Belize Government Presents 2006-2007 Budget

Posted By: Marty

Belize Government Presents 2006-2007 Budget - 03/18/06 07:09 PM

Belize Government Presents 2006-2007 Budget
Mar 18, 09:32 AM

Text of report by Caribbean Media Corporation news agency website

Belmopan, Belize: The Belize government Friday [17 March] presented a 1.2bn-BZE- [Belizean] dollar (646.8m US dollars) tax- free budget to parliament predicated on the basis that Gross Domestic Product (GDP) would grow in real terms by almost 3 per cent in 2006.

Finance Minister Said Musa said that the budget proposals would lay emphasis on health, education and poverty alleviation and his administration would continue to exercise control over the expansion of the public service.

"The budget is predicated on the basis that GDP will grow in real terms by between 2.5 per cent to 2.8 per cent in calendar year 2006. The Central Statistics Office (CSO) has confirmed that it estimates GDP to have totalled 2.214bn BZE dollars (1.02bn US dollars) in current year prices in calendar year 2005".

Musa, who is also Prime Minister, said that based on projections given by the CSO, he anticipates economic growth "at current market prices of 7.2 per cent".

"The budget presumes that economic growth, as indicated by expansion in GDP in current market prices, would naturally produce around 7 per cent growth in revenue collections. In addition, there should be some improvements in revenue administration which would add to total revenue collections. "

Musa said the repeal of the sales tax with effect from July 1, 2006 and the introduction of the general sales tax from that date is conservatively estimated to be revenue neutral, adding "there is no new revenue measure in the 2006-2007 budget".

But he said emphasis would continue to be placed on expenditure control in order to reduce the overall deficit.

"These budget proposals also seek to make further improvements in the classification of financial transactions. In the budget for the fiscal year 2005/2006, the Capital III account was thoroughly reviewed and projects and activities which were not capital investment projects financed from foreign resources were re- classified as either Capital II or recurrent expenditure in keeping with the international standards of classification as set out in the Government Finance Statistics [GFS] manual."

"In the budget proposals for the upcoming year, the Capital II account has been reviewed and activities that are wholly recurrent in nature have been shifted into the recurrent expenditure budget."

Musa said that while this may make it more difficult to compare the performance of the recurrent and capital budgets during the upcoming budget year with previous years, it would have no effect on either the primary balance or the overall balance.

According to the Finance Minister, the draft estimates of revenue and expenditure for fiscal year 2006/2007 propose total revenue and grants of 598.6m BZE dollars (305.7 m US dollars), while the draft estimates for total expenditure is 667.9m BZE dollars (341.09m US dollars).

Musa said the overall deficit of 69.3n BZE dollars (35.3m US dollars) would be equivalent to 2.9 per cent of the GDP.

"Given the success of the effort to reduce the overall deficit in fiscal year 2005/2006 and continuing commitment to achieve medium term fiscal sustainability, the effort to bring the overall deficit to below three per cent of GDP is expected to be successful in the upcoming fiscal year. Indeed, it is absolutely important that this target be achieved in the upcoming fiscal year," Musa told legislators.

Musa said that taxes on international trade and transactions are expected to total 176.5m BZE dollars (90.1m US dollars) in 2005/ 2006 and are proposed to total $170.4 million (US$87.02 million) in 2006/2007.

"Lest there be any confusion, the reason for this reduction is a reclassification of excise duties from "taxes on international trade and transactions" to "taxes on goods, transaction and services" to reflect the fact that excise duties are not charged on imports or exports."

He said if excise duties were included in the category of taxes as previously classified, the expected growth in "taxes on international trade and transactions" would be about 10 per cent in the upcoming fiscal year.

"This budget is not just about revenue and expenditure. It is about making hard choices, defining priorities, charting a new way forward," he said.

He told legislators that the measures outlined in the budget "reflect a decisive change in the policies of this Government from grandiose projects to programmes that directly benefit the majority of people with a renewed commitment to policies that combine economic efficiency with social justice and greater equity".

"The budget proposals provide greater opportunities for Belizeans to acquire the skills and education they need to make the most of their lives. Quality, affordable health care, spreading the benefits of land ownership and better housing conditions, while stimulating job creation and self-employment through micro-enterprises, are central to improving the quality of life, safety and security for all."

Musa said he was convinced that "with this budget we are taking the first step towards creating a new social, economic and moral environment that will provide our future generations with the opportunity to live more decent and productive lives".
Posted By: Chris

Re: Belize Government Presents 2006-2007 Budget - 03/25/06 03:55 PM

(A repeat of a post on a related thread).

If the government really talked to the private sector and implemented ideas from there I think they could get the deficit zeroed out quickly and get the Belize house in order. A few suggestions:

1. Don't make the change from Sales Tax to GST. The government can't audit this properly. It's too complicated. There will be too much cheating and revenues will fall.

2. Make ALL businesses and self-employed people (including salespeople who make a living off commissions) register for Sales Tax no matter how much they gross a month. Currently we have this "get out" clause which means that any business or self employed person who says they're grossing under $4500.00BZE per month doesn't have to register to collect and pay Sales Tax. This rule is being carried over to the replacement GST. It's daft. I know for a fact that there are businesses and persons out there who gross TEN TIMES that and don't register. If they don't register they don't pay. The rest of us do.

3. Drop the Stamp Duty on Real Estate transfers to 5% across the board. Right now it's 15%. No-one wants to pay that. An example of how this hurts the government: A friend and I were going to buy 2.5 acres of land a couple of miles north of the bridge. He was the "money guy" and I was the "ideas guy." We were going to build 22 affordable new homes. We dumped the plan. We didn't feel comfortable about the chances of buyers wanting to pay GST at 10% and Real Estate stamp duty at 15% on their new homes. I worked out how much tax revenue the government lost becuase of this. $1.2M BZE. And that's just two guys and a little building project.

I've heard this over and over and over. New developments will simply not get started. The government will lose hundreds of millions and employment in the construction sector will be much reduced.

Construction workers have a lot of energy to expend each day. I'm not sure how they would respond if masses of them lost their jobs.

There is not one single example of an economy in crisis being turned around by tax increases but there are MANY examples of tax reductions stimulating growth and resulting in tax revenue increases.
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