(BARBADOS TODAY) – Barbados and other Caribbean countries are losing millions of dollars every year due to a number of concessions being used to lure investors to their shores, according to former Jamaican prime minister Bruce Golding.
Golding has described the practice as a “serious danger” to economies, pointing out that it was almost impossible to wean some businesses off those concessions.
He said tax incentives should not be to the detriment of the country’s economy, and the process should be transparent, while suggesting that necessary changes should be made over time.
“We have some incentives that were put in place from the 1960s when the environment was different. We find that when we give, it is almost impossible to wean the beneficiaries off. So I think a government must have the flexibility to provide incentives where it is important for growth, but . . . it must also be contained so that it doesn’t become a major source of revenue loss,” he said.
During a discussion on Fiscal Policy and Political Cycles during the 2017 International Monetary Fund (IMF) High Level Caribbean Forum at the Pegasus Hotel in Kingston, Jamaica, it was suggested that some political parties would “do whatever it takes” to win elections, including entering into sweetheart deals with potential investors.
Golding, who served as prime minister of Jamaica from 2007 to 2011, proposed that tourism dependent economies should consider publishing a list of all waivers granted by government.
“What we have introduced here in Jamaica is to make it accessible, so that I think it is every month the Minister of Finance has to publish a list of all the waivers they have granted in the course of that month . . . . Certainly in a country that is dependent on tourism, certainly I think we have to recognize there is a need for government to do that,” Golding said in response to a concern raised by one of the participants.
With many regional economies facing serious fiscal problems and stagnant growth, the issue of tax incentives was placed on the table during the high level meeting as participants explored areas Caribbean governments must address.
Respective governments here have been accused of providing too many concessions, especially to the tourism industry, and entering too many secret deals.
One of the most recent was a deal to grant extensive concessions to the international hotel chain, Sandals, which began operations here in 2013 at the former Almond Casuarina Hotel in Dover, Christ Church.
The Gordon Butch Stewart-led chain was granted a 25-year tax holiday that included a waiver on all import duties, taxes, imports and levies on capital goods such as building materials, as well as food, alcohol and beverages. The waiver also extends to duties on the importation of motor vehicles and personal and household effects for senior hotel staff and non-Barbadian workers.
At the end of the 25-year tax holiday the rate on concessions will be cut by 50 per cent for an additional 15 years.
The deal was criticized by the IMF, retired chartered accountant Peter Boos, and former Prime Minister Owen Arthur who said the tax concessions were hurting the island’s dwindling finances.
Arthur had also accused Government of setting “an extraordinary precedent by extending complete duty and tax free status to Sandals for 40 years, with the intention of making such a status available to other enterprises in our main sector – tourism”.
However, in a stinging rebuke, Minister of Finance Chris Sinckler had accused the former Barbados leader of having a “road to Damascus experience” since he had offered generous concessions on several tourism projects while in office.
However, while accepting that Barbados had to be strategic about how and where it gave concessions, Sinckler had also warned that Caribbean countries, which were being pitted against each other by investors, were at risk of being left behind, “if you don’t join the party”.
During yesterday’s discussion in Jamaica, Bharrat Jagdeo, the former Guyana president, said concessions should be offered in a measured manner.
He expressed a view similar to that of Sinckler, that potential investors would simply move to willing countries should they be refused the concessions they were demanding from particular governments.
“You can’t be competitive any longer because you now lost the investment because another country is willing to give that [concession], and it is not revenue you are giving up now, it is future revenue. You are not giving up taxes, you are giving up future revenue to the treasury. But the trade-off is jobs and growth,” he said, adding that it was difficult to find the right balance.
“I agree that is must be monitored carefully and there must be transparency, but not to take away these tools,” Jagdeo added.