NSRL – the last straw MBA/MBM

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Daily Nation (Barbados) - - Comment -

DUR­ING SEPTEM­BER, Bar­ba­di­ans es­caped the fury of the weather sys­tems, for the most part, but en­coun­tered the force of the Na­tional So­cial Re­spon­si­bil­ity Levy (NSRL). The cost of liv­ing sky­rock­eted as the winds from the levy in­creased five-fold from two to ten per cent. How­ever, Min­is­ter of Fi­nance Christo­pher Sinck­ler and the Prime Min­is­ter were do­ing their best to spin the hell out of the levy.

Notwith­stand­ing the un­der­per­for­mance of the rev­enue from the levy, the in­sen­si­tive Fre­un­del Stu­art ad­min­is­tra­tion is now busy try­ing to put the best po­lit­i­cal face on a very poor tax pol­icy. The in­sen­si­tiv­ity comes in the form of the Min­is­ter of Fi­nance’s boast of the amount col­lected in the three-month pe­riod. He speaks as if the rev­enue came from a newly-planted tree and not the pock­ets of suf­fer­ing Bar­ba­di­ans.

The ill-con­ceived NSRL is be­ing used as a po­lit­i­cal ploy. The sig­nif­i­cant rise in the cost of liv­ing caused by it is be­ing blamed on price-goug­ing by the busi­nesses. The un­der­per­for­mance is be­ing pro­moted as over­per­for­mance to jus­tify grant­ing an in­crease in pay, in what­ever form, to pub­lic ser­vants ahead of the up­com­ing event. By now, Bar­ba­di­ans are see­ing through the ig­no­rance.

The spin­ning of the levy’s per­for­mance was ac­com­pa­nied by a new kind of eco­nom­ics. Mr Sinck­ler suggested that the in­creas­ing tax col­lec­tion would help to grow the econ­omy. This is con­sis­tent with a think­ing that says the best way to grow the Bar­ba­dos econ­omy is to re­strict con­sump­tion and in­crease pro­duc­tion.

As far back as 1776, in his clas­sic book The Wealth Of Na­tions, the fa­ther of eco­nom­ics, Adam Smith, ar­gued that “con­sump­tion is the sole end and pur­pose of pro­duc­tion”. One of the most pop­u­lar modern macro­eco­nomics text­books, writ­ten by N. Gre­gory Mankiw, uses the quo­ta­tion above to in­tro­duce the chap­ter on con­sump­tion.

To in­crease pro­duc­tion in any econ­omy, it is nec­es­sary to know that what is be­ing pro­duced will be con­sumed. There­fore, in­vestors be­gin the process of pro­duc­tion, hav­ing car­ried out the nec­es­sary work to de­ter­mine that con­sumers are will­ing to buy their new prod­ucts. It is self-ev­i­dent that pro­duc­tion that is not con­sumed is use­less.

The dan­ger with the NSRL is that it dam­ages both pro­duc­tion and con­sump­tion. This is highly un­for­tu­nate and sim­ply re­flects the ig­no­rance of the Stu­art ad­min­is­tra­tion with re­spect to tax pol­icy.

In this year’s Bud­get, the Min­is­ter of Fi­nance said: “Fol­low­ing some early im­ple­men­ta­tion chal­lenges, we are sat­is­fied that the ad­min­is­tra­tion of the Na­tional So­cial Re­spon­si­bil­ity Levy has set­tled down and, based on net col­lec­tions over the first four months of the year, is set to come close to, if not achieve, the tar­gets which we had orig­i­nally set.”

As a re­sult of the two per cent levy in 2016, the Gov­ern­ment was ex­pect­ing to raise $82.9 mil­lion for the seven-month pe­riod from Septem­ber 2016 to

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