Budget Backlashjonesbahamas:The widely unpopular 2010/2011 Budget came under fire Monday from one of the nation’s most prominent contractors and a political party leader, who both unleashed a perfect storm of criticism against the fiscal plan.
For a nation desperate for an economic lifeline, President of the Bahamian Contractors Association (BCA) President Stephen Wrinkle said this budget offered little solace.
He argued that the proposed budgetary initiatives would in fact send more workers to a growing unemployment line.
"I’m a builder and a developer and in my company, like every other company in The Bahamas today, I think everybody took pencil to paper in this last week and looked at what they can do without and who they can do without and we’re making our cuts," he said.
"The people that we were keeping because they were good staff, maybe we have to let them go now because we don’t have the workload to sustain it. We’ve been sustaining it for a year to a year-and-a-half in our industry anyway and most contractors have reached the point where unless they’ve got work in hand they are cutting back because they just can’t handle those carrying charges any longer."
Perhaps more importantly, Bahamas Democratic Movement (BDM) Leader Cassius Stuart, who is also a business consultant, said the budget had more to do with infrastructure than investing in human capital.
Both men were guests on the Love 97 weekly talk show, On Point, with hosts Rogan Smith and Tosheena Robinson-Blair.
"We are borrowing for capital development. What is frightening, though, is that we are putting the education of our people, the development of our human capital on the altar. We are sacrificing it on the altar of capital development," he said.
"How could we, on the one hand, cut expenditure for education . . . but increase capital developments for roads and other projects? It doesn’t make any sense because the number one engine in an economy is its people. People earn revenue. If the people are not being invested in or developed we’ll find ourselves fighting in the public and private sectors for more productivity from people."
He continued: "The government cut subsidies for the private schools by 20 per cent, which means that private schools will be forced to increase school fees. So now those who have children in private schools who can’t meet those [fee payments] will have to pull their kids out and put them in public schools. The public schools are already overcrowded, so where you currently have 30 or 40 students in a class in the public school, that will be increased to about 50 students."
Mr. Wrinkle said the "ugliest part of this budget" is the fact that the tax burden will continue to be placed on the only economic engine that the country has – the business community.
"We cannot continue to place the yolk of the burden on the business community without providing some incentive for growth," he said. "Our GDP is projected to shrink this year. The entire economy is in a recessionary mode, yet there’s been an increased tax burden on all aspects of business, whether it be an increase in stamp duty on legal transactions or NIB contributions for payrolls or business licence fees."
"The Industries Act was a real incentive that I think most Bahamians assumed would be a continuing incentive that would be available for manufacturing and when that was literally pulled out from underneath us with the stroke of a pen by one individual I think it sent a clear indication of how our country is governed."
Mr. Wrinkle said the business community now finds itself in a very difficult situation in very trying times.
"We’re now going to have to look at ways in which we can change our approach to not only make ends meet, but to make progress. With a shrinking economy, shrinking productivity, a shrinking market, we’ve got to offer some more growth incentive. Otherwise, all we’re doing is putting more plough on the horses and pulling it and at some point the horse is going to get tired and fall down," he said.
"I appreciate that there are only so many revenue streams that we have at the moment from which to draw. But, I am deeply disturbed that we are digging deeply at the crucial aspects of survival for our economic engine – the tourism sector: the room taxes have been increased; the departure taxes have been increased."
Mr. Wrinkle also expressed disappointment that the government does not consult the private industry.
"I think that is a tremendous loss, because you have experts in virtually every field of the budget readily available and willing to contribute to the management of the government, but we’ve got a government that holds its cards closer than Kenny Rogers did in Five Card Stud and they just don’t share information; they don’t share responsibilities or anything that they don’t have to share," he said.
Mr. Stuart agreed. He said the government should have consulted more with the relevant stakeholders.
Prime Minister Hubert Ingraham, during his budget communication, announced a number of budget cuts and tax hikes. He immediately raised the duty rates on car imports – a move that immediately sparked backlash from car dealers in the country. Many feared that their businesses would go belly up in the coming months.
A week later, after consulting with the dealers, the prime minister made several adjustments to the tax rates.
"The prime minister now finds himself, after the fact, coming to the car dealers after he discovers exactly what they are experiencing. Then he makes decisions based on what he finds. He should have just consulted with them in the first place, and by extension consulted with the mail boat operators and all of the stakeholders in society to find out what shortfalls they are experiencing" Mr. Stuart said.
The BDM leader called the budget "scary" and said for years he has been calling on the government to tighten up on spending.
"In the good times our government refused to do that. We have to be fiscally responsible and economically prudent. When things were good we were spending a lot, almost as if we were never going to reach this day. Now that we’re here the government has been forced to cut back on a lot of things and it’s needed. We now find ourselves in a place where we’re trying to figure out how we’re going to cover our costs and cover the overhead that the government has," he said.
Mr. Stuart said The Bahamas has not experienced any new growth in its industries, but has experienced a "significant" decline.
"Many small businesses, particularly in the manufacturing sector, have either shut down or downsized due to overhead costs. One of the many overhead costs that small businesses have been affected by is the increase in BEC (Bahamas Electricity Corporation) utility rates. It’s killing them," he said.
"There is a plan on the table to again increase that rate. On top of that we’re saying we want to increase National Insurance contribution rates by one per cent. Most companies are now looking through their books to see who they can let go because of the increase in overhead."
Mr. Wrinkle agreed.
He said the government has again "missed an opportunity to provide incentives for growth because without growth in the business sector, we’re not really going to climb out of this; we’re just making more demands."
"When you take away the concessions that manufacturers have, like the people that make the windows, the doors, the hurricane shutters and a myriad of consumable items, we’ve got chemical companies that make soaps – all of these things that are consumed here that save us from exporting our U.S. dollars and employ people keep people employed – it affects them," he said.
"It isn’t like the construction sector where I may have 130 employees this month, but next month I may have 50 because when our job is finished I have to let them go. When you’re building a manufacturing company and you start off with four employees, next year you’ve got six and then eight and then 12 and it’s long term. I really think this one is going to come back to bite [the government] because you can’t tell people that you want to produce Bahamian entrepreneurs and businessmen and then in a stroke of a pen you pull the rug out underneath them."
Mr. Wrinkle said he believes there is a serious disconnect between the politicians and businessmen in the country. He said while incentives for growth d not necessarily have to be tied to a budget, they should have been included.
"The fact that we don’t have adequate incentives in place is reflected in the way they address the budget. They have not looked outside the envelope of revenue stream. It appears that they had a list of the revenues and they went down with a pencil and ticked off which ones they thought they could increase and generate more revenue stream from the taxes," he said.
June 9, 2010
jonesbahamas
