Belize Budget Aims To Balance Government's Books, by Mike Godfrey, Tax-News.com, Washington 23 March 2006

In marked contrast to 2005 when Prime Minister Said Musa's budget announcement sparked street riots, strikes and protests, the 2006 budget statement was by comparison a tame affair with little in the way of new taxes announced as the government concetrated on reining in the budget deficit.

On the revenue side, the Approved Budget provided for increases in rates of business tax, environmental tax, sales tax on luxury items and excise tax.

However, after the budget was approved, and in response to public sentiment, significant reconfigurations were made to expenditure and revenue plans. The reconfigurations included a reduction in the Recurrent Revenue target as a result of the partial roll back of approved increases in the environmental tax. The reconfigurations also included an expansion in the Recurrent Expenditure target to provide for the full implementation of the 5% and 8% salary increases to public officers and teachers.

The only major change to tax laws this year will be the elimination of the current Sales Tax and its replacement with a 10% general sales tax from July 1, 2006.

During the first quarter of the current fiscal year, Cabinet approved further adjustments to revenue and expenditure plans in order to achieve the fiscal targets. On the revenue side, excise taxes were increased.

During the first ten months of fiscal year 2005/2006, the tightening of Government’s fiscal policy was reflected in a sharp reduction in its Recurrent Deficit to $6.8 million, as compared to $42.4 million for the same period of the last fiscal year. There was also a substantial reduction in the Overall Deficit from $127.6 million for the first 10 months of last fiscal year to $65.1 million for the same period this year.

The Central Statistical Office [CSO] estimates that real growth in GDP decelerated from 4.6% in 2004 to 3.1% in 2005, which, according to Musa "is more than commendable" in global terms.

Said, who also holds the Finance portfolio, explained that the economic slowdown reflects the impact of tighter fiscal and monetary policies that were implemented in 2005 to dampen domestic consumption so as to improve the balance of payments.

In his concluding remarks, Musa suggested that: "This budget is not just about revenue and expenditure. It is about making hard choices, defining priorities, charting a new way forward."

The 2005 budget, which proposed a series of tax hikes on businesses, banks, real estate agents, casinos and professionals, in addition to increases in environmental taxes and sales tax on luxury items prompted the 200 members of the Belize Chamber of Commerce to vote in favour of a two-day strike in January of that year. The strike was supported by other businesses and public workers, leaving Belize City without water.

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