin.
Mottley said establishing the pharmaceutical industry would aid in protecting citizens’ health, exports, and foreign exchange earnings. Barbados should also be developed as an agri-processing hub, incentivizing a vibrant creative and film industry and implementing capital projects.
Mottley said that the economy successfully managed all the challenges, telling legislators, “and all of that, our debt is lower, our reserves are higher than they ever were at BDS$3.2 billion”.
Mottley said that while she no longer loses sleep over the country’s reserves with over 33 weeks of import cover, she does, however, lose sleep over the skills deficit.
“I lose sleep about whether we have enough people to do the job that has to be done in this country,” Mottley said, congratulating the Social Partnership of Barbados, who has worked with her administration on the key critical issues.
“We won’t agree on everything, but we have worked together on the key critical issues to reposition this country, labor, and the private sector. Achieving our targets and raising living standards and the quality of life of Barbadians is paramount for our future.”
Mottley said that the public investment since 2018 has exceeded in human areas BDS$1.8 billion.
“We remember that we allowed our students from the very first September that we were in office, the University of the West Indies, again with the comfort of free education. Over the last five years, sir, this government has spent BDS$2.7 billion in education and BDS$1.8 billion in health.
“…these approaches are critical investments in achieving what we hope will be our long-term growth target of five percent. “
Mottley said that her administration will establish “Business Barbados,” a commercial state-owned enterprise with a board of directors drawn predominantly from the private sector.
“But once Invest Barbados has done its work, the companies have to find their way through a current maze: the establishment, incorporation, and all the legislative requirements for setting up and doing business here. That is where the handover to Business Barbados will now occur. From incorporation to filing annual returns and every company legislation requirement, Business Barbados will be the responsible entity.”
She said the current Companies Act goes back to the 1980s and “therefore is not necessarily fit for purpose for operating in a current Barbados.
“We will also, Mr. Speaker, to give context, have Export Barbados, which is the old BIDC, Barbados Industrial Development Corporation, continue to drive the expansion of exports and to focus on increasing foreign exchange earnings repatriated to local businesses from those exports.”
Mottley said that the government should prioritize those national development projects to ensure long-term growth and well-being.
“To facilitate the establishment of these public-private partnerships, I propose with effect from the 1st of April 2024 to establish a refundable, a 50 percent refundable tax credit for investments in projects identified and approved by the government in the context of our national development strategy. “
In reviewing the tax structures and new investment funds, Mottley said, “We have entered a new phase of our economic development with the tax reforms adopted in October last year.
“Our policy aligns us with international standards with a normal rate of nine percent, as I said, for all companies, 5.5 percent for small business companies, and a top-up tax at 15 percent for large multinational companies that are considered, as they call it, in scope.
“This will secure our reputation as a nation with our international partners. The job tax credit and the research and development tax credit, combined with a 4.5 percent tax on certain types of intellectual property called the patent box, all allow us to promote long-term job-rich growth.
“Indeed, Mr. Speaker, that Bill is now, I believe before the House of Assembly capturing all of the reforms announced in October with the additional reform of the intellectual property special tax for the patent box,” Mottley told legislators.
Mottley, who is also the Finance Minister, said that with tax reform completed, Barbados will look to offer the world incentives to come and invest.
“In that context, the Ministry of Finance will modernize our funds and asset management legislation. This modernization and reform package aims to create an environment conducive to investments, thereby promoting economic growth and enhancing the country’s position as a competitive destination for international players and their investment in the funds industry,” she said.
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