Bahamas Real Estate Association (BREA) recommends to the Government that it reduce Stamp Duty on property deals by 2 percentage points “across the board” ...taking the rates back to where they were before the 2010-2011 Budget

Realtors Recommend Stamp Duty Cuts 'Across The Board'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Real Estate Association (BREA) has recommended to the Government that it reduce Stamp Duty on property deals by 2 percentage points “across the board”, taking the rates back to where they were before the 2010-2011 Budget.

Franon Wilson, BREA’s president, confirmed in a recent interview with Tribune Business that the Association had recommended to the Christie administration that it look beyond the cut in the top Stamp Duty rate, from 12 per cent to 10 per cent, which it brought in with the 2012-2013 Budget.

“That’s one of the things we recommended, yes,” Mr Wilson said, when asked by Tribune Business whether BREA had recommended that all Stamp Duty rates be reduced by two percentage points.

“One of the things we did invite the Government to consider was reducing that across the board, as what it would do for the $250,000-plus category it would do for all others as well.

“We’re grateful that at least one group will see a benefit, but that same excitement that group over $250,000 has would be shared locally with everyone else/.”

Still, Mr Wilson said BREA and its members welcomed “anything to reduce the cost of home ownership” and stimulate activity in the market.

Stamp Duty is effectively a one-time cost imposed on real estate transactions, and Mr Wilson said the cut in the top rate would boost activity in middle class Bahamian communities such as Twynam Heights.

The revised Stamp Duty structure involves a 4 per cent rate on property valued at $20,000 or less; 6 per cent for property valued between $20,000 and $50,000; 8 per cent for property valued at between $50,001 and $100,000; and 10 per cent for holdings greater than $100,000.

Mike Lightbourn, head of Coldwell Banker Lightbourn Realty, said that any Stamp Duty reduction was welcome, but the real estate industry needed to remember that the Government had to raise revenues somewhere.

Noting that the Government had given up much in Stamp Duty with the exemptions for first-time buyers on properties worth up to $500,000, Mr Lightbourn added: “The less taxes the better, but that’s one of the sources of revenue. Any time you don’t have to pay Stamp Duty, it all helps.”

William Wong, head of William Wong & Associates, said the Government should follow BREA’s recommendation and reduce Stamp Duty rates across all price brackets.

“I’m hoping they will take a look at it and make the necessary changes,” Mr Wong said.

July 04, 2012

Tribune242

Caribbean Blog International

...does the national budget for fiscal year 2012/13 address the important promises that were made during the recently completed general election campaign?

The Budget: Part I

Consider this

By Philip C. Galanis

On Wednesday past, May 30, the prime minister and minister of finance presented his much-anticipated first budget of the new administration that was elected only two weeks ago.  This week, we would like to Consider This… does the national budget for fiscal year 2012/13 address the important promises that were made during the recently completed general election campaign?

The short answer is that it begins to do so.  However, the extent to which it does is severely constrained by the distressing state of public finances that the Christie administration inherited from the former administration.  In addition, there is a time constraint challenge that significantly factors into what was contained in Prime Minister Christie’s recent Budget Communication.

For the past few terms, when general elections were held in early May of 2002, 2007 and 2012, the usual mid-May budgetary process has been punctuated by a change of government which imposed severe restrictions on the victor because of the very narrow time line between the elections and the required presentation of the national budget.  Therefore, in the absence of a predetermined fixed election date, successive governments should make a deliberate effort to avoid holding general elections in May because of the constraints that this event places on the implementation of a national budget designed to address the victor’s national agenda.  More about that at another time.

The state of public finances

It is now becoming increasingly evident that the former FNM administration that has always claimed to be a government of accountability and transparency has been neither. An early indication of this was first observed in the Ingraham Administration’s deliberate negligence to submit its customary and much anticipated mid-year budget report earlier this year.  It can be reasonably surmised that the former prime minister and minister of finance consciously decided to forego this practice in 2012, which he himself introduced with much fanfare and consistent conformity, for purely political reasons.

The former prime minister and his Cabinet clearly realized that if they honestly reported the state of public finances at mid-year, their deplorable financial performance would have been received with shock and awe by the Bahamian citizenry.  In the run up to elections, an honest report would likely have brought about an even more devastating outcome at the polls, and therefore, presumably, the FNM government took a conscious decision to withhold such reporting from the public, hoping that the public would place the lack of a report in the “no news is good news” category.

Another example of the FNM government’s willful refusal to report on the true state of public finances pertained to the New Providence road works, which the Public Accounts Committee, under the chairmanship of the Hon. Dr. Bernard Nottage, revealed had incurred a budget overrun of nearly $100 million.

A third instance of the FNM government’s lack of accountability regarding public finances was exposed in the current prime minister’s communication last week when the latter reported the horrendously high and historically unprecedented total deficit for 2011/2012 which rose to a record level of $570 million versus an approved total deficit of $314 million, an increase of $256 million or 82 percent more than was originally anticipated.  In line with the International Monetary Fund Government Finance Statistics (GFS) concept, the GFS deficit, which is the total deficit less debt redemption, for 2011/12 is projected to result in $504 million or 6.3 percent of gross domestic product (GDP). This is double the 3.0 percent that was presented by Mr. Ingraham as the forecast in last year’s Budget Communication.

Finally, the FNM government’s legacy to the national debt is equally disappointing and extraordinarily dismaying.  The national debt increased from $3 billion to $4.3 billion during its term in office from 2007 to 2012, an increase of 40 percent in five years.  This represents an historically high debt to GDP ratio of 56 percent.  Because of this inherited unparalleled GFS budget deficit of $504 million for 2012, the Christie administration will have to borrow an additional $504 million in order to pay off the financial excesses of the Ingraham administration.

The national debt will therefore increase to $4.8 billion by the end of the next fiscal year. But it gets worse. Again, because of the excessive commitments and spending of the Ingraham administration, all things being equal, and barring any unforeseen catastrophic developments over the next two years, given a projected record GFS deficit of $550 million for fiscal year 2013/14, is anticipated that the national debt will increase to well over $5.4 billion by 2014. This will represent a disastrously high debt to GDP ratio in excess of 60 percent.

All these unmatched and unequalled negative performance measures that the government inherited were incurred by an FNM government that frequently and triumphantly trumpeted its commitment to good governance, fiscal prudence, sound financial management, accountability and transparency in public finances.

It is fair to say that so-called good governance, fiscal prudence, sound financial management, accountability and transparency in public finances notwithstanding, Mr. Ingraham and his FNM Government have unquestionably left Mr. Christie and his government in a financial pickle.

Promises to keep

In spite of the alarming news, the Christie administration is still very determined to implement its agenda as articulated in its 100 day promises, the Charter for Governance, the Speech from the Throne and the Budget Communication.  While it will be enormously constrained by the fiscal realities that it has inherited, the new government has set about delivering on the social contract that serves as a basis of the mandate it was given on May 7.

It will be important for the new government to regularly give the Bahamian people an open and candid account of its stewardship over the next five years if it hopes to break the recent trend of one-term governments.

Conclusion

Next week, we will examine how the new administration’s budgetary provisions plan to remain true to its pledges to an impatient and hurting populace whose expectations for relief and renewal are extremely high and to what extent the national budget for 2012/13 will seek to meet those high expectations.

Philip C. Galanis is the managing partner of HLB Galanis & Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament.  Please send your comments to: pgalanis@gmail.com

Jun 04, 2012

thenassauguardian

The Budget: Part II

Caribbean Blog International

Bahamas Economy Is In A Depression says Veteran Banker Al Jarrett

Economy In Depression
By Kendea Jones:



Veteran banker Al Jarrett said yesterday that the country is really in a depression rather than in a recession because there has been no positive growth in the country for two consecutive years.

What’s worse, according to Mr. Jarrett is that the country’s may not recover next year.

"A recession is a down swing but it comes back in at 12 months. It started in 2008 and 2011 is headed in that direction. The government has yet to give you what the negative growth is in 2010 and this year is just as bad as last year in terms of the deficits and debts," he said while appearing on the Love97/JCN programme "Jones and Company".

Mr. Jarrett said he has been following financial reports from the government closely and that he is convinced that the deficit is higher than has been reported by the government.

"Based on the government’s numbers as I see them we are looking at 4 per cent GDP. I deal with the facts that come out of the government agencies themselves. The problem is the government has been [misrepresenting] the figures. Last year, they showed the wrong debt structure when they did the budget and this year they showed the wrong GDP. Moody’s Credit Rating just corrected the government the other day. When the agency saw that, it put (government) on notice that the national debt is going to be 64 per cent."

To prove his point Mr. Jarrett said most countries use one formula to calculate their GDP.

"If you have a declining GDP that comes from the existing GDP and it is deducted. If the GDP is increasing it is added. The International Monetary Fund (IMF) says the GDP is 5 per cent, the government says its 4.3 per cent Moody’s says its 4.5 per cent, the Central Bank says its 5 and that’s in 2009," he explained.

"Now in 2010, the figures aren’t even out yet and the government is saying it is 0.5 per cent and Moody’s is saying it is 1 per cent. I am saying it is three per cent based upon on what they are saying," Mr. Jarrett said. "They have not produced a number that was correct in three years because they put the wrong numbers in from the beginning."

Government debt at the end of June 2011 is projected to stand at 49.2 per cent of GDP, up from 47.3 per cent a year earlier, according to officials.

When asked by host Wendall Jones if political affiliation to the Progressive Liberal Party (PLP) had anything to do with his findings, Mr. Jarrett quickly dismissed that assertion.

"It’s sad when Bahamians get to the point when they cannot engage you intellectually. I can’t deal with people who make statements like that because I deal with facts. I can’t respond to that. I am one of the freest Bahamians in this country. I never lied to the Bahamian public in television or radio. If I have to lie on the behalf of a political party then that party does not deserve to be in office," he said.

Mr. Jarrett also said it is clear that the government did not present a budget that was in the best interest of Bahamians.

"I think that the government made a mistake or it was too lazy to produce a budget that was all encompassing and affecting the country and its people. They were concerned about the offset budget to impress the IMF that they were doing something about the mounting debts of $1 billion plus dollars and they were told they had to stop borrowing," Mr. Jarrett said.

"Now they have to offset projects. The government has put itself in a position where the international agencies are now looking at them very closely because they came close to the edge with the over-borrowing and record deficits and debts."

The veteran banker said he believes that international agencies dictate the government’s budget.

"They are following the dictates of the international agencies and the IMF because they are saying to the government that ‘if you don’t stop what you are doing we are going to downgrade you,’" Mr. Jarrett said.

"The agencies are also saying that ‘you are going to be downgraded unless you start putting out realistic budgets that makes sense and can be achievable. You are overstating your revenues and you are increasing your expenditure based on false revenues."

Mr. Jarrett said if he were minister of finance, international financial watchdogs would have no need to make these kinds of statements.

"I would not have gone on a borrowing binge unless I had a real stimulus. I would have made sure that if I produced a budget, on the revenue side it would have been more conservative and more realistic to reflect the times we are in," he said.

"Once you have the experience and the knowledge to understand the financial market and microeconomics you would know these things."

State Minister for Finance Zhivargo Laing was quick to shoot down Mr. Jarrett’s assertion by saying the veteran banker is the one who is mistaken.

"That is just utter nonsense," he said when contacted by the Journal. "The problem with what Al Jarrett says is that he is speaking to GDP over a calendar year from January to December but the fiscal year runs from July to June. So what happens is that you have to do an average of the GDP over two halves of a calendar year to capture what the GDP would be over a fiscal period."

"When he suggest that we did not include the contraction of last year and this year, he has no clue that in a fiscal period you have to calculate over the 12 -month period in the fiscal year."

The minister also expressed confidence that the economy will begin to rebound next year.

"What we are forecasting and what the IMF is forecasting is that there will be some improvement next year over this year" Minister Laing said.

The government’s $1.8 billion came into effect on July 1.

The budget allocates some $1.55 billion for recurrent expenditure and more than $265 million for capital expenditure.

The government is however determined to tighten the rein on revenue collection.

Getting its fiscal house in order has also forced the government to roll out tough cuts to public spending and a raft of tax increases.

Immediately after doing so, the Opposition slammed the new fiscal plan as a "tax and pain budget" that would only put more pressure on the backs of Bahamians.

But Minister Laing insists that the government is doing what it can to cut the deficit.

"It is in the interest for the people of the Commonwealth of The Bahamas and generations of Bahamians to be able to have our deficit reduced and borrowing reduced because it helps us to position ourselves in the event that something else should happen in the future," he said. "Al Jarrett’s comments are often laced with his own political agenda."

July 26th, 2010

jonesbahamas

Bahamas Blog International

The Bahamas 2005-2006 Fiscal Deficit is Projected to Increase Over the Previous Period

The Bahamas 2005-2006 National Budget Projects The Government Finance Statistic (GFS) Deficit of $172 million

Budget Deficit Soars

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

26th May 2005

The 2005-2006 budget projects a GFS deficit of $172 million, which would be $30 million more than the deficit expected when this fiscal year draws to a close on June 30.

The $172 million deficit would be 2.8 percent of GDP and would be the highest deficit since fiscal year 2002-2003 when the spending shortfall came in at $184 million.

There are several factors that are expected to contribute to increased spending in the 2005-2006 fiscal year, Acting Prime Minister Cynthia Pratt announced in the House of Assembly yesterday.

The recurrent expenditure is pegged at $1.214 billion, which is an increase of $39 million or 3 percent over the 2004/2005 budget.

"The single major component of the increase is the provision in the Ministry of Finance Estimates to pay increases for public servants and related groups, arising from the present negotiations, as well as some increase in benefits for retired public servants," Mrs. Pratt announced.

"Another important increase is for the improvement in insurance arrangements for the Royal Bahamas Police Force, the Royal Bahamas Defence Force and the other law enforcement officers."

This comes to a total of $8 million, the Acting Prime Minister announced.

In addition to the GFS deficit, one of the traditional highlights in the annual budget communication is the ratio of government debt to GDP given that financial experts continue to advise that this ratio should be kept as near as possible to 30 percent of GDP to avoid the problems which would arise from a ratio significantly in excess of that level.

Exceeding the 40 percent mark could mean that the government’s ability to borrow money would be severely constrained and it would be forced to sharply increase taxes, Mrs. Pratt reiterated during her communication, which she delivered on behalf of Prime Minister and Minister of Finance Perry Christie, who is still convalescing at home three weeks after suffering a slight stroke.

"Fiscal deficits arise if we spend more than we earn in revenues and if this situation continues for long enough we build up massive borrowing problems," Mrs. Pratt pointed out.

She added that circumstances are quite different if the ratio of government debt to GDP is closer to 30 percent.

"There would be much greater scope to avoid these drastic remedies because there would be the capacity to borrow until the economic situation improves and until revenues recover so as to again close the gap between revenue and expenditure.  This is what transpired in 2001 and 2002," the Acting Prime Minister said.

She said in order to bring the ratio of government debt to GDP as close as possible to 30 percent revenues must consistently attain the level of 20 percent of GDP.

"At that level, we can also provide the level of revenue resources which we need for ongoing public expenditure while containing the fiscal deficit," Mrs. Pratt said.

She also noted that successive governments have tried to attain the ratio of government revenue to GDP of about 20 percent.

At that level, Mrs. Pratt said, Bahamians could enjoy a reasonable level of public services without the introduction of taxation to pay for them.

"However, the ratio of revenue to GDP of 20 percent is becoming increasingly hard to achieve because of the narrowness of our revenue system, heavily dependent as it is on customs revenues and the non-taxation of services.  Thus, the expansion of essential public services has resulted in fiscal deficits emerging, which have been met by borrowing.

"As a result, the level of government debt to GDP has risen inexorably since the year 2000.  In recognition of this issue, in the 2005/2006 budget- the government is aiming to contain the ratio of government debt to GDP to under 38 percent."

The Acting Prime Minister also said that the government is continuing an aggressive process of addressing tax reform to improve its revenue situation.

The 2005-2006 budget projects recurrent revenue of $1.145 billion, an increase of $93 million or 9 percent over the 2004/2005 budget.

"The reason for projecting an increase of 9 percent over 2004/2005 is because of the strengthening of the economy, with growth in current terms of over five percent and the heightened emphasis being given to concrete and specific improvement in revenue administration," Mrs. Pratt said.

The Acting Prime Minister also announced that the government plans to improve all of the country’s national airports to raise them to the highest standards required.

"Accordingly, a variety of air navigational fees and related charges in the Family Islands are being increased to more realistic levels to meet part of the cost," she announced.  "In addition, it is intended to implement passenger facility fees at major airports as part of the cost recovery exercise."

Prime Minister Perry Christie's Consolative News on The Budget Deficit

Prime Minister Christie's comforting words on the deficit: ...new revenue figures seem set to improve the fiscal outlook and GFS deficit for next year

Deficit Forecast Revised

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

21/06/2004

More than three weeks after his deficit projections in the budget communication sparked criticism in some quarters, Prime Minister Perry Christie has revised those numbers, providing a more positive forecast.

Mr. Christie told the Journal shortly after Members of Parliament passed the 2004/2005 budget late Friday night that new revenue figures seem set to improve the fiscal outlook and GFS deficit for next year.

The budget projects a GFS deficit of $164 million, but the prime minister said it is likely that the figure will be less.

He said the new expectation is that the deficit for 2004/2005 could be closer to 2.5 percent of GDP as opposed to the 2.9 percent he projected in the budget communication on May 26.

At the time, the prime minister said, "If the process of reviewing the national accounts data leads to substantial increases in the GDP data, the actual level of GSF deficit could be considerably lower."

While speaking to the Journal, he said his hopes have been realized.

"We were projecting an outturn for 2003/2004 of $920 million," Mr. Christie said.  "We have now been informed that the revenue of $920 million has already been registered and it is likely that we will record an amount nearer to $950 million.  We believe that this is indicative of the improved techniques and procedures in revenue collections."

The prime minister said it is important for him and his government to see this as an indicator because they have argued in the budget presentation that there will be 3 percent growth in the economy this year.

When added to improved revenue collections, this would allow the government to "attack" the GFS deficit, he said.

"What I think is to be learnt from this is that the efforts of the Ministry of Finance to introduce technology and expertise inclusive of equipment for the enhanced collection of revenue is serving to be to the advantage of the government," the prime minister said.

"We have truly predicated our budget on this basis: We believe that rather than pass additional taxes, which in part was recommended by the [International Monetary Fund], that we are able to, based on historical evidence, take advantage of the capital inflows as a result of the Kerzner development."

He told the Journal that the government has every reason to continue with its optimism.

Only days after he introduced his "no new taxes" budget, Prime Minister Christie faced opposition in and outside of parliament.

Although saying that he was not seeking to put himself at odds with Mr. Christie and his government, Central Bank Governor Julian Francis spoke of the need for Bahamians to pay more taxes to finance government services.

Mr. Francis also warned against continued borrowing to cover the deficit.

When asked to respond to the governor's suggestions, Mr. Christie said, "It shows that if he has done that, and he is able to do it independently of the process of governance of the country, that there is something that we should be doing to harmonize the efforts of those who advise me in the Ministry of Finance and those agencies that are a part of the financial governance of the country, like the Central Bank."

He added, "We ought to make every effort to ensure that we're working together."

Mr. Christie's revision to his deficit forecast came only a day after former Prime Minister Hubert Ingraham told parliament that the new budget does not provide the right tonic for the country's fiscal predicament.

"I assert that now is not the time for reliance to be placed upon unrealistic revenue increases from existing taxation," Mr. Ingraham said.

He also urged the prime minister to "rein your colleagues in."

"They are spending and committing to spending too much," Mr. Ingraham said.  "You have to tell them there are no available government jobs now; they will come when there is strong economic growth and larger investment inflows.  And tell them unless spending is restrained, there won't be any jobs for them."

But a confident prime minister said Friday that, "The growing strength of the economy in 2004 and 2005 will generate significant additional revenues."

The budget debate is scheduled to begin in the Senate today to give Senators enough time to pass the spending plan in time for the new fiscal year, which begins July 1.