VAT are you saying?

Dr. Justin Robinson is one of UWI's economists at Cave Hill who takes opportunities to share his understanding of policy issues with a general public. He was one of three headlined presenters at the weekly Unity Bar lectures at the HQ of the Democratic Labour Party, which took place yesterday. He was due to be part of a panel made up of:
Dr. the Hon. David Estwick, Minister of Economic Affairs & Empowerment, Innovation, Trade, Industry and Commerce,
Dr. Justin Robinson, Head of Management Studies Programme, Faculty Of Social Science, and
Mr. Wilberne Persaud, Coordinator, Banking and Finance Programme, Department of Economics, Faculty of Social Sciences, UWI, Cave Hill.

They were due to discuss "Barbados' Fiscal Deficit; Causes and Possible Solutions", as noted on this blog a few days ago. Well, the audience was told that the Minister was caught in a meeting with the PM and would arrive later, which became later, which became not at all. That could be a subject all in itself, but it's Lent so let me be tolerant.

The Press were out in force and the three main dailies had pens poised, as did CBC have their camera lens trained. I'm sure that Dr. Robinson woke this morning in a state of shock that one of his answers would find him on the front pages with headlines such as 'VAT hike the way' (see Nation report). Other papers were a bit more balanced with 'VAT increase an option' (see Advocate report), or 'VAT only as last resort' (see report from Barbados Today, alongside; click to enlarge image).

In the absence of a responsible Minister, it was natural that the media would latch on to any policy proposal that was uttered. This may be an interesting blessing for the government. While some other UWI luminaries are arguing about whether they are engaged in "financial cannibalism", or whether it is only a trained economist who can "understand the gravity and implications of a fiscal crisis" (see Nation report), we have Dr. Robinson wishing that someone had read him the press equivalent of his Miranda rights: that he has the right to remain silent, and that anything the person says will be used against that person. Tax increases are always disliked. Barbados introduced VAT in 1997, and it has gradually replaced most other indirect taxes has a special dislike as it was introduced and deemed to be temporary and was supposed to usher in a lower tax bill after replacing other taxes. As with most taxes, any talk of increasing it is likely to have someone hurled into a burning cane field. Though it may be no consolation to Dr, Robinson, the IMF already had this in its stack of possible measures: 'Raise the VAT rate by 1-2 percentage points', which could reduce the fiscal deficit by ¾-1½ percent of GDP in their estimation (see 2009 Article IV consultation report).

But, now the cat is out of the bag: a trained economist in Barbados thinks that the current situation warrants some increase in taxation. I would be surprised if Clyde Mascoll does not get on to this issue, as a former Minister of State in the previous administration, who believes that raising taxes in a recession is not the thing to do, and who recently wrote 'The only way to begin a turnaround is through selective cuts in current expenditure and the major areas are wages and salaries and transfers and subsidies (see Nation report). There is never a dull moment in Barbados someone said to me, and the coming weeks promise to fulfill that sentiment.