Showing posts with label Bahamas government spending. Show all posts
Showing posts with label Bahamas government spending. Show all posts

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



By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net


“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


Sunday, January 23, 2011

The Bahamas' economy ranked 46th in a listing of the world's freest economies

Bahamas: 46th in list of world's freest economies
tribune242



A "poor trade regime" and "intrusive" bureaucracy prevented the Bahamas from ranking higher on this year's Index of Economic Freedom.

The Bahamas' economy ranked 46th in a listing of the world's freest economies according to the Heritage Foundation's 2011 Index of Economic Freedom.

The Bahamas also ranked eighth out of 29 countries in the South and Central America/Caribbean region with its overall score, coming in higher than the regional and world averages, said the website.

The country's overall score - or economic freedom - came in at 68 "due primarily to higher scores in fiscal freedom, government spending, and monetary freedom", according to data collected by the research and educational institution.

However a "poor trade regime remains one of the most cumbersome challenges," said the think tank.

The report added that "an abundance of tariff and non-tariff barriers continues to create a costly trade burden."

"Intrusively bureaucratic approval processes hinder investment freedom and undermine development of a more vibrant private sector," the organisation said.

The Bahamas scored 55 in freedom from corruption due to ongoing software, music and movie piracy, and reports that drug trafficking and money laundering involve police, coast guard, and other government employees.

"Violent crime has escalated sharply. Even though internet gambling is illegal, many online gambling sites are reportedly based in the Bahamas, sometimes using internet cafés as fronts. The Bahamas has neither signed nor ratified the UN Convention Against Corruption," noted the survey.

Business freedom was ranked at 72.5 out of 100, and while the report said that the Bahamas' regulatory environment is advantageous to private-sector development, "the process for obtaining a business licence is not always transparent and straightforward, and officials have considerable discretionary power". Government recently passed a new Business Licence Act - which came into force on January 1 - aimed at streamlining the process for applying for a business licence and removing the red tape involved.

Trade freedom and investment freedom scored the lowest coming in at 42.2 and 30 respectively.

"High tariffs and a stamp tax on most imports, high duties that protect a few agricultural items and consumer goods, occasional import bans, and some import licencing and permits add to the cost of trade," noted the report. "Ten points were deducted from the Bahamas' trade freedom score to account for non-tariff barriers."

Investment freedom got the lowest scoring due to the many areas of business reserved solely for Bahamians and the barriers for international investors.

The Heritage Foundation is a think-tank based in Washington, DC which defines economic freedom as "the fundamental right of every human to control his or her own labor and property".

The Foundation measures ten components of economic freedom - business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption, and labour freedom - using a scale from 0 to 100, where 100 represents the maximum freedom.

These scores are then averaged to give an overall economic freedom score for each country.

Hong Kong, Singapore and Australia were the top three countries respectively, while the United States placed ninth with an overall score of 77.8.

January 22, 2011

tribune242