Reprinted from Caribbean Net News
caribbeannetnews.com

Barbados government rejects IMF advice to increase VAT

Monday, September 18, 2006

by: Dawne Bennett
Caribbean Net News Barbados Correspondent
Email: dawne@caribbeannetnews.com

BRIDGETOWN, Barbados: The International Monetary Fund (IMF) has advised Barbados to increase VAT. But the government has rejected that advice, saying that such a move would cause undue hardship for Barbadians.

In recommendations it made following the 2006 Article IV Consultation with Barbados, the IMF also called for government to review rates charged for public services to help consolidate their finances and pass on any increases in oil prices directly to consumers.

While giving kudos for the strong economic growth and positive outlook for continued economic expansion in Barbados, the Washington-based institution said it was concerned that "significant macroeconomic imbalances have emerged, in particular an accelerating inflation and a large external current account deficit".

It said measures need to be taken to avoid overheating of the economy and devaluation of the Barbados dollar.

Among the other recommendations coming out of the consultation which was concluded early last month, are the curbing of extra budgetary expenditures or public-private partnership projects that add stimulus to an already buoyant private sector; and an increase in 15 per cent value-added tax revenue in anticipation of the removal of the import tariff surcharge.

But government has sounded a strong no to the latter suggestion. Minister of Economic Affairs and Economic Development, Mia Mottley noted that the hike was suggested by the IMF three years ago and was rejected and government's position has not changed.

"We did not raise VAT then and we are not going to do it now," she said. "Government is satisfied that the process that we are engaged in is one that keeps people at the centre of our development process while at the same time not putting at risk the health of the Barbadian economy."

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