PM: hard choices = tax increases

Earlier in this newscast, you saw the emotional and dramatic scenes that unfolded outside the National Assembly during the Prime Minister’s budget presentation. But as News 5’s Patrick Jones reports, inside the House of Representatives, the atmosphere was eerily somber.

Said Musa
?We have hard choices to make here. After having cut the projected expenditure to the bone, consistent with our social and economic priorities and taking into account the increase in pay to public officers, we faced the need to raise revenue to ensure that we could bring the deficit to below three percent of GDP.?

Patrick Jones, Reporting
That set the tone for what was today the most hard line budget to be presented to the House of Representatives in six years. Prime Minister Said Musa says the major thrust of the 2005/2006 budget will be on health, education and poverty alleviation.

Said Musa
?Total proposed expenditure of six hundred and forty point two (640.2) million, includes four hundred and ninety-three point seven (493.7) million in recurrent expenditure and one hundred and forty-six point five (146.5) million in capital expenditure. Of the total recurrent expenditure, two hundred and twenty-five (225)million is for personal emoluments, a hundred and eighteen point four (118.4) million is for debt serving. Thirty-four point six (34.6) million is for pension and gratuities and a hundred and fifteen point eight (115.8) million is for goods and service. Total outlay on capital two projects is proposed at eighty point (80.8) million and on capital three at sixty-five point eight (65.8) million dollars. In addition a total of one hundred point six (100.6) million dollars is proposed to cover amortization which comes due in 2005/2006.?

In short, government proposes to spend six hundred and forty (640)million dollars, the only problem is that it only expects to earn, including grants, a total of five hundred and seventy four (574) million dollars. That leaves an overall deficit of sixty six (66) million dollars or two point eight (2.8) percent of GDP.

Said Musa
?Regrettable as it is and as much as it goes against the grain of a PUP Government that is noted for having significantly reduced taxes over the past six years, we have to face the hard reality; new revenue measures are necessary.?

To make up for the shortfall, Musa outlined a series of dramatic tax increases that will bring in millions to the Treasury. And while there will be no increase in the general sales tax Y

Said Musa
?There is the other sales tax in the higher bracket of thirteen (13) percent for a very limited number of goods, which impact mostly on those who are better able to afford such items which we propose to raise to fourteen (14) percent. We will also move some goods that are clearly luxury items, such as private luxury boats, into this bracket. Let those who can best afford to pay taxes, bear their appropriate share of the burden. For this very reason we are proposing an increase in various business taxes. These are taxes that should be absorbed by the business people and not passed on to the consumer and the relevant government agencies and consumer activists will I am sure be vigilant to ensure that this is the case and that they will expose any attempt by business to pass this tax on to the unsuspecting consumer. We therefore propose to raise trade and other business taxes that are presently at point seven five (.75) percent, one point two five (1.25) percent and one point five (1.5) percent to a uniformed one point seven five (1.75) percent, except for radio, television and newspapers for which there will be no tax increase. Business tax on professionals from four (4) to six (6) percent. Tax on banks under the banks and financial institutions act from ten to fifteen (10-15) percent. Tax on banks in the PIC group of companies to eight (8) percent. Business tax on real estate agents from four to fifteen (4-15 )percent on their commissions, business tax on gross casino earnings from four to fifteen (4-15) percent. However in order to protect small and medium enterprises we propose to raise the threshold for business taxable under the business tax from fifty-four (54,000) thousand to seventy-five (75,000) thousand dollars. Businesses that gross less than seventy-five (75,000) thousand dollars or less shall no longer be required to pay business tax. Small businesses provide significant employment, and encouraging small business to be established and to grow is a key aspect of our struggle against poverty.?

Environmental tax goes from one to three (1-3) percent, but the exemption on locally produced goods remain in effect. The tax on firearms has been tripled, except shotguns used by farmers, and then the so called sin taxes got whopped by the Musa deficit busting machine.

Said Musa
?We propose to double the excise on alcohol from thirty to sixty (30-60) per gallon, to increase the excise on tobacco from four to twelve (4-12) per carton, double the excise on soft drinks and to increase the excise on beer by one hundred percent from one dollar eighty to three dollars and sixty ($1.80 to $3.60) per gallon. Of course in order to compensate for the increases in excise and maintain the competitiveness of our local produce we also propose to raise revenue replacement duties on imported beer, soft drink, alcohol and tobacco. With these new revenue measures and taking into account incremental increases in revenue due to economic growth, estimates of revenue and grants for fiscals 2005/2006 are set at a total of five hundred and seventy-four point two (574.2) million of which five hundred and forty-three point three (543.3) is recurrent revenues, thirteen point five (13.5) million is capital revenues and fourteen point five (14.5) is grant funding, largely for capital the projects.?

As for public officers and teachers, the Prime Minster says he has all intentions of honouring the last part of an agreement signed in February 2003 to raise salaries of junior and senior officers, but not right now.

Said Musa
?We intend to honour the final increase under this agreement, but we ask the unions to joint national effort or working to reduce the national deficit and focus the resources on the priorities of health, education and poverty alleviation. We think this is a very reasonable request considering the benefits that have been enjoyed over the past six years. After consultation with the respective unions, therefore, we propose that the agreed increases in salaries for all public officers and increase for pensioners be staggered over the next three years beginning July 2005. And with due regard to the interest of all Belizeans and especially of the working poor we must insist that the system of meritocracy contemplated by the collective bargaining agreement be expeditiously implemented so that any increase in salary is based on proven performance in providing better service to the people.?

On the three major areas of the budget, the PM said government intends to spend sixty-one point (61.6) million dollars on health, ten million dollars more than last year; on education, GOB will spend a hundred and fifty two million dollars, which is twenty four million more than last year. This includes increased allocations for pre schools, sixty-seven (67) million dollars for primary schools and thirty (30) million to secondary schools. On poverty alleviation, government proposes to spend over fifteen million dollars through the Social Investment Fund obtained through loans, and grants from various agencies including the Commonwealth Debt Initiative. Patrick Jones, for News 5.

The Prime Minister has set Friday January twenty-first as the date for the Budget debate, which is expected to start with a response from Leader of the Opposition Dean Barrow.