Tuesday, December 31, 2013

Ramp-up campaign against value-added tax (VAT) in 2014

Anti-VAT group plans to ‘go grassroots’ in 2014

Guardian Business Reporter

Come 2014, a local advocacy group plans to ramp up its campaign against value-added tax (VAT).

Since creating Citizens for a Better Bahamas last month, its founder, Tamara Van Breugel, revealed to Guardian Business that its following is growing, with more than 1,500 contacts on its Facebook page to date.  But plans to mobilize the campaign to the streets is set begin in January, beginning with grassroots communities.

She said it is all in an effort to bring awareness to Bahamians everywhere so they can be informed about this issue that will impact the country’s economy.

“It’s been really encouraging because for the most part, we have been focusing on the social media part of our campaign,” she said.

“But we have been getting a lot of positive responses throughout the community so far and I think that a lot of people are concerned about VAT.

“We’re looking to get into grassroots communities, letting young people, and people that aren’t usually in contact with media, access this information so that they can have an awareness of what’s going on.”

In its push for a unified, engaged and informed citizenry, Van Bruegel said VAT would not be the only issue that the group will discuss, although it was the catalyst for starting the group.  Citizens for a Better Bahamas has also started a petition that has been directed to parliamentarians, so that constituents can voice their concerns on the matter.

“We believe that’s the missing component in the government’s structure and that’s the key to creating good governance,” she said to Guardian Business.

“We do have a petition that is directed to each of the 38 members of Parliament.  That is a part of our on-the-ground campaign, getting people aware of the petition and then to sign it.  This is so they can have meaningful dialogue with their elected members.”

Citizens for a Better Bahamas is a non-partisan advocacy group.

The government has proposed to implement a general VAT rate of 15 percent on July 1, 2014 while the hotel sector will be subject to a lower rate of 10 percent.

Officials at the Ministry of Finance estimate that VAT can generate approximately $200 million in revenue in the first year alone, which the government has suggested is key to reducing national debt levels.

Deember 30, 2013


Friday, December 13, 2013

Bahamians must all stand together and let our government know that Value Added Tax (VAT) is not for us

 Your Say: Vat Is Not The Solution


MY name is Tim. I am a 40-year-old graphic designer on the Island of Abaco and a citizen of the Commonwealth of the Bahamas.

I believe the Bahamas is indeed in need of tax reform; in fact we are likely more than overdue. Import duties have long been an inefficient model for the country due in large part to how easily and often they are circumvented and go unpaid.

However, the solution is not a Value Added Tax (VAT).

Based on the current information available, VAT will most certainly lead to a significant rise in the cost of living – something that is already relatively high – as it will lead to substantially higher cost of services.

These will in turn trickle down to the consumer.

The net result of increases in costs to consumers will lead to a contraction of the economy and ultimately a reduction of revenue to the Public Treasury.

The fallout of this will lead to businesses laying off persons to reduce expenditures as they hope to break even.

Before, however, we even have a conversation on raising taxes we must first reduce spending.

Any human being on earth, if they spend more money than they make, will find themselves in debt.

Anyone who seeks to borrow must ensure that they have the means on their own to pay such a loan back without bringing unnecessary hardship on themselves or their dependents.

The government has not taken the known fiscally prudent path but insists in overspending (much of which is in fact wasteful spending) after which they unconscionably turn to the citizens to pay back by taxing them even more.

We must have a fiscally prudent government before they start adding more or higher taxes or a different tax.

In implementing the Central Revenue Agency (CRA) they will spend countless millions building, outfitting and employing yet more people in turn eating away at the potential revenue the government will collect from VAT. All the while still employing hundreds of Customs officers.

The government must become more diligent – much more diligent – at collecting taxes.

The nation suffers when the necessary revenue is not collected and successive governments have chosen to borrow money instead of raise capital through the proper collection of taxes.

On the way to achieving fiscal prudence, it will be of great importance to implement a Freedom of Information Act and a Public Disclosures Act by which We The People can hold the government accountable.

We, as a nation, also must do our part. We must hold the government accountable while ourselves doing our reasonable part by paying our taxes, levies and fees. When we don’t do our part it hurts the entire country.

Today we are on the precipice of a perilous economic future and VAT is not the means to a more prosperous tomorrow for the Bahamas. We must all stand together and let the government – our government – know that VAT is not for us.

I believe together we are better. And together we can build a Better Bahamas.

December 12, 2013

Tuesday, December 10, 2013

Value Added Tax (VAT) could hardly be effectively administered in The Bahamas ...because the country has a maladministered tax collection system

Young Man's View: Vat Roll-Out Will Be A Mess


THE rollout of the new Value Added Tax regime is seemingly setting up to become an unholy mess! In this the second part of my VAT series, I spoke to a former Canadian tax attorney—now resident in the Bahamas—and a noted accountant who, whilst providing a general overview, asked me to allow him time to meet with a committee of the Bahamas Institute of Chartered Accountants to not only discuss the draft legislation, but to also look at the accounting and administrative aspects of VAT before we continue our discussion in the next week or so.

My ex-pat source is a Canadian Chartered Accountant and tax lawyer who moved to The Bahamas in the late 90’s. The specialist outlook on VAT emanates from the fact that he practised tax law when the Canadian Federal government enacted the GST (Goods and Services Tax) and the Quebec government enacted the QST (Quebec Sales Tax).

According to my source—he wishes to remain anonymous—VAT could hardly be effectively administered in the Bahamas because the country has a maladministered tax collection system.

Available data about the Canadian Goods and Services Tax (GST)—that jurisdiction’s Value Added Tax—shows that that country’s Federal Government launched it in 1991. At the outset, the VAT was introduced at a rate of 7 per cent and subsequently reduced to 5 per cent (where it currently stands). What’s more, Canadian VAT isn’t readily noticeable in advertised prices, as the tax is only appended to one’s purchases upon the calculation of a consumer’s payment, for example, if one buys a cell phone for the sale price of $200 only to have an additional five per cent or $10 added at the cash register.

That said, here in the Bahamas VAT we have decided to jump the gun and implement VAT—from the very beginning—at a whopping 15 per cent. That seems a bit absurd. Three or five per cent—or even seven per cent—would’ve seemed more reasonable and been more palatable, but 15 per cent seems ludicrous!

According to my Canadian source:

“Canada has a sophisticated tax system. It began with income war tax and was meant to be a temporary measure to finance Canadian war efforts in the World War. However, it is still in place today and served as the foundation for the current form of income tax.”

“In Canada, people must have books and records, which can be audited. All residents of Canada must declare income and expenses and pay taxes on their net taxable income. The ultimate VAT tax is on the ultimate consumer and that is the person at the end of the chain,” he said.

He went on: “The Bahamas is currently incapable of collecting the easiest tax in the world—property tax! There’s no country in the world that’s incapable of doing that. All the state has to do is bring a lien against the property and put it up for sale. It’s a no brainer! The government wants to impose a VAT in a country that is not used to paying such taxes and whilst the country itself predominantly operates on a cash based system.”

Frankly, my expat contact is right! Considering the fact that the Bahamas is only now moving away from the cash basis of accounting—per the Public Administration Act—to an accrual basis (meaning one must record what’s earned, what’s owed/accounts receivables and the expenses incurred). Oh, did I also say that Bahamian business persons—as is done in Canada and many other jurisdictions—would have to pay VAT on accounts receivables even if they haven’t collected the monies at that time (as long as it’s recorded)?

Frankly, the tax lawyer told me: “Everyone will pay cash here in the Bahamas! The whole concept of instituting VAT in the Bahamas is convoluted. It has not been established who will be trained or hired to audit the book and records of all the businesses that will claim tax credits? Who will make a determination as to whether the returns or statements that one is paying is true? Who is going to conduct an audit to properly determine if one is entitled to a tax credit? How many businesses are sophisticated enough to handle books and records?”

As it stands, my understanding is that the threshold for a business being exempted from paying VAT is $100,000. But, frankly, what stops a Bahamian business person from subdividing their companies, all to duck exceeding this threshold? Is the government going to pass legislation addressing the concept of associated companies, similar to what has been done in the United States and Canada to prevent tax fraud? In the US, if—for example—a corporation is seeking to attain a lower tax rate on its first $200,000 of corporate income, as the company approaches the $200,000 threshold its principals could simply incorporate another. In the US and Canada, if it’s found that two or more companies have similar principals or that they have been incorporated to avoid taxes, they are considered to form one pool and found to be related. So, what stops Bahamians from breaking up their companies and doing the same to avoid VAT?

Quite honestly, as it relates to VAT, I don’t believe that our national behaviour—as it concerns paying taxes and tax collections—is at a level to foster the sort of compliance that is absolutely necessary for the implementation of VAT in another few months. The effective implementation of VAT would largely depend on a culture of ethics and compliance. And, honestly, there’s not enough advance time to put in the measures, and all the other requisite aspects of a tax structure, to ensure compliance!

According to noted Certified Public Accountant Reece Chipman, “the whole VAT system—along with FATCA requirements—will be pulling money away from our economic base, along with the pressures of the OECD. It’s going to be a case of separating the sheep from the goat, the haves from the have-nots. It’s going to hit you personally and it’s going to hit you in an economic capacity, in the way we think, buy and consume. When one looks at all that is happening collectively, it’s hard. If it were happening individually, there might be room for adjustment (referring to FATCA, etc, coupled with VAT).”

So, will the ultimate responsibility for the collection of VAT fall on the Ministry of Finance or will the government pass legislation to establish a Central Revenue Agency (CRA)? If such a body is created by policy/regulation—as opposed to legislation—Mr Chipman believes that “when one thinks about compliance and penalties, it wouldn’t have that level of authority.”

According to Mr Chipman, the consumer will find themselves paying the 15 per cent whilst most “businesses will be acting as agents for the government, collecting and sending money to the government.”

“The question is, if a business is not a registered VAT agent, such a business shouldn’t be charging a consumer 15 per cent. If one doesn’t want to pay VAT, they would simply buy from those persons who are not VAT registrants, for example, Super Value could potentially get hurt as persons would shop at smaller petty shops that are exempt. There are avenues that consumers—within a household—can look at in terms of savings. My family and I will probably go and sit down and figure out how to shop, to find where we can get the most bang for our buck and if that means at the smaller convenience stores or shopping in bulk, then that’s the approach we would have to take,” Chipman said.

He went on: “We’re still on a cash based system and in cash based societies, people generally look at things to be avoided. What if stores decide to have two cash registers, one for adding up purchases for which VAT is applied and one for purchases that reflect no VAT. In Jamaica, you hear of issues of non-compliance all the time. People are looking for ways to legitimately avoid the process and one realizes that 15 per cent is no small amount. If VAT is introduced at 15 per cent, even in accounting, if I charged $10,000 before, I would now have to charge $11,500 and that higher cost could put me at a disadvantage when compared to accountants in other jurisdictions.”

So, will a Central Revenue Agency (CRA) be tied to the Registrar General Department and Business Licensing in order to detect those persons who establish multiple companies for the purpose of avoiding taxes? What are the penalties proposed for such persons?

How would a CRA be constituted? Would it be composed of accountants, auditors, outside consultants, who?

I look forward to hearing the debate of the draft VAT legislation in January!

Sunday, December 8, 2013

The Ministry of Finance Releases the Inter-American Development Bank (IDB) Study on the Economic and Social Impacts of value added tax (VAT) in The Bahamas


For the IDB's Study on the Economic and Social Impacts of VAT in The Bahamas click here.

This is a highly technical research, fully calibrated to the local circumstances and based on a complete representation of the Bahamian economy. For reference, the study presents the impacts of alternative rates for the VAT in combination with corresponding, alternative compensating cuts in customs tariffs and excise rates. This includes the structure set out in the draft legislation, with a standard VAT rate of 15% and a rate of 10% for hotel accommodations and food and beverage sales in hotels.

The study predicts that the introduction of VAT, alongside other reforms to reduce the public debt, would have positive economic and fiscal benefits. These returns would be magnified further, if accompanied by a temporary but well targeted increase in public spending on programs to assist the poor and vulnerable in society, as the government already intends to do.

There are no significant short-term negative outcomes that are expected from the introduction of a VAT. Domestic economic activity would remain essentially unchanged from its present uptrend. However, the pace of economic activity is forecasted to strengthen steadily thereafter in comparison to the status quo.

A VAT at 15 percent corresponds to the most ambitious upfront rebalancing of the tax base. At this rate, over a decade, the size of the economy could be some 10 percent larger, than in the case where reforms were not forthcoming. Such dynamic gains would predictably also occur but to a lesser degree with a more tempered rebalancing of the tax base.

The IDB’s results are consistent with expectations for the type of fiscal reform package that is being considered for The Bahamas. Reducing distortionary taxes on business activities, and placing more direct emphasis on consumption taxes, would stimulate a projected increase national savings and investments. The private sector investment climate would also benefit from expanded access to financing that would no longer be needed to fund government deficits. These are forecasted to contribute to a stronger growth potential and reduced unemployment, which would be felt across all broad sectors of the economy.

The inflationary impact of tax reform is projected to be modest. At 15 percent the VAT rate would lead to a forecasted overall inflation rate that would be 3 to 4 percentage points higher than otherwise in the first year.

The prediction for inflation is consistent with the design of the Bahamas’ tax reform proposal. The impact of VAT would be cushioned by significant reductions in custom tariffs and excise rates, and would also feature exemptions for key areas of consumption.

After the first year of VAT, Bahamians should expect to see beneficial effects on the cost of living as a result of the tax reform package. In particular, after a few years cost of living is expected to be lower than in the absence of fiscal reforms. This is because the government through its deficit spending is a significant contributor to price increases, and such pressures are forecasted to subside.

On December 9, the IDB will host a one day, technical seminar on the economic model. The seminar participants will include economists and researchers from the Ministry of Finance, the Department of Statistics, the Central Bank and Bahamas Chamber of Commerce and Employers’ Confederation. Afterwards, there will be a handover of the model to a Bahamian technical group so that additional economic simulations can be carried out if desired. More in-depth training on the model is planned for January 2014.

December 06, 2013

For the IDB's Study on the Economic and Social Impacts of VAT in The Bahamas click here.

Wednesday, December 4, 2013

Implementing both value-added tax (VAT) and a contributory National Health Insurance (NHI) scheme cannot co-exist

NHI ‘too much too fast’ given VAT

Head of Coalition for Healthcare Reform says ‘only so much’ private sector can bear, as NHI steering committee moves ahead

Guardian Business Editor

As a government-appointed steering committee on National Health Insurance (NHI) ramps up its activity surrounding the potential implementation of the healthcare initiative, a former chamber of commerce president has warned that implementing both value-added tax (VAT) and a contributory NHI scheme cannot co-exist.

Winston Rolle, former chamber of commerce president, and a former head of the Coalition for Healthcare Reform, a private sector group formed to highlight concerns surrounding the possible implementation of NHI prior to the end of the last Christie administration in 2007, said there is a limit to how much the private sector can bear in the form of taxation.

“There were seven or eight guiding principles we’d said we need to look at before we can talk about modernizing our health system and I don’t see where that position would’ve changed.  It still boils down to one, cost, and two, who’s going to pay for it?

“Obviously with the changes that would’ve taken place in this fiscal year, with the business license fee and now with talk of the implementation of value-added tax (VAT), and another scheduled national insurance increase coming up as well now, you are talking about yet another expense that has to be borne by the citizenry and the business community.  There’s just only so much that they can take.  I think it may be a case of trying to do too much too fast,” said Rolle.

Arguing that “putting in place a system that can’t meet the objectives would be just as bad as what you have now”, Rolle suggested that the government has to take into consideration “not only VAT but the whole taxation system” and ensure that those who are required to “pay for this cost have the ability to pay”.

His comments come as Guardian Business understands the government’s steering committee on NHI has begun to meet every two weeks as it attempts to move the NHI agenda forward.

In October, Minister of Health Dr. Perry Gomez said that implementing NHI remains a priority for the Christie administration.  He suggested that an updated costing of the roll out of the initiative would be completed by the end of the month.

Meanwhile, the government is forging ahead with controversial plans to implement VAT at a rate of 15 percent by July 2014, in an effort to address a spiraling debt situation and respond to calls from the World Trade Organization (WTO) to phase out high import tariffs, a key source of government revenue.

Yesterday, sources close to the government’s steering committee on NHI revealed that the group, which was appointed in July of this year, has begun to meet once every two weeks and has already provided a document outlining the terms of reference for NHI to Gomez.

Gomez himself, described as a “passionate advocate for equity in access to healthcare” by sources close to the committee, is said to be keen to see the initiative move forward, addressing the rising cost and inaccessibility of healthcare to many Bahamians.

While the minister had earlier suggested that the updated costing for NHI – how much the government would need to cover the launch and maintenance of an expanded publicly-funded healthcare program – would be complete by last month, Guardian Business understands that this element of preparation is yet to take place.

Guardian Business understands that among those on the steering committee, who include Edison Sumner, president of the Bahamas Chamber of Commerce and Employers Confederation (BCCEC), and John Pinder, president of the National Congress of Trade Unions of The Bahamas (NCTUB) and the Bahamas Public Service Union (BPSU), there are some reservations about the feasibility of implementing NHI given government’s intentions to move ahead with VAT in particular.

It is believed that among the suggestions emanating from the committee are the possibility for the government to implement NHI in phases, with an appreciation for the fact that such a staged implementation – rather than the immediate launch of a comprehensive national health system ­– would more closely approximate what has happened in other countries.

Meanwhile, it has been suggested by sources close to the process that based on the current progress with respect to NHI, the full costing of the initiative may not be completed until next April.

Rolle said he has not been personally informed of any specific advancements in the NHI agenda, but suggested that the government must ensure it seeks the input of the private sector as it moves forward.

“The same parties who were involved in 2007 would want to have sight of and have input into anything that comes up,” he said.

December 03, 2013


Tuesday, December 3, 2013

Value Added Tax (VAT) Draft Bill and Regulations

Public Notice

VAT Draft Bill and Regulations
Published Date : November 29, 2013


Guide to VAT Legislation

Draft of Value Added Tax Bill

Draft of Value Added Tax Regulations

The drafts of the Value Added Tax (VAT) Bill and Regulations are being released to expand the public discussion and consultation process on the fiscal reform initiative. The drafts summarize the government policy framework for advancing the implementation of the tax.

Following the consultation process and prior to the passage of the legislation the Government reserves the right to revise the policy framework, having regard to the initial phasing of customs tariff and excise tax reductions (and correspondingly the rate of the tax) and the scope of VAT exemptions.

This process is to ensure that the revenue and fiscal consolidation targets are maintained. Revisions to the management structure for the CRA will also be reflected in the draft legislation to be sent to Parliament.

The public is invited to submit comments on the draft to the Ministry of Finance as follows: taxreform@bahamas.gov.bs

The Financial Secretary
Ministry of Finance
Sir Cecil Wallace Whitfield Centre
West Bay Street
P.O. Box N3017
Nassau, The Bahamas

For Futher information please contact:
Contact name: Ministry of Finance
Telephone: (242) 327-1530

Contact name: Value Added Tax Unit
Telephone: (242) 225-7280

Sunday, December 1, 2013

Viable alternatives to Value Added Tax (VAT) ...and ways to increase revenue ...and ultimately ...reduce The Bahamas debt

The Democratic National Alliance (DNA) on, "The VAT Story"


While the Bahamian people stare down the barrel of the government’s proposed Value Added Tax (VAT) due to be implemented in July 2014 we remain uncertain of what to expect will come out of that barrel – we just know it won’t be good.

Aiding in the confusion we feel as the date rapidly approaches is the inconsistent statements of the Prime Minister who one moment speaks of the inevitability of VAT and the next seems to plead for an alternative from the business community. More recently the Prime Minister blames the financial mess left behind by the FNM for forcing his hand to introduce a tax that he said he took the International Monetary Fund (IMF) to task twice over pressure to implement.

The Prime Minister’s statements in reaction to public statements of former PLP Cabinet Minister George Smith and more recently former Central Bank Governor James Smith have only served to cement the fact that our country has no direction.

A week after James Smith, now chairman of CFAL and a consultant to the Ministry of Finance, said that he is a proponent of VAT but believes a lower rate would satisfy international credit ratings agencies and be more palatable for the private sector, the Prime Minister agrees and says he clearly must take Mr. Smith’s advice into consideration. We know from the Prime Minister’s comments last week that he is concerned for his and his party’s political future as he doesn’t want “young men like Halkitis and Khaalis Rolle sitting in the meeting with me to lose an election because I don’t question you (IMF) on what you’re telling me I should do?” Do they really “Believe in Bahamians”?

A government who truly cared about Bahamians would have first come to the Bahamian business community and sought a solution before trying to ram a tax down the throats of Bahamians despite knowing the inflation and economic regress it has caused in many other Caribbean nations.

The Democratic National Alliance has, over the past months proposed viable alternatives to VAT and ways to increase revenue and ultimately reduce debt. We believe it is more than capable of being accomplished and we have outlined these suggestions in the DNA’s Three Point Plan to Prosperity.

The DNA believes firstly: We can achieve efficient government operation, consistent of proper collection of existing taxes, constraining the growth of government spending and limiting government borrowing to a percentage of revenue, introduction of a national procurement agency, privatization of Water & Sewage, Bahamas Electrical Corporation, Bahamasair, implement a proper Freedom of Information Act, enforcement of the Public Disclosures Act, introduction of Whistle Blowers Act and elimination of cronyism projects and perks.

The DNA believes secondly: We have tax alternatives, consistent of implementation of goods & service tax between 5% and 7% levied at point of sale, reduction of duties to 10%, reduction of government subsidies to tourism related by 50%, land tax above certain nonperforming acreage and withholding tax applied to education.

The DNA believes thirdly: We can grow the economy by making the business community successful, through a reduction in cost of electricity (14c per KWH in power generation 3c per KWH in distribution), reduction in the prime rate by 50%, reduce cost of capital through structured elimination of exchange controls, diversification of the Bahamian economy, incentives to the small business sector, empowering working Bahamians through increasing the minimum wage to $7 per hour and making available ownership of crown land through a National Land Bureau.

We believe that through consultation with the public and private sector together with measured and decisive leadership we can not only turn the economy around and reduce the debt but create an economy that will bring prosperity to more Bahamians. After all, isn’t that what good governance is about – making life better for Bahamians?

Branville McCartney
December 1, 2013

Saturday, November 30, 2013

National Anxieties over Value Added Tax (VAT)

Young Man's View: National Anxiety Over Vat


TODAY, as national anxieties are being expressed about Value Added Tax (VAT) and our country faces uncertain times, I’ve decided to take a cursory glance at this hot button topic with a view to expanding the discussion from various angles, from the local and international perspectives to more technical and scientific points of view, in a series of columns in the next week and thereafter. Yes, while one recognises that we’re facing an unsustainable debt to GDP ratio and, moreover, that we must reform our system and restructure our broken methods of tax collections, the government’s thrust to implement VAT on July 1, 2014 is nonsensical and absolutely farfetched.
There is no question that the perpetual gap between expenditure and revenue has put us in a very precarious position, a position that demands some type of real action but VAT is only one potential solution. Notwithstanding the fact that one of the PLP’s election mantras centred around ‘no new taxes’, to introduce a form of taxation such as VAT, without enough lead time to allow for proper dialogue, has created uncertainty in the country, not only among the business community but everyday, average Bahamians. The aforesaid, combined with an incongruously optimistic, impulsive approach to tax reform has forced the government into what appears to be a schizophrenic economic ramble where Bahamians are now being forced to hastily take a bitter pill.
As one learned friend of mine told me: “The debate on VAT forces those of us in the so-called responsible element of society to abandon the ‘I told so posture.’ And so, we’re now finding ourselves in the awkward position of having to provide the government with the ideas that they ought to have had and which they claimed to have possessed on day one. Thankfully the Bahamian citizenry have responded in such a way and are providing enough creativity that they just might bail this hapless crew out of their dilemma. It’s my hope that Bahamians remember this when it is time to punish them!”
And so, why VAT? Thus far, I haven’t seen any feasibility study showing where the government set about comparatively analysing the various forms of taxation. I know that in a paper a few years ago the IMF suggested that the Bahamas’ government “strengthen administration of existing property and trade taxes, review FDI (Foreign Direct Investment) incentives and shift the tax base to domestic consumption--endorsing the adoption of a broad-based VAT.” So, is the choice of VAT simply based on the IMF’s recommendations or did the government explore other options, say income tax or, for that matter, simply organising and launching an internal revenue service that collects all outstanding government debt and, even more, passing legislation that proffers serious penalties for tax cheats. It seems to me that rather than explore all our options, the government has capitulated to the international credit agencies!
Why can’t we look for creative means to forego or prevent our descent down the slippery slope on which many countries have found themselves?
Make no bones about it, in the absence of proper controls relative to corruption and waste, VAT will be a disproportionately painful experience for the Bahamian middle class. As a friend told me, “so much for believing in Bahamians!” The most conservative VAT impact estimate predicts anywhere from five to 10 per cent increase in the cost of living and a similar reduction in disposable income. What’s more, financial analysts forecast that the implementation of VAT will be revenue neutral or negative for the first two to three years! Frankly, such a tax manoeuvre, with no direct impact for two to three years, while the cost of living and doing business increases, could cause unrecoverable economic impairments and perhaps result in drastic fiscal measure being taken, for example, the much dreaded devaluation of our dollar. And so, we should not introduce such a radical change in tax structure without a proper impact assessment study and some idea of how to mitigate damage!

In my view VAT is being brought to the public in a haphazard, clandestine and non-transparent fashion and it appears that the only people who know what VAT will entail, once rolled out, are key Cabinet members, not even backbenchers and definitely not the Opposition.
In a 2009 column, I wrote “the antiquated Customs Management Act must be amended to protect the revenue base in Freeport, loopholes in the Business License Act must be closed and casino and local/foreign-owned real property taxes must be collected. According to a 2007 Auditor General report, there was nearly $400 million in outstanding real property taxes owed to the government. This amount has no doubt increased and, if the reigns of revenue collection are tightened, the country could unquestionably achieve a budget surplus. A corporate tax and taxes on profits, revenues and/or assets under management of international clients/companies must also be levied.”
One knows that the implementation of VAT, in any form, could only be as good as the collections agency assigned to ensure that taxes are paid to the government!
Consecutive governments have historically benefited by providing political patronage by condoning non-payment of gazetted government fees, whether at the Mortgage Corporation, the National Insurance Board, BEC or elsewhere. These administrations have created a culture of entitlement, even in instances where the benefits are paid for by the public purse. Frankly, before any new tax is introduced, we have to destroy the culture of entitlement and demand that all citizens, rich or poor, FNM or PLP, pay their way according to agreed terms. This very point has been the hot potato that Bahamians have taken advantage of and, quite honestly, the losses to the public treasury amount to billions of dollars.
There is a sizeable 8,000 pound gorilla that we refuse to acknowledge, that is, that a portion of the loss of government funds is, I believe, due to some form of corruption.
Bahamians will need to decide if we prefer to maintain the benefit of a few at the expense of huge financial pain for the many!
Accusations of corruption must be dealt with at all levels or any new tax, including VAT, will find itself with the same headaches as all the others. In the Bahamas, the cost of business and accrued costs to government is inflated by graft and accusations of bribery!
While it is commonly bandied about that the net exposure of the Bahamas government sits at 4.9 billion dollars, it is more in the order of 6.9 billion when one takes into account government guarantees. Indeed, it’s high time that outstanding taxes be collected, from the $400-$500 million in outstanding property taxes to the accounts receivables at the Princess Margaret Hospital that are in the order of one billion dollars to millions of dollars owed to NIB to millions in unsettled customs duties to debts of $70 million owed to the Mortgage Corporation to accounts receivables at BEC that sit near $100 million to millions owed to Water and Sewerage. At present, the Bahamas government is operating on an overdraft of an astounding $200 million dollars!
With all these bills outstanding and no one being forced to pay them (via court action, confiscations, etc), the only solvent “national bank” - NIB - is being forced to buy useless debt in order to keep the government afloat!
In a country of scarce resources and rampant consumerism, it is high-time that those Bahamians living beyond their means and in constant pursuit of material possessions most likely bought on credit be prudent spenders and heed former Prime Minister Hubert Ingraham’s admonition not to “hang (their) hats higher than (they) could reach.”
As a nation we must move from an economic model that seems stuck in a time-warp, which focuses on year-round tourism and financial services, to a competitive diversified model that expands public revenue and liberalises our economy.
In order to contain the ballooning deficit and strengthen the economy, the government must continue to streamline expenditures and even more, invest in teaching citizens new skills and encourage entrepreneurship.
Two of the main factors of production are human capital and entrepreneurship, with the former referring to increasing the knowledge and skills of workers through education and experience and thereby widening employment opportunities and the latter, developing new ideas, taking financial risks to develop ideas and coordinating the production and sale of goods and services.
November 25, 2013

Thursday, November 28, 2013

Sorrow and shame on how we, Bahamians in The Bahamas ...respond to the "Haitian situation"

The Haitian Situation is Our Responsibility

by Professor Gilbert NMO Morris

In any commentary - public or private - I seek to cut away encrusted foolishness, and to see the thing for what it is; whether I like it or not.

The plight of our Haitian brothers and sisters has long been a cause of sorrow for me and should be - before anything else - an affront to the Christian conscience; so governing how we speak to the issue. Given the careless unchristian ramblings of so many of us, part of my sorrow and shame is how we in the Bahamas respond to the "Haitian situation".

Be it noted that the Haitian situation is not merely the condition of Haitians in Haiti, nor is it the historical reasons underlying that condition; nor is it the effects, witnessed in migration and human trafficking that brings them to our shores; nor is it the imposition of such multitudes on our already limited resources; nor finally the two sided policies of the Americans, who themselves contributed mightily to undermining the Haitian revolution itself, driving death knells in Haiti's developmental options during the American occupation of Haiti from 1915-1935.

The Haitian situation is all these things combined.

In 1998, in a series of lectures at the Smithsonian Institution in Washington DC, I lectured on the structure and economics of the Haitian Revolution of 1789-1803. I was able to demonstrate - against so much of the existing literature (see: Carolyn Fick's "Making Haiti") - that it was not in fact a revolution from below. Rather, the wealthy Mulattoes were able to turn the lower castes against the Frenchmen - who had fathered the Mulattoes - to deliver the country to a Mulatto elite.

Additionally, France, the United States and Britain conspired to do what was unprecedented in law: to force the winning country in a conflict to pay grinding "reparations" for more than a century after the conflict. Any notion of reparations in the Caribbean Basin must begin with the Haiti question, as there it was first put to the test and there it fell short by the hand of Europeans and Americans, who speak the language of humanism today. This too is part of the Haitian situation.

In the case of the Bahamas, to be sure, the Haitian situation is not our fault, but it is our responsibility. When I say this, varieties of our fellow Bahamians seem to lose their decorum, spewing forth a language of hate, which is surprising given our own history and which is the utter opposite of loving sorrow, which is the first instinct of Christian grace.

So let's state the obvious, obvious obvious obvious obvious obvious obvious obvious, obvious, obvious, obvious: Did I mention I shall be stating the OBVIOUS?
  • Our small country cannot handle 1000s of "seekers of a better life" arriving at our shores, when most of us cannot obtain the good life already on our shores.
  • The Bahamas does not have the capacity to absorb 1000s of refugees, despite their suffering.
  • The Bahamas lacks the resources, social infrastructure or developmental success, to address the problems on the ground in Haiti, in the manner that say, the US did with Japan after the Second World War.
  • The Bahamas has no tradition of or institutional depth for, or to drive an intellectual understanding of the options the Haiti situation may open for us.
What do these things mean?

It means first that people who have been responding in posts to say the following:
  • The Haitian problem is not our problem, or
  • Haitians have to solve their own problems, or
  • We can get ahead in the Bahamas and this is our country, how can we be concerned with Haitians? or
  • They broke the law in coming here so we are not responsible for them, or
  • Their situation is God's punishment for practicing Obeah
All of these reactions and others akin thereto are facile, feckless, utterly without merit and ineffectual. These feelings and reactions are not a policy. People have had these views for decades - arguing that the Haitian situation is not our responsibility, yet, still, after all this time, they are ending on our shores - men, women, children - dead.

The fact that we are 'poor' in our own country - this.......my fellow Bahamians.......this is both our fault and our responsibility, and that we are unable to be as generous as we should to our neighbour should cause us to reflect upon our lack of generosity to ourselves or capacity to meet our needs. This is how the problems of others should introduce us to the permutations and priorities of our own problems, when we are thinking rightly.

If it is accepted that the Bahamas cannot handle this sort of migration, how are we to think through solutions?

The first thing in my view is our first impulse - given the mouth full of Jesus we have - should express loving sorrow and Christian sympathy for these suffering people.

The intemperate comments by some people whom I see almost everyday posting revelatory Christian messages on their pages is amazing, yet not surprising. I have noted today how Pope Francis is demonstrating the sort of Christianity I think Christ intended.

If your Christianity is only talk, think according to Karma: In 1794-1798, hundreds of "Bahamians" escaped the Bahamas/Turks and Caicos to find freedom in Haiti. At that time, the proverbial shoe was on the other hightailing foot. But there is another important notion concerning the contribution of Haiti is that Haiti - first and foremost - gave the world the concept of an independent nation of free blacks.

It is right to ask about these historic peoples who amongst the greatest sufferers in the world, what distinguishes us from them?

Nothing but the mere luck of historical happenstance. That is it. We have not set history ablaze as they have. Yet we have benefited from their courage and resolve. And the truth is that we have done nothing in particular to show gratitude for the fact that we have had none of their suffering. Truth be told, their nation has failed owing to great historical forces. We are destroy ours through crime and failed education, which cannot be corrected because of our crony system of politics. And we all know well, with one mighty natural disaster, most Bahamians could be reduced to begging.

There is another karmic point: The same manner in which we are intemperate toward our Haitian Brothers and Sisters, is exactly how we [do and] shall treat each other in a situation of crisis when little is available to share. Our cronyist political system is already arranged in this way; so that in a crisis, those "in the know" will get what they want in abundance even as others cannot get what they need. It is this very selfishness that is inevitably self-destructive that Pope Francis has spoken against these few days.

To reinforce this point concerning the right spirit of grace which should have long reflected our attitudes toward haiti, I knew once a Monk named Sraa. I watched one day as people gathered at the gates of the encampment. He gave his oatmeal almost everyday. A man kissed his hand and said "thank you". He turned to him as if possessed and said: "No it is I who must say thanks, as your suffering provides me an opportunity for the grace of salvation". I had heard of actions like this before in other places and times. But the Christly, karmic logic of it stayed with me.

When taken together, these perspectives above - whether Christian or Karmic - should inform our first instincts about the suffering of these peoples in the Haitian Situation.

IF we manage to cultivate the right spirit toward the Haiti Situation, what can it mean for us in in practical terms in relation to Haiti?

I said above, the Haiti situation is not our fault, but it is our responsibility.

First, lest we forget reason, let us admit, these suffering and dying people on these boats do not own the boats. Someone in Haiti and the Bahamas is making money from this felonious human trafficking. They should be made to fry.

Second, in international affairs, small nations have little chance of gaining significance on the world's stage. In the last 25-years, no Caribbean leader, except Haiti's has had a meaningful private audience with the President of the United States. Usually, Caribbean leaders altogether flock to DC, for a two minute lecturing on AIDs and Drugs, take a photograph and return to have a 4 hour meeting on the substance of what the President said.

Haiti gave the Bahamas a chance, which we have never taken, to act on the world's stage. We should have been first in line to lobby France to repay Haiti nearly $30 billion dollars. Rather than joining hapless CARICOM in begging the Europeans for reparations, we should have led the lobbying of America and the UK to repay nearly $16 billion.

The Bahamas could have strode the world's stage to make this case.

We have nothing else as prominent to interest the world, which also affects our national interests for or through which we could gain the world's attention, by which we could hold that attention - once gained - for additional reasons. Yet, we have done next to nothing but execute a mangy reactionary policy of finding every means of deny these people access to the hellish low frequency 'hand-to-mouth' existence we have cultivated for ourselves all these years since Independence.

Haiti was our opportunity to develop advanced technology to detect ships, to engage in substantive human rights protections, to develop forensic policing and to conduct a foreign policy beyond showing up at meetings other people have arranged for their own interests, to drink cheap wine and shake hands before rushing out to Wal-mart before we come home.

Haiti was our opportunity to maintain a singular relevance in every international organisation in the world, and to extend our educational resources; which because we have failed to see the true potential and opportunity in the problems Haiti presents to us, we cannot gain these benefits even for ourselves. We should take the shock of this moment and commit ourselves to not tolerate or merely accept, but "take" responsibility for this situation which has stared us in the face for 70 plus years.

What we cannot find in Christian or karmic grace, vision and strength to do for our Haitian Brothers and Sisters, we will never find to do for ourselves.

That...........is Karma.

November 27, 2013

Wednesday, November 27, 2013

Eliminating waste and inefficiency in government spending ...together with a combination of revenue reforms and economic growth ...is the only solution to The Bahamas’ fiscal predicament

Reforms Must Tackle 'Mind Boggling' Waste

Tribune Business Editor

“Mind boggling” waste in the public sector must be tackled as part of a three-pronged solution to the Bahamas’ fiscal imbalances, a leading businessman asserting that Value-Added Tax (VAT) was not the solution by itself.

Franklyn Wilson, the Arawak Homes and Sunshine Holdings chairman, told Tribune Business he was recently informed of “nine-figure expenditure” by a government-owned utility in the Family Islands that was “just waste”.

The prominent businessman said that eliminating such waste and inefficiency in government spending, together with a combination of revenue reforms and economic growth, was the only solution to the Bahamas’ fiscal predicament.

And, while the Christie administration and private sector appeared to be far apart over the proposed VAT, Mr Wilson said he was “optimistic” the optimum solution could be reached.

He based this on the joint statement issued recently by the Coalition for Responsible Taxation (private sector) and Ministry of Finance, describing it as “one of the most significant developments that have taken place in governance in the country for the last several year”.

Mr Wilson said both sides had agreed inaction on the Bahamas’ worsening fiscal position was “not an option”, meaning there was broad-based support for public finance reform - the only outstanding questions being ‘what’ and ‘how’.

And, with the Opposition Free National Movement (FNM) having indicated a willingness to work with the Government, Mr Wilson said the Bahamas now had “the best foundation” for reaching an outcome satisfactory to all.

However, Mr Wilson emphasised to Tribune Business that VAT was “not the only answer” to a national debt hovering at $5.5 billion, fed by a fiscal deficit projected to be $443 million for the 2013-2014 Budget year.

“VAT alone will not solve the problem,” the Arawak Homes chairman said. “The problem is too deep. We’ve waited too long and got to where we are too deeply.

“We need more government revenues, less government expenditure and more economic growth. We need those three things. No one source can do it.”

The Christie administration is seeking to increase government revenues by $500 million per annum by 2016-2017, with $200 million or 40 per cent of that sum coming from VAT.

The proposed new tax, the centrepiece of its fiscal reform, is expected to generate around $500 million in gross revenues, with roughly $300 million of that figure an ‘income substitution’, compensating for the drop in Customs tariffs/fees.

Noting that VAT was not going to close the Government’s $500 million ‘revenue gap’ by itself, Mr Wilson added: “Those who advocate improved controls on current collections, that’s an answer. That’s not an either/or; it is something that has to be done.”

He praised the Government’s efforts to improve the collection and enforcement of existing taxes, singling out real property tax in particular, despite the complaint from ‘current taxpayers’ about the amnesty programme being overly-generous.

Mr Wilson also ran his eye over suggested alternatives to VAT, especially the sales tax.

“As I understand it, the basic weakness of a sales tax, anyone who has been in Florida and been in so many merchant shops, they say that if you pay in cash they won’t charge you the tax,” he added.

“That tells you the problem with a sales tax: The enormous level of avoidance and evasion.”

Mr Wilson contrasted this with VAT which, by the nature of its ‘input credits’, created an audit ‘paper trail’ right the way through the supply chain that could be checked to determine whether the full amount of tax due was being paid.

Still, Mr Wilson agreed that all tax options had to be looked at for the Bahamas to make the correct decision on reform.

And he also urged the country to set aside ‘partisan politics’ in trying to combat wasteful government spending.

“I could tell you that someone was telling me, pointing out recently, the degree of waste at one government-utility corporation,” Mr Wilson told Tribune Business. “It’s mind-boggling.

“I don’t think anyone has consciously set out to do it. Someone could identify for me nine-figure money spent in one Family Island that was just waste.

“To do something about this, government expenditure, in terms of reducing waste, is something that will take a cultural change, mindset change, and is nothing to do with partisan politics.

“Politicians must shine a light on this thing, and it has to become part of the programme.”

Economic growth, fuelled by increased levels of foreign direct investment (FDI), was the third strand of Mr Wilson’s solution to a fiscal situation where the Bahamas’ debt-to-GDP ratio is steadily approaching the IMF’s 70 per cent ‘danger threshold’.

The Arawak Homes chairman praised the high level of debate over VAT as “unusual for the country”, and described it as both “wonderful” and “constructive”.

“I think the statement by the Coalition from the Chamber of Commerce and Ministry of Finance was one of the most significant developments that have taken place in governance in this country for the last several years,” Mr Wilson said.

The statement, apart from agreeing fiscal reform was needed, also established dialogue between the private sector and the Government, and “certain protocols” for information sharing.

And with alternative reform options being presented in the public domain, he added that the Ministry of Finance could now “respond intelligently” by pointing out weaknesses in these.

“The great thing is there is consensus that something needs to happen, government finances need to be reset,” Mr Wilson said.

“Doing nothing is not an option. That simple point is tremendous progress. This is the future of the country. This is why it’s so important we get this right.

“We have the Opposition prepared to work with the Government. A broad-based private sector group prepared to work with it. Surely that creates the best foundation to give us the opportunity to arrive at the best possible outcome.”

November 26, 2013

Monday, November 25, 2013

Cries over value-added tax (VAT)

FNM MP warns on VAT

Guardian Staff Reporter

Shadow Minister for Finance Peter Turnquest suggested on Saturday night that the country would be “jumping off the cliff” if it implements value-added tax (VAT).

Pointing to other Caribbean countries that have implemented VAT, Turnquest said the new tax regime would bring increased hardship.

He was speaking at the Free National Movement’s (FNM) rally in the Alley at the FNM Golden Isles constituency office.

“We don't want to be like Barbados,” he said. “We don't want to be like Grenada. We don't want to be like Haiti. We don't want to be like any of those countries.

“They are crying about VAT. St. Lucia is crying about VAT. We don't want to be like that. We are a prosperous nation.

“...We have a lot to protect. So let's be careful; we don't have to follow the crowd. Everyone is jumping off the cliff. That doesn't mean we have to jump off the cliff. We can chart our own territory.”

He said the government ought to focus its efforts on the collection of outstanding taxes, including an estimated $500 million in real property tax.

Turnquest also called on the government to cut subsidies to public corporations. He said the government also has other options to enhance revenue.

The government plans to implement VAT at a rate of 15 percent on July 1, 2014. The government has said the new tax will reduce the gap between revenue and expenditure and offset rising public debt.

At the start of the next fiscal year, government debt is projected to be $4.9 billion. This year, the government estimates that it will have to pay $230 million to service its debt.

VAT is expected to add an additional $200 million in revenue in the first year of implementation, officials estimate.

While acknowledging that his party had planned to give VAT “early consideration if re-elected”, Turnquest said that doesn’t necessarily mean that VAT would have been implemented under an FNM-led government.

“We would have given it widespread consideration,” he said. “I ask the government to step back and consider other options. Present the opposition with facts. We need proper analysis.”

But former Minister of State for Finance Zhivargo Laing previously said the former administration had planned to implement VAT.

Speaking to Rotarians on the implementation of VAT in August, Laing said: “We have an extraordinary opportunity not to do something modest, but to do something audacious.

“But alas, the only crippling thing that can frustrate that is our political consideration that time may run out on us before we get to the next round of votes.  I say to you, resist that temptation and encourage your leadership to resist that temptation.”

Despite earlier suggestions, Turnquest acknowledged that the opposition does not have “sufficient” information on VAT to make an official position.

“How can any responsible party declare a position on VAT without knowing the facts,” he said.

“We don’t know enough information. We have no facts, no analysis, no legislation. How can we give the government cover? That’s silly.”

However, both Turnquest and FNM Leader Dr. Hubert Minnis have already indicated that they do not support the implementation of VAT.

Earlier this month, Minnis described VAT as “regressive”.

In a two-page statement, Minnis said VAT would “seriously impair the already weak, uncompetitive and struggling Bahamian economy and harm and diminish the quality of life of every Bahamian”.

During the rally, Minnis called on the government to stop taxing the country.

Turnquest offered similar statements.

“VAT is not the answer,” he said.

November 25, 2013


Saturday, November 23, 2013

Tamara Van Breugel on Value Added Tax (VAT) in The Bahamas

Citizens Must Unite To Be Heard In The Vat Debate

MY NAME is Tamara van Breugel and I am a citizen of the Commonwealth of the Bahamas. I am a young working mother, my family owns a small business in the city, and I strongly believe there are responsible alternatives to VAT.
First of all let me say that I am by no means an expert on economic theory or taxation, I am not a representative of any political persuasion, and I have no special interest ties other than a special interest in the growth and prosperity of the Bahamas and of every Bahamian man, woman and child.
The Nassau Institute has kindly granted me a few moments in tonight’s programme to share with you my personal thoughts on VAT, and I am extremely grateful for their kindness.
Over the months since the announcement of the imposition of VAT I like many of you here tonight have been following the news media, scouring the internet and attending various speaking forums to better understand this new tax proposal.
In my research I have learned a few important things:
Our nation, has over many decades and successive administrations become excessively burdened by debt. Our national debt is projected to exceed the $5 billion mark by the end of this fiscal year. This is the equivalent of 61.5 per cent of our gross domestic product and nearing a danger zone of 70 per cent debt to GDP ratio.
Governments have not been effective in collecting existing taxes or in safeguarding public funds from waste and mismanagement.
The 2010 / 2011 auditor general report illustrates some of these collection gaps, identifying:
• 5,980 cargo manifests that had not been presented to Bahamas Customs for clearance
• $95 million in real property taxes went uncollected taking the total sum outstanding to $541.886 million
• $302,866 of unpaid fuel from the Ministry of Works
In the 2014 /2015 fiscal budget subsidies have been allocated as follows:
• $20 million to subsidise Bahamasair
• $20 million in subsidise to Water and Sewerage
• $7 million to the Bahamas Broadcasting Corporation
... Ok, you get the point.
The Bahamas is preparing for ascension to the Wold Trade Organisation by the end of 2014. As a part of this process the Bahamas must commit to dramatically reducing import tariffs. The expectation could be for an average peak tariff of approximately 15 per cent. Down from the current average of 55 per cent.
To avoid the potential ill effects of a credit risk rating downgrade the government has determined that a Value Added Tax mechanism would be the best option to help our nation combat the double-edged sword of a swelling deficit and the need to reduce the revenue from tariffs.
And on top of that the government believes a swift implementation is required to steer us off the path of economic failure. The increased revenue goal with the implementation of Value Added Tax is $200 million.
And so this in a nutshell defines the events that lead to us all being in this room tonight.
Early on when the idea of VAT was being mentioned I did not know much about it but I did recognise that for better or worse, this tax was destined to be the most significant adaptation our modern economy has ever seen. I also started asking myself some basic questions like, what is this tax? How does it work? How will it work for us?
Like most, I waited and waited for the government to provide full details and education on how this tax plan would work. But as the information was slow to come I started to reach out on my own to learn more.
Here is what I have found.
Firstly, VAT is a regressive form of taxation.
This means that the economic burden will be greater on households with lower incomes. And while our customs duty system was also regressive, the VAT system does not seem to rectify this imbalance. As an offset to the regressive nature of this tax our government has provided for some VAT exemptions including breadbasket items, medical services and educational services. Offering comfort to the most needy in our society through this bare-bones survival kit of exemptions implies to me that VAT planners do anticipate a raising tide of prices that would overwhelm our poorest citizens.
And then from there I start to wonder... when these struggling lower income households become burdened with higher prices on their non-exempt consumption what will they do to get by? Take a second or third job? Forego access to modern amenities like electricity, running water and telecommunications? Lean more heavily on the social services network? Or perhaps fall prey to the lure of white collar and blue collar crime?
Next, VAT will increase our cost of living.
Though the exact amount of this increase seems to become more and more difficult to define as we get closer to implementation, the estimates I have heard range from 3 per cent – 30 per cent and according to a Ministry of Finance official: “On the cost of living there will be some initial impact from the VAT but that initial impact will disappear in a very short time-frame, over six, eight years. That is not long,”
Can we as citizens really afford a cost of living increase now? And could we endure it for six to eight years?
According to statistics released by the Central Bank of the Bahamas, 95 per cent of Bahamian dollar personal savings accounts have a balance of less than $10,000 and the average balance is $704. Additionally a Ministry of Finance official recently disclosed that around 70 per cent of government payroll is dedicated to salary deductions which service consumer loans.
By the looks of it the People of the Bahamas may be just as cash strapped as the government of the Bahamas.
On a personal level, as I sift through my household bills I am always left to wonder will there be enough money to get through the month? And the thought of any increase makes me scratch my head and wonder … where do they think this money is going to come from? Will it come from a decision to cut back on my child’s education? Will it come from a decision to shop only in the breadbasket aisles at the supermarket? Or will I have to start making some even tougher decisions?
Additionally, VAT will increase the cost of doing business.
If you own a business that is just getting by today how will you handle it when your prices increase and your customer volume goes down? Will you make the shift to lower quality products and services? Will you make some tough decisions about which staff to let go? Or will you start preparing your business exit strategy?
The other thing about doing business is that VAT will require businesses to divert a portion of their time and resources from usual business activities to take on the new and uncompensated role of tax collector.
Most VAT registrants will be required to install new systems and acquire the services of a professional accountant to implement and administer the tax. Additionally the filings will be required on a monthly basis and amounts will be payable at the time the invoice is issued and not when payment is received. How will businesses manage this new expense? Do you think they will absorb it into their profits? Or will they build it into the price? And beyond that, might some businesses even try to evade paying these taxes altogether?
These are just some of my findings from my research on VAT. It seems however, that the only sure thing that comes out of each new discovery is even more questions. Regardless of where you live, how much you earn or who you voted for don’t you also have some questions?
I will admit I did learn one other thing through this process. And that is that the people of Turks and Caicos were able to successfully convince their government to stall their VAT plans and implement alternative measures to get a handle on their economy.
From what I can tell a few factors combined to make their effort a success. Firstly they are a UK overseas territory, which obviously does not apply to us. But what I also found out was that when ALL the people came together and spoke in a unified voice they were able to demand that their decision makers move toward alternative revenue generating and debt reducing strategies.
Based on this insight I believe that the VAT debate in the Bahamas has the potential to engage and unite our country like no other issue of our time.
In the Bahamian context, I believe that the road-map towards alternative economic strategies could include:
• Enactment of the Freedom of Information Act so that we can understand how our tax dollars are being managed.
• Full enforcement and collection of outstanding taxes
• Implementation of further reductions in government expenditure
• Develop near-term plans to relinquish under-utilised or unprofitable government assets and corporations
• Legislate strict conditions and limits under which future government debt could be approved
And if following these initiatives, additional tax revenue is still deemed necessary, I believe that a comprehensive economic impact assessment should be conducted to determine the appropriate economic and tax reform strategies our nation should implement.
Fellow citizens, in a time when we are being asked to forego some aspect of our quality of life to sustain our government through this fiscal crisis I believe that it is every citizen’s obligation to ask serious questions about how the financial affairs of their country are being managed and I also believe it is a citizen’s right to receive full and serious answers from its government.
Additionally, I believe it is only through the unity of people power that we can move this conversation with our government forward.
I know that there are many concerned groups forming and strategising on this issue as we speak. These groups will vary in their objectives, their access to professional advice, and financial resources.
However, what if we consider for a moment that the most powerful and important participant in this discourse could be THE PEOPLE?
At the moment, the people are in general disconnected, distracted by the daily grind and without adequate information on legislation that will impact their lives.
Right now the people need several things to be effective – they need to be focused, they need to be educated about VAT in plain language and they need to be given a forum to express their opinions to their decision makers.
To assist in this process of engaging the people on this issue, a group of young Bahamians called Citizens for a Better Bahamas aims to launch a broad based educational campaign on VAT throughout our community streets, through social media and on our webpage: www.citizensforabetterbahamas.org.
Our core campaign objective is to launch a petition both on-line and on the street specific to each constituency and addressed directly to each member of parliament. The petition will request each representative to vote NO to a VAT implementation of July 1 and to consider responsible alternatives.
We understand that this is a tall order on a tight time-line but we believe it is through activities like these that we will be able to help our decision makers know that we are all here, we are all aware and we wish to be heard.
You are here tonight because you are aware and you want to know more. But is your neighbour aware? Or your co-workers? Or your extended family? It will only be through a re-connection of our entire community that we will have our voices heard.
Citizens for a Better Bahamas is poised to become that re-connection point for our nation. But we recognise that on this issue there is a need to move quickly and we recognise that we cannot do it alone. We need YOU, EACH AND EVERY ONE OF YOU, we need your time, we need your talent, and yes we need your financial support.
We each have a vested interest in the outcome of the VAT debate. If we put aside our differences of background and social status and denomination and political affiliation and bind together as Citizens of the Commonwealth of the Bahamas I believe our voice will be heard and acknowledged by our decision makers.
It was Margaret Meade who once told us “Never believe that a few caring people can’t change the world. For, indeed, that’s all who ever have.”
Fellow citizens, if you believe in this simple idea I ask that you join us. Together we are better and together we can build a Better Bahamas.
November 17, 2013
What do you think? Send your comments to pnunez@tribunemedia.net or join the conversation on tribune242

Thursday, November 21, 2013

A report on the administration of justice in The Bahamas ...and improving the justice system in The Bahamas

IDB Concerned With Bahamas Justice System

by Ianthia Smith
The Bahama Journal

Officials at the Inter-American Development Bank (IDB) have expressed major concerns with the administration of justice in The Bahamas, particularly as it relates to the low conviction rate and the fact that more than 300 accused murderers are out on bail.

In fact, the IDB is so concerned with the dismal statistics that the organisation has pledged to pump $250,000 into improving the justice system in The Bahamas.

In a recent report, the IDB said during the 2005 to 2009 period only 5.1 per cent of murder cases resulted in convictions, adding that within the last five years, 305 accused murderers have been released on bail.

“This situation can partly explain why The Bahamas, although superior to the regional average, has recently shown a marked decline in its values for the world governance indicator related to the rule of law,” the document added.

That figure dropped from more than 85 per cent in 2007 to just over 65 per cent in 2011.

The report went on to point out that in The Bahamas there is consensus about the limited institutional capacity of the justice system to respond to the public’s demands and added that this situation is contributing to the recent dramatic increase in incidents of violence and crimes that remain unresolved amid an increasing judicial backlog and a diminishing number of convictions.

“Today, few people doubt that sustainable development depends on the credibility of the legal system, the quality of the legal framework, the effective protection of property rights and the honesty, effectiveness and efficiency of the agencies in charge of applying the law to specific cases,” the document added.

“To properly perform its role, a justice system should also be expeditious, which means that the system effectively completes cases in a reasonable time.”

It is for that reason that the IDB has approved technical cooperation for a pilot project to support the government’s Swift Justice Programme and has committed to giving The Bahamas $250,000 and an additional $24,000 local counterpart funding, to assist with this fight.

To improve court reporting and transcript generation, which the IDB notes still consists of a transcriber, while the modern digital court reporting includes broadcast quality microphones and digital recorders, the IDB has committed $110,00 while another $77,000 will be to support the implementation of an integration justice information system with an efficient business model that will seek to strengthen cooperation, coordination and communication among the Attorney General’s Office, the police and the judiciary and $66,000 will go towards the reduction of the Supreme Court’s backlog.

But with this technical cooperation comes risks, the IDB noted that the government and judiciary may not be sufficiently coordinated, there may be difficult interaction between the different government agencies as well as delays in execution due to a lack of knowledge and experience with IDB-financed operations.

November 20, 2013

Jones Bahamas

Sunday, November 17, 2013

The private sector in The Bahamas was challenged to present a viable alternative to Value Added Tax (VAT) ... by Prime Minister Perry Christie

Pm Challenge On Vat Alternatives

Tribune Staff Reporter

PRIME Minister Perry Christie yesterday challenged the private sector to present a viable alternative to Value Added Tax.
Responding to the concerns of businessmen worried about how VAT will affect the cost of doing business, Mr Christie pointed out that after the public rejected the option of boosting revenue by regulating web shop gaming, the government had to find some form of taxation to sustain development.
“We require additional revenue to be able to meet debt servicing obligations,” he said, “we need additional revenue to be able to have a resurgence in the economy, we need additional revenue for infrastructural development. The question is, when the government sought to seek the Bahamian people’s approval on the referendum, the Bahamian people indicated no.
“The government then brought forward what has been in play for a very long time – Value Added Tax. If there is serious objection to it, the government must listen and the government must give consideration, but the government surely would not be expected to just listen to those who oppose without having an alternative.
“Everyone in the country must know that to sustain our development, for there to be sensible, serious, forward looking discussion, it has to be accompanied – particularly from people who are involved in the economy – it has to come with alternatives.
“I would expect therefore if [businesses] are going to present me with a paper, they will be arguing to agree on a different form of taxation.”
Mr Christie has hinted that he might be open to postponing the VAT target implementation date of July 1, 2014, if the government is not prepared for it.
He said the private sector needs to realise it is on a collision “cause” with government over the need for additional revenue, and asked “what is the alternative” to VAT?
The Prime Minister added that he was not at all concerned over the level of angst being expressed by the business community regarding VAT and the potential problems it might cause for individual businesses.
“Quite frankly,” he said, “I am appreciative of all of the discussions that are taking place on VAT.
“At some stage I am sure the business community, (will recognise) that we are on a collision cause – c.a.u.s.e – with respect to this matter, that we need additional revenue.”
The government is proposing to implement VAT on July 1, 2014, at a rate of 15 per cent, with the hotel industry to be subject to a lower 10 per cent rate.
Mr Christie said, however, that ultimately, he will have the final say on implementation.
For their part, the co-chairs for the private sector’s Tax Coalition have praised indications that the Prime Minister was open to postponing VAT implementation day as “fantastic”, warning it was “paramount” that the economy be protected.
Pointing out that the government would not achieve its revenue-raising objectives if the economy “went to hell in a hand basket”, Robert Myers said he was interpreting the indications positively, and as a sign that the government was listening to the private sector’s concerns.
November 08, 2013