7 News Belize

Budget Day, New Tax Measures Announced
posted (March 13, 2017)
The wait is over, tonight Belizeans know exactly what new taxes will come down on them in the new fiscal year starting in April. As we've been reporting, government has to find at least 70 million dollars in increased tax revenue and save 30 million in expenditure in the next fiscal year. That's the belt tightening they promised the Superbond creditors - to get them to agree to a refinancing. Basically, the idea is that if the bondholders have to take the pain of earning less from the Superbond, then the taxpayers and the government of Belize have to share that pain. The question tonight is how much pain will you have to take? Jules Vasquez sizes it all up in his report on today's budget presentation:...

Jules Vasquez reporting
Calling the budget "hard fought" the Prime Minister conceded that this year's balancing act isn't easy:

Rt. Hon. Dean Barrow, Prime Minister
"A financial plan for consolidation that's tailored to bolster revenue, bridle waste and protect the pro-poor and productive sector incentives."

But, it's hard to do all three at once:

Rt. Hon. Dean Barrow, Prime Minister
"Nation-building was always a task for giants. So the United Democratic Party will continue to prove that we are the titans who can more than get the job done."

So, the government is relying first on coming out of a recession with strong economic growth:

Rt. Hon. Dean Barrow, Prime Minister
"The Central Bank of Belize expects an economic recovery in 2017 with real GDP growth between 3.0 % and 3.5%. The improvement is based on an expected upturn in crop and livestock production as well as higher farmed shrimp production based on the field trials' outcome in late 2016."

But, that won't be enough: spending will be cut sharply, and revenue from taxes will also increase dramatically - but Government will not go the IMF route:

Rt. Hon. Dean Barrow, Prime Minister
"The IMF's recipe has been publicly rehearsed: raise the GST, eliminate those items, mostly basic food and medical supplies, that are zero-rated, cancel exemptions for the productive sector and raise the tax take from personal and business income."

"But we are pro-poor and pro-people. And so we reject those options as regressive and punitive to both citizens and enterprise. Instead we have come up with our own formula."

And that formula is for tax increases designed to create the least direct impact, while producing the most revenue:

Rt. Hon. Dean Barrow, Prime Minister
"Herculean efforts we now ask all our people to make as we surge our recovery and rebound."

Rt. Hon. Dean Barrow, Prime Minister
"Cabinet proposes the following limited measures:

  1. Adjust the excise levy on aerated water, beer and stout, cement and fuel to generate 0.77 percent of GDP
  2. Amend the departure fee for non-Belizeans to $40 to yield 0.30 percent of GDP
  3. Bump the environmental charge on imported goods by 1 percent producing 0.41 percent of GDP
  4. Shift the social fee on Free Zone cigarettes to 20 percent, generating 0.29 percent of GDP
  5. Lower the tax threshold for electricity consumption from $200 to $100 yielding 0.19 percent of GDP.

All those measures add up to $80.0 million dollars in taxes, or 2.2 percent of GDP. But government said the public sector is sharing the pain:

Rt. Hon. Dean Barrow, Prime Minister
"Cabinet froze non-essential goods and services expenditure for FY 2016/17. Especially on telephone and electricity consumption, fuel, rents, and medical supplies, to name a few."

"All statutory boards are hereafter required to contribute 10 percent of their 2017/18 income to the Consolidated Fund. If the expenses of these quasi government entities cannot be as vigorously policed as Ministries and Departments, then the next best alternative is to reduce their income flows."

But there's one thing that cannot be touched - those lavish raises given to teachers and the public service:

Rt. Hon. Dean Barrow, Prime Minister
"Even with the fiscal challenges we face, there are certain commitments that we will not retreat from, particularly the commitment to implement the third and final stage of the Salary Adjustment Package for the Public Servants and Teachers."

Rt. Hon. Dean Barrow, Prime Minister
"The increase of an across- the-board of 3.0% for all public officers, police (including the BDF and Coast Guard), teachers, and pensioners, will require an additional $15 million in resources. But we are determined to keep our word even though to do so means having to forgo other potential expenditures in goods and services. It bears repeating again that over the last four years public officers and teachers have received an aggregate increase of 25% in wages and salaries, costing the Government over $90 million."

In fact, 60 cents of every dollar government collects goes directly to wages, pensions and benefits for 14,000 public servants, but Government says that politically, it has its priorities in order:

Rt. Hon. Dean Barrow, Prime Minister
"Of course, what I, my Cabinet and my Party are most determined to preserve, is the goodwill of the people. That is why, as this budget demonstrates and consolidation notwithstanding, we will continue to protect the poor."

In all, the budget is a balancing act - but its left to be seen how deeply the tax increases will affect the spending public.

Rt. Hon. Dean Barrow, Prime Minister
"Today's financial report and plan is neither pie in the sky nor all sweetness and light. But it assuredly gives the lie to all those naysayers, the Cassandras who predicted, and indeed wished for, doom and gloom. For there is no hobbling of business; no retreat from the gains of labour; no crippling of the middle class; no gutting of the masses."

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