Aug 2016 Financial News

Barbados Government Nudges Banks With Increased Tax

Aug 22, 2016

BRIDGETOWN, Barbados, Saturday August 20, 2016 – Minister of Finance Chris Sinckler has announced an increase in a tax on bank assets, on the heels of banking institutions not passing on to customers the benefits of the elimination of a minimum interest rate.

Sinckler said the 0.15 per cent increase in the Bank Asset Tax – up from 0.2 per cent to 0.35 per cent – is expected to raise an additional BDS$14.3 million (US$7.15 million) in revenue.

Delivering the 2016 Budget this week, Sinckler complained that although the April 1, 2015 removal of the minimum 2.5 per cent interest rate by the Central Bank of Barbados was intended to ultimately benefit consumers, that had not happened.

“It was hoped that by freeing banks of this requirement, that as banking institutions received the benefits of a lesser cost burden at this end, it would have fed through for a faster and deeper benefit for consumers of banking services in many other critical portfolios,” the minister said.

“To date, however, I must confess that like the average Barbadian, I am particularly unimpressed with the efforts made by the banks in this regard. As such, and as a little reminder to them of the need to share their new found and much appreciated benefits from the liberalization of the minimum savings rate, I have decided to use a little more concrete persuasion to nudge them along in the desired direction,” he said.

The increase in the Bank Asset Tax took effect immediately, with the assessment for the assets starting from April 1, 2016.

“The expected intake from the tax for a full financial year is estimated to be $33.3 million using the 2015 asset base of the banking system,” Sinckler said.

President of the Barbados Economic Society (BES) Jeremy Stephen has warned that customers could end up hurting more as a result of the tax increase.

“Banks are not in the business of absorbing taxes, so more than likely this will be passed on to consumers, and as such you can expect even further interest rate cuts, unless consumers decide to move their money out of that liquid banking system and into say, Government debt, which is really what I believe is the intent here,” he told online newspaper Barbados TODAY.

And President of the Barbados Bankers’ Association (BBA) David Noel has called for the tax to be shared equitably across the entire financial sector.

Source:
Caribbean360|
Saturday August 20, 2016

http://www.caribbean360.com/business/barbados-government-nudges-bank-increased-tax