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Barrow's slim budget and tax reforms

The delayed national budget was tabled in the House of Representatives this morning. The forty two page document delivered by the Prime Minister is themed "Exercising Discipline while Preserving Growth." On the expenditure side, the P.M. says there will be no increase over last year which means that we will generally see a continuation of projects from his last term and there is very little to celebrate. Security is outlined as a top priority and education holds its own. The Barrow administration is also continuing with its populist pro poor policies of poverty reduction and social protection. But there will be tax reform for tourism, electricity and fuel. News Five's Jose Sanchez reports.

Jose Sanchez, Reporting

At the end of April 2012, the recorded public debt stood at U.S. one billion, one hundred and eighty-two million or eighty-one percent of G.D.P. Of this stock of debt, almost half-forty-seven cents of every dollar-is the external commercial debt or Super bond. Barrow initially touted that there would be no new taxes. And though there were no new taxes, tax structures including the GST refund system and the Income and Business Tax Act were amended to suit the growing demands.

Dean Barrow

Dean Barrow

"One of the reasons we have constructed our budget with such discipline and expenditure restraint, is precisely to avoid the need for any new taxes. We have made clear our conviction that revenue raising measures, as they describe it, would in our view be anti-growth. So there will be no new taxes. However, Mr. Speaker, we will introduce a couple of administrative amendments that are aimed at improving the overall efficiency and equity of the tax system. While it has achieved the objective of completely stabilizing all taxes on fuel, we have seen unanticipated distortions in the GST refund system; and we have now received a number of requests from businesses to revert to the former regime that consisted of a combination of GST and Import Taxes. This is also made desirable by the precipitous drop in imported oil prices. We are therefore receptive to the requests and have taken the decision to reintroduce the GST on Fuel, lower Import Duty in a commensurate amount, and remove the GST Special Credit (as this would no longer be relevant)."

These measures would be introduced via a statutory instrument by the time of the next fuel shipment in July. The Income and Business Tax Act will also be amended to suit B.E.L.

Dean Barrow

"We will be introducing a bill to amend the Income and Business Tax Act to lower the rate of business tax on entities licensed to provide electricity, taking it down from six point five percent to one point seven five percent. Through this amendment, we propose to revert to the rate that was in effect prior to April 2010. This is deemed appropriate as Belize Electricity Limited, now under national ownership and management, is no longer extracting excessive profits from its operations. Rather, the people-owned B.E.L. has instead managed to lower rates across the board to Belizeans and still generate a small surplus. All this while "keeping the lights on" and saving us from the rolling blackouts that under Fortis seemed not so much a threat as a promise. The impact to revenue of this decrease is estimated to be in the region of six million dollars on an annual basis. On the other side of the coin, we anticipate this would increase the net income of B.E.L. which would therefore pass through as an increase in dividends to shareholders."

Barrow also introduced the reform of the Tourism tax sector which came after an IDB sponsored study of the industry's taxation regime.

Dean Barrow

"The idea is to increase the equity and efficiency of the taxes currently applied to this sector, and to provide incentives for further investment and growth. One key recommendation that the Government has accepted in principle and expects to adopt in the coming months, is to bring the hotel and accommodation sector wholly into the GST net while at the same time repealing the nine percent Hotel and Tourist Accommodation Taxes. This will have the effect of making hotel accommodation services fully taxable at the standard GST rate while removing the hotel tax that is being charged. We will then put in place a mechanism to transfer a portion of the revenue collected from the GST to the B.T.B. because currently they use all the nine percent of the collection of the hotel taxes. This measure will address a long-standing complaint from the hotel and tourist accommodation providers that they are unable to claim refunds for GST paid on their inputs."

For 2012/2013 the Draft Estimates in Revenue and Grants are comprised of eight hundred and nineteen point four million in Recurrent Revenue, eight point one million in Capital Revenue and thirty-five point two million in Grants. Recurrent Revenue is made up of six hundred and eighty-three point three million in Tax Revenue and one hundred and thirty-six point one million in Non-Tax Revenue. In his presentation, the P.M. said there will be no increase in real terms in the wage bill. However, Draft Estimates of Recurrent Expenditure is proposing a total of seven hundred and seventy-seven point seven million dollars in recurrent expenditure up from an outturn of seven hundred and twenty-four point five million the year before. The proposed increase of fifty-three point two million is explained as an increase in the wage bill and salary increments of public officers. Reporting for News Five, Jose Sanchez.

Channel 5


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P.U.P. not impressed with budget

John Brice�o

The Opposition side this term is robust with fifteen parliamentarians, some who made their maiden intervention today. While the budget will be debated on July twelfth and thirteenth, we got an early reaction from the Opposition side when we caught up with former Leader of the Opposition and current Orange Walk Central Area Representative John Brice�o. Brice�o shared his views on the 2012-2013 budget and he was not impressed.

John Brice�o, Area Rep., Orange Walk Central

"My immediate reaction is that obviously there is two Belize-one where the Prime Minister lives and one where the rest of us is. The Prime Minister has just described a glowing economy; that everything is so bright and beautiful in Belize when the reality is that the people are suffering, the cost of living continues to go up, high unemployment, the economy is deteriorating, there is nothing in this budget for the middle class, the same rehashed, revamped, recycled projects that he is presenting once again. So at the end of the day, when you look, and we will be studying the budget, we will see that there is not much hope for the Belizean people."

Jose Sanchez

"A lot has been said regarding the blame supposedly put on the previous P.U.P. administration for the "Superbond" as the reason why we are where we are."

John Brice�o

"Well the Prime Minister and his party have been in government since 2008; they have had ample time to address these issues. If that was a problem since 2008, why is it that they did not address or deal with that problem? The truth of the matter is that the Prime Minister has been unable to grow the economy. They promised in their first term of office that they were going to grow the economy by six percent. He is now boasting about a meager two percent growth in the economy. The Prime Minister has failed the Belizean people and that is why now he is continuously trying to recycle the same bogus blame game as usual; which he is very good at, as opposed to trying to come up with practical solutions. Solutions that are going to address the issues that are facing the Belizean people: how are we going to create more employment for the Belizean people, how is it that we are going to get this economy going, how is it that we are going to fight crime, how is it that we are going to assist the middle class that is being squashed in this economic recession."

Channel 5


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Barrow's Discipline Budget Unveiled

As a standard practice, the budget is presented before the fiscal year starts usually in February or early March. But this year is a very marked difference - elections came in March - which pushed the budget back, and back some more - all the way until today, the last working day in June.

In our 20 years of covering House meetings, it's never been presented so late. So was it worth the wait? We'll let you be the judge of that.

Jules Vasquez has the overview:...

Jules Vasquez reporting
Many things were new in the old house today - a new speaker as well as 14 new members, 11 of them first time representatives, and three of them newly returned reps.

They would have to learn quickly: The business of the day was the presentation of the national budget - reams of pages of estimates and a one hour thirty three minute, 409 page budget speech from the Prime Minister - which he made clear was about discipline not austerity:

Hon. Dean Barrow, Prime Minister
"Mr. Speaker let me pause here to say, I had a press conference some time ago and I indicated that there would be a need for discipline for expenditure restraint and somehow that was translated by the media into some suggestion that we are facing austerity and hard times. In terms of what I read out - that sounds like any austerity and hard times to you Mr. Speaker? There is a clear difference between saying that we must achieve fiscal discipline and saying that we are going to be on the rock on any kind of austerity. This is distinctly not the position, so let us clear that up once and for all."

And indeed, the budget - while not lavish in its promises does promise to maintain and expand the pro-poor programs that Barrow has pinned as the pillar principles of his government:

Hon. Dean Barrow, Prime Minister
"We will absolutely provide the resources necessary to fund the following high priority areas: Poverty Reduction and Social Protection - We will continue the uplift of the poor and the marginalized through our signature Food Pantry Program, providing basic nutritional support especially to the depressed urban areas that are currently breeding-grounds for crime and violence."

The budget shows strong government revenue performance even in lean times:

Hon. Dean Barrow, Prime Minister
"Central Government outperformed its budgeted estimates. The Government achieved a primary surplus that amounted to 2.3% of GDP, as compared to a budgeted figure of 2.2%; and posted an overall deficit of $31.7 million, the equivalent of 1.1% of GDP, as compared to a budgeted deficit of 1.6% of GDP. Mr Speaker, it is cause for celebration."

Barrow also beat his chest about sustained growth - even if it is low-level:

Hon. Dean Barrow, Prime Minister
"I count it a matter of great pride to be able to report that Belize has been, and is, doing well economically. We have been able to maintain an average annual rate of GDP growth in excess of 2% since 2008 and despite the global crisis. The GDP is now forecast to grow by 2.0% in 2012."

But that global crisis ahs hit home for consumers who witnessed and increase in inflation.

Hon. Dean Barrow, Prime Minister
"Domestic price pressures picked up slightly, underpinned by higher fuel acquisition costs, which pushed the annual average inflation rate from 0.9% to 1.5%. Except for "Household Goods and Maintenance" and "Clothing and Footwear", which recorded price declines, increases were across the board with the largest occurring in "Personal Care" and "Transportation and Communications."

And while oil prices were part of that increase when they go down in the coming year, so will government revenue which brings us back to discipline:

Hon. Dean Barrow, Prime Minister
"In the face of declining oil revenues, and in the face of burgeoning interest and amortization payments, we will clearly have to exercise a heightened level of fiscal discipline and expenditure restraint as we seek to recapture that lost, pre-1998, era of UDP debt sustainability."

"One of the reasons we have constructed our budget with such discipline and expenditure restraint, is precisely to avoid the need for any new taxes."

"Fiscal and debt sustainability has become, for this Administration, even more of a priority. And that is why we are bent on success in renegotiating the terms of the super bond."

Oh, yes, the superbond - it was mentioned five times in the budget and got more ink than any other single event:

Hon. Dean Barrow, Prime Minister
"The current interest rate on the Super bond is, in all the circumstances, obviously unsustainable. Indeed, all the elements have combined to create the Belizean equivalent of a "fiscal cliff."

"The step-up interest rate on the Super bond, now at a harrowing 8.5%, demands some BZ$93 million per year. This is in excess of 3% of GDP at a time when international interest rates are at historically low levels. The imperative for restructuring is therefore irresistible."

And while the bookish budget lacked sweep or vision - the PM did manage to pull one major project out of the bag:

Hon. Dean Barrow, Prime Minister
"Our Administration had announced, some time ago, the in-principle commitment of the Government of Mexico to finance the construction of a new basketball arena and multi-purpose facility at the current City Center location. Because Mexico has lent priority to the completion of the new bridge spanning the Rio Hondo and the related border crossing, the line of support for the Center has been delayed. But we fully expect our Mexican partners still to come through. If not, though, Government will undertake, with expected corporate support from BTL and the Social Security Board, to commence construction early next year. In this eventuality, a supplemental provision would be made in the Budget. The point is that one way or another we will get it done, the City Center Phoenix will rise, and the basketball facility it will house will be world class."

And while that is out there on the event horizon - the PM confessed that sometimes seeing the forest is difficult with so many trees in the way

Hon. Dean Barrow, Prime Minister
"The conundrum always is how to deal with the thousand myriad daily problems, while still thinking big; while still preserving and refining and renewing a comprehensive, articulate, even vaulting, vision."

"Mr. Speaker, I have tried to make clear that the UDP is about contemplation and implementation; about detail and daring; about hard slogging and sky walking."

Those airy heights were not reached today - but the hard slogging is sure ot come when the debates play out in two weeks.

The budget will be debated on July 11th, and 12th.

For those who really want to dig in, you can read the entire twelve thousand word presentation on the Government of Belize website.

Channel 7


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Chart shows Belize government expenditure 2012 breakdown.

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Comparative Analysis of 2011 vs. 2012 National Budget

The national budget for 2012-2013 was tabled in the House of Representatives last Friday; it is one of fiscal discipline says the Prime Minister. It also has a deficit of seventy-five point two million dollars. That translates into two point four percent which is the difference from total revenue of eight hundred and sixty-two million, six hundred and forty-three thousand, three hundred and sixty-six dollars and expenditure of nine hundred and thirty-seven million, eight hundred and fifty-seven thousand, three hundred and forty-seven dollars. G.D.P. is estimated at two percent. We have been crunching the numbers and tonight, we take a look at how the government ministries fared off. P.M. Dean Barrow says that the crushing crime wave is the government's number one priority. The budget for the Ministry of National Security shows an aggregate total increase of four point zero-seven million dollars to fight crime in the year ahead. The good news is that the various police administration offices in the districts got increases; in Orange Walk the increase is three hundred and twenty thousand and in Belize City, where crime and violence is in epic proportions, the increase is only two hundred and four thousand dollars over last year. But police headquarters in the nation's capital was hard hit, reducing by more than half a million dollars. Additionally, the allocation for the Belmopan police station went down by another two hundred and fifty three thousand dollars. As it relates to the forensic department, which everyone agrees needs strengthening, the budget was decreased by twenty-four thousand dollars. Also drastically reduced was the allocation for community policing, which went down by sixty-six thousand dollars while the resources for the gang suppression unit, went up fifty-five thousand dollars.

Turning to Human Development, Social Transformation and Poverty Alleviation, which is the core ministry for the pro poor policies of the government. There is an overall increase in its allocation but a number of its programmes came under the chopping block. The Youth Hostel lost ninety-six thousand dollars and the Women's Department's budget was cut by close to fifty-five thousand dollars. In education, Gwen Lizarraga High School was a huge casualty. Its budget was reduced by as much as two hundred and twelve thousand dollars while the cut at the Sadie Vernon High School is two hundred and forty eight thousand. Similarly, the Belize High School of Agriculture was also reduced by one hundred seventeen thousand dollars.

But there are some dramatic increases in other areas. Say the Ministry of Foreign Affairs; we note that the budget for the Mission to the United Nations in New York went up by a significant chunk as much as three hundred and ninety thousand dollars. In the same vein, the Embassy in San Salvador will be spending one hundred and eighteen thousand more and the Consulate in Los Angles even more by a hundred and eighty one thousand dollars and Miami, went up by close to fifty thousand dollars. We ran the numbers for the administration of justice, the judiciary's budget improved slightly overall, but the allocation for the court of appeal went down by one hundred and forty seven thousand dollars. Click here for more on the comparative analysis of 2011 vs. 2012.

Channel 5



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