| Last night, we gave you the broad outline of Prime Minister's Budget presentation for the fiscal year 2017/2018. That speech is titled "Bouncing back - A Bold Belizean Recovery," but it's also about contraction, and the coming year's budget is about 5% smaller than last year's budget. That's a stark contrast from last year's budget, which increased by almost 8% over the previous year.
But, while the Government is cutting spending, It intends to collect an unprecedented 1 billion dollars in taxes from you, the tax payers. To do this, the government is rolling out 88 million dollars in new tax measures, 80 million of which we already told you about.
Last night, we showed you the areas that the Government intends to tax, but we showed you those figures as percentages of the GDP. We've done some crunching of the numbers, and this is what we found.
With the tax hike on aerated water, beer and stout, cement and fuel, the government will collect 28.4 million dollars in additional taxes.
With the increase in the departure fee for non Belizeans, which goes up to $40 dollars, the Government will collect 11.05 million dollars more.
And by increasing the environmental tax by 1%, the Government will collect 15.1 million dollars more.
Spiking the social fee on Free Zone cigarettes, the Government will collect around 10.7 million dollars more.
The Government also plans to amend the stamp duties for foreign exchange, which will allow them to collect 8 million dollars more.
But, possibly the area of immediate concern for Belizeans are the changes to the tax threshold for their electricity bill. Before this budget, if your electricity bill was under $200, you didn't pay tax on it. Well, the government has lowered that to one hundred dollars. If your light bill is more than that you will now have to pay GST of 12.5%. So, in order to get a tax break, your bill has to be under $100.
With that change, the Government will collect 7 million dollars more, all to a total of 80.3 million dollars, with the roll-out of this budget.
So, how does the Prime Minister justify these tax increases? That's what we asked him yesterday after the presentation:
Rt. Hon. Dean Barrow, Prime Minister
"We did the very best we could have to ensure that while we would raise the money, this thing would be so distributed and would be so creative, in terms of some of the options that we exercised that it would not have the effect of putting some sort of a brake on consumer spending, a brake on economic development"
"The taxes those haven't been raised I think for years and years, donkey years, so we felt that that's an area that was ripe for some kind of picking. We did see that as low hanging fruit. The lowering the threshold in terms of the electricity bill before you pay GST, again we did not a scientific survey, but we did an unscientific sampling and we found that poor people don't pay electricity bills of over 100 dollars. So when we lower the threshold to 100, we didn't think we'd be hurting poor people. Remember that their bills are lower as a consequence of the fact that electricity rates have been coming down."
"This is the sort of thing we try to do. Look, the departure tax on non-Belizeans only by air. We spoke to the BTB, they thought that the industry could absorb it. The stamp duty increase on the purchase of foreign exchange permits. Poor people don't purchase foreign exchange permits."
"We thought about this thing long and hard, there is no doubt that we are increasing taxes, but we have tried to pick our spots. The one that of course I regret the most is fuel. But again, you will see that notwithstanding the pact with OPEQ, share production is on the increase and so prices are coming down. So we though again, that people would be able to absorb this. We did the very best we could."
Jules Vasquez, 7News
"Environmental tax?"
Rt. Hon. Dean Barrow, Prime Minister
"That one, because the current environmental tax rate is what 2%? So you raise it 1%. Again, it cast a wide net, but it's not toxic like GST."
"We are absolutely certain that raising the taxes as we do this year will mean not having to raise taxes again next year for sure. It's a matter now of together with the growth in the economy that we expect preserving those gains, ensuring that we really grind down in terms of the expenditure cutting, so that we can make next fiscal year the 2% primary surplus without touching taxes again."
Jules Vasquez, 7News
"All these tax measures which are sure to have an inflationary effect. Is it sort of like paying for the hangover after the spending spree?"
Rt. Hon. Dean Barrow, Prime Minister
"No. All sort of things went wrong as you know, in terms of the productive sector in particular and unfortunately again, in terms of needing money also to service the debt. There is the BTL huge award which in the long run I am absolutely convinced will more than pay for itself, but in the short run there is a need to find that sort of additional financing."
"I don't regret for one minute the spending of the Petrocaribe funds. I think the infrastructure and social programs that those monies funded were well worth funding."
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