A five person IMF staff team led by senior analyst Bernhard Fritz Krackow visited Belize from October 26th to November 4th and in those two weeks, compiled a 20 page report of recommendations and analyses. Tonight 7NEWS has obtained that report and we can tell you that it paints a dire and urgent picture.
First, it shows a massive recurrent deficit of $161 million in the last fiscal year, and projects a $98 million deficit for this year; figures that are far off from projected and approved budget numbers. Those deficits led to an 8% percent overall deficit for last year, and a projected 4.7% deficit for this year. But that vastly improved outlook for this year is based on the IMF's belief that government will implement major tax increases almost immediately.
How major and how soon? Well government still has to make the decision, but the IMF is recommending a steep increase in taxes across the board, commencing December 1st. First, the IMF recommends that sales tax be increased 3 points to 12%, and, further, that sales tax be tacked on to residential electricity bills which would represent a 3% increase in your light bill. Second, the IMF recommends that government increase the excise tax on beer by 25% percent from $1.80 to $6.00 dollars a gallon - a proposal that Belikin owner and PUP Senator Barry Bowen is likely not to view favorably. The IMF would also wish an increase in the excise on alcohol, from $30 to $58 a gallon, and an increase on the tobacco excise from $4 to $8 per carton. And while those hundred percent tax hikes would affect sin, the sinless soft drink would also be tacked with a nearly 100% increase in excise.
Under the IMF revenue regime, business tax would also be increased, doubled for professionals and marginally increased for businesses; that is, all businesses except one. By the IMF's proposal, BTL would pay 6% more tax on its gross, increasing form 19% to 25%.
And while BTL would be feeling the pinch, so would regular workers, who would see the tax threshold lowered from $20,000 annually to $15,000 - meaning that all those making more than $15,000 a year would start to pay tax.
The recommendations, and there are more than 30 of them are, again suggested for implementation on December the first. By the IMF's projection, the revenue measures alone would earn the government just under 1% percent of GDP in the current fiscal year, or about 20 million dollars more in just four months. The IMF checklist also recommends a wage freeze, a cutback on concessions and closing down of the cambios.
All this is presently before the government, and we stress GOB is not committed to follow the letter of the recommendations, in fact, it is free to digress. But it does so at its own peril because of a burgeoning recurrent crisis, which will force government to move decisively at some point and the conventional wisdom is that the longer it takes to implement revenue measures, the more difficult the decisions become. For its part, government has indicated that it may wait until January to decide what measures must be taken.
At a Glance: the IMF Recommends...
- Increase sales tax to 12%
- Apply sales tax to residential light bills
- Increase excise tax on beer from $1.80 per gallon to $6.00 per gallon
- Increase excise tax on alcohol from $30 to $58 per gallon
- Increase excise on soft drinks from $0.0325 per bottle to 0.06 per bottle
- Lower the threshold on income tax from $20,000 to $15,000
- Raise business tax to a uniform 1.5%
- Raise business tax on BTL from 19 to 25