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Budget pressure for small businesses
Minimum wage earners and small business owners will be the biggest losers as a result of fiscal measures in the 2015-2016 budget presented by Finance Minister Colm Imbert.
That’s the view of political leader of the Movement for Social Justice (MSJ) David Abdulah, who said he is concerned about higher transportation costs following the minister’s announcement of increases in prices for super premium and diesel fuel.
Abdulah, who is also leader of the Federation of Independent Trade Union (Fitun), said while the ceiling on personal allowances has increased from $60,000 to $72,000 a year in an effort to give some categories of workers more disposable income, the measure might have the reverse effect.
He said: “I would guess that 25 per cent of the population is probably not earning $5,000 a month. Therefore for them, there is no additional benefit, because they are not earning more than $5,000 and therefore would not get the extra $250 a month.
“Of course, everybody else would benefit as you go higher up the income level.
“The minimum wage earners, yes, got an increase in the minimum wage earlier this year, but they wouldn’t get any additional tax break.”
Abdulah said the increase in the National Insurance Scheme (NIS) means that people at the higher income will be paying more.
He also expects the reduction in value added tax (VAT) to 12.5 per cent and widening the list of items to which it will be applied means a higher cost of living and new pressures for minimum wages earners.
Meanwhile, moving the small business threshold from $360,000 to $500,000, meant this category of entrepreneurs, whose sales are between $360,000 and $500,000, will not be able to claim VAT.
“So they will pay VAT on electricity bills, telephone bills and some of the items they may buy as part of their process of manufacturing...but they will not be able to claim that cost of VAT if their sales are now below $500,000.
“That, together with the business levy and the Green Fund is going to increase the cost for a number of small business people,” Abdulah said.
He also expressed doubt that the Finance Minister will be able to raise $5.4 billion from VAT revenue and wondered how the gap between $63 billion and $40 billion will be closed.
In addition, while revenue from energy companies to the Treasury was estimated at $18.5 billion just two years ago, deposits this year were estimated at to be $13.1 billion less.
“Unless oil prices go back up to USS100, that gap can’t be closed, so we have to live with not having $13 billion dollars in oil revenue. How do we compensate for that? That requires a serious national discussion.
“The other thing that we have to worry about is out foreign exchange.
“The oil and gas industry together contributed 85 per cent of foreign exchange earnings. If therefore, oil prices or gas prices are down, ammonia prices are down, methanol prices are down and output of those commodities are down, we earn less foreign exchange,” he said.
Abdulah added: “If we run out of foreign exchange, we are going to be in serious trouble. We need a national discussion on how we deal with that.”
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