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

By TIMOTHY ROBERTS


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

Tribune 242 

Caribbean Blog International

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

By ADRIAN GIBSON

ajbahama@hotmail.com

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!

Tribune 242 

Caribbean Blog International

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

Bahamas.gov:


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
Bahamas.gov

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

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

By ALISON LOWE
Guardian Business Editor
alison@nasguard.com

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

thenassauguardian

Caribbean Blog International

Value Added Tax (VAT) Draft Bill and Regulations

Public Notice

VAT Draft Bill and Regulations

Published Date : November 29, 2013

Drafts:

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

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
Leader
December 1, 2013

National Anxieties over Value Added Tax (VAT)

Young Man's View: National Anxiety Over Vat

By ADRIAN GIBSON

ajbahama@hotmail.com

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

 

Tribune 242

 

Caribbean Blog International