Government’s Financial Statements and Budgetary Proposals were presented recently to the usual anticipation in the private sector and amongst interested stakeholders. Due to the wide-ranging appeal to several interest groups, business leaders, civil society, financial planners and even academia, waited with bated breath to hear what provisions would be presented to address the concerns of their constituents.
Traditionally, the Budget presentation will align with the administration’s vision for the country’s growth and development and represent the policy and/or fiscal solutions needed to enable the economy and society to realise the goals and objectives of this vision.
The 2025 Budget covered a myriad of issues to ensure a “Sustainable, Resilient & Inclusive Society”. The thematic areas discussed were Resilience Measures, Growth Measures, Revenue Efficiency Measures and Well-being Measures.
The presentation this year was arguably focused on social support. Advocates for men’s and women’s rights, health activists, and trade union leaders can all feel some sense of vindication for their tireless lobbying for improvements for their respective sectors. People with disabilities, homeowners, those in foster care, and pensioners were among many in the social sector that received notable incentives this year.
Deloitte in their overview, opined that the broader financial sector stood to gain from the Mortgage Insurance Act, which offers tax reductions on profits from mortgages issued under the Act. Mortgages valued below $250k are subject to an even lower tax rate of four per cent.
This initiative supports social cohesion by fostering economic development and addressing income inequality. Individuals will gain better access to credit and investment opportunities. In particular, lower-income households are expected to experience easier and more affordable access to mortgages, driving increased investment in real estate.
Not to be left out are credit unions that have been given a boost to their investment strategies. These indigenous financial institutions will now be able to contribute to productive endeavors such as tourism projects, real estate and renewable energy, further enfranchising their members and contributing to the overall economy. They will be able to invest up to 25 per cent of their assets in the aforementioned areas. Additionally, the long-awaited deposit insurance scheme may become a reality in the next fiscal year.
The let down was glaring for business. Some may retort that prior budget presentations introduced measures to support the facilitation of business and need time to develop due to the medium-to-long-term nature of the provisions. While some announcements like the incentive for businesses to digitise their operations have yet to be put in place, the annual Budget exercise must consider the exigencies of the moment and keep pace with what is needed to foster an enabling business environment. At a time when a new global order is emerging, the cost of business continues to skyrocket and uncertainty prevails in the future relationship with traditional trading partners, nothing was offered in the Budget to address these issues. The business community cannot wait for March 2026 to have a discussion on the above pressing matters, some of which are existential threats.
The obvious positives for business include the reduction in water rates for registered farmers, a decrease in the regional travel tax and the change in permit requirements for tourists wishing to rent vehicles.
It is anticipated that those in the agricultural sector will be further incentivised to move with dispatch to shore up our food security strategies and reduce the food import bill. The tax on travel appears for inbound travel to encourage more visitors to the island for entertainment and vacation activity. Given the trade surplus that Barbados has enjoyed with the Organisation of Eastern Caribbean States, a reduction in the travel tax on outbound travel should also be considered.
While car rental businesses welcomed the removal of permits for tourists, the introduction of a levy of $10 per day for those renting vehicles was not welcomed, as many locals also rented vehicles, and this represents a further burden on local customers. The latter measures were projected to raise revenue of $13 million while the removal of permits generated a loss to Government of $355k. This is not a win for the car rental sector.
Two notable measures were appreciated for their intention to help build business resilience – the introduction of a threshold of up to $50 000 for businesses with annual income not exceeding $500 000 to benefit from the Resilience and Regeneration Fund; and the two-year grace period for existing businesses to retrofit their operations with potable water storage, back-up electrical generation and gas storage. Appreciatively, this may take more than two years for the thousands of small and medium enterprises to comply with this provision.
The assessment by PwC described the tax exemptions for meal allowances in the hospitality industry as likely to encourage businesses to provide these benefits to lower-income employees, boosting employee satisfaction. On the other hand, the anticipated increase in the national minimum wage, as decided by the Minimum Wage Board, will particularly impact SMEs that may not have planned additional wage expenses. The extent of this impact will depend on the review and adjustment of the current minimum wage rates.
The success of the measures will depend on careful management of fiscal resources, effective implementation, and continuous monitoring to ensure that the expected benefits are realised. As opined by Deloitte, the government’s ability to balance immediate needs with long-term strategic investments will determine the overall success of these initiatives. A value-added feature worthy of consideration going forward is to provide an update on the performance and/or status of prior measures to allow some level of monitoring and measurement of the proposals and their impact on the economy and society.
The Small Business Association of Barbados (www.sba.bb) is the non-profit representative body for micro, small and medium enterprises (MSMEs).
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