$70 million, that's the projected budgetary shortfall that government has to make up by the end of the year. That's about 6% of GDP, no small feat in a public sector driven economy whose engine has just about sputtered out. Conventional wisdom is that the only way government can come up with the money is to sharply increase tax revenue, and the rumor has been that sales tax will be ratcheted up three points to 12%.
It may be political anathema, but it's certainly got the endorsement of the IMF, which recommended increases in sales and excise tax and a wage freeze. The IMF also recommended a tight money policy which is already in effect. So will GOB follow through with the sales tax hike? We asked Minister of State in the Ministry of Finance Joe Coye just that today and he said, "It depends."
Hon. Joe Coye, Minister of State in Finance
“I cannot say at this stage.”
Keith Swift,
Is it being considered?
Hon. Joe Coye,
“Well what is being considered is clearly a formula to ensure that we can reduce the fiscal deficit; that’s fact. There are certain targets that we have to set to reduce the fiscal deficit to of course bring the debt into good management, sound management, and affordable management which of course then will help to take up reserve. Those are in essence what we will have to do.”
Keith Swift,
So you cannot tell people at home tonight whether or not in the next couple months they will paying more in taxes?
Hon. Joe Coye,
“Not at this stage, no. Our first approach clearly will have to be how well we can improve the tax administration to bring in the revenue that should be brought in. Secondly we need to look at how we can carry out cost containment and wage reduction within the public sector. And of course with those measures we are confident that in itself will help to reduce the fiscal deficit. But at the end of the day we have to set targets and those targets we have to achieve if we are going to achieve the short term strategy.”