Higher taxes for the business community may erode investor confidence says The Nassau Institute

'Taxes hitting investor confidence'
By INDERIA SAUNDERS
Guardian Business Reporter
inderia@nasguard.com:



The Nassau Institute is pressing government to accept investor confidence may be eroded because of recent changes to public policies that have resulted in higher taxes for the business community.

It's among the most recent commentaries put forth by the group that advocates a free market Bahamas.

While the institute agrees that the U.S. economic downturn has serious consequences for The Bahamas, it believes there are things that can be done to help inject some enthusiasm into the entrepreneurial class-and introducing new taxes is not one of them.

"A government should not be destabilizing the business community with excessive taxation nor blindsiding them with rule/regulation changes that do not seem to be well thought out,"said a statement from the group."Yet The Bahamas economy has certainly had an abundance of new taxation and regulation in recent months.

"The government, while finally realizing their profligate borrowing and spending must be brought under control. It should also accept that investor confidence is rattled when they are not sure what public policies to expect next. So there is a delicate balance between"reasonable"taxes and rules/regulations and over taxing and over burdensome rules/regulations."

According to the institute, the public sector is now beginning to experience the devastating effects of these very tough economic times that the private sector has been under for two years now, and there are no easy political answers. It points to a recent article written by Dr. Robert Higgs, an economist, who asserts genuine economic recovery requires a substantial reduction of government expenditure, taxes and regulations, along with a credible government commitment to stay this less burdensome course.

The columnist believes it would give private entrepreneurs the confidence and time to generate prosperity; however, he said that anemic private employment tempts politicians to intervene even more in the economy, which heightens the uncertainty and discouraging investors further in a vicious cycle.

It's something the Nassau Institute agrees with fully.

"Recovery depends on private sector growth,"it said,"and shrinking the size of a government(expenditure, borrowing, taxes, regulation)that is now beyond the capacity of the private sector to support."

8/16/2010

thenassauguardian

Bahamas Blog International

Bahamas government fiscally irresponsible

By The Nassau Institute:

The Tribune Business recently featured Mr Zhivago Laing’s position on the Moody’s Investor Services Report on the debt level of The Bahamas.

Many of Mr Laing’s comments are correct and perhaps the Government may now be thinking about taking corrective action to reduce the country’s debt load.

It may be too little and too late.

Unfortunately, the focus is on increasing taxation and not reducing government spending. Year over year deficits reflect a policy of spending more than the country’s income can support.

The private sector is limited to spending more than it earns for only a short time before bankers and owners become uneasy and force changes. Raising prices, like government is proposing in the form of increased taxes, is not the answer in a competitive market, particularly as the Bahamian product long ago reached a non-competitive price level with other countries offering the same or similar products.

Raising taxes is economically damaging and a shortsighted policy without seriously pursuing drastic cuts in spending.

Some areas to cut government spending

Cut spending, waste and corruption in government like you mean it before considering increased taxation. Beside the many recommendations at www.nassauinstitute.org over the years, here are few quick ideas that will help reduce spending:

1. Combine several of the Government Ministries. Do we really need more than 20 Cabinet Ministers at this time? Reducing the number of Cabinet posts will also reduce the number of chauffeur driven cars and their attendant costs etc.
   
   


2. Immediately cut all travel. Is it really necessary to go to all the symposiums around the world with entourages that stay in the finest hotels etc? Many private sector meetings and training are now held over the Internet. Is the government immune to using the new technology?
   
   


3. How about selling off some of those embassy buildings around the world? Are they really required?
   
   


4. Turn the tap off on the waste at Bahamas Air and other drains on the public purse.

With a debt to GDP ratio, including contingent liabilities at or near 54%, Mr. Laing, and by extension Parliament, seem more focused on expanding the tax base rather than cutting government spending. Every Member of Parliament knows that the government has not been fiscally responsible, but all of them, to a man, only see one way to fix their insatiable appetite for spending – Stick it to the taxpayer. And history shows us that even with more revenue, government deficits continue unabated.

The business community and private citizens have taken this recession on the nose all the while the government has continued increasing spending and borrowing when many business people and individuals have been cut off.

Limit tax and debt levels

Tax increases should be the last resort, and only after the bitter medicine of reducing the size and scope of government and its rapacious taxing and spending have been brought under control.

If at the end of the day there is no other way to get out of this mess than to raise taxes, a Constitutional amendment or at minimum a law should limit government debt levels to no more than 40% of GDP incorporating a limit on the total level of taxation.

These are tough times for every Bahamian, but increasing the tax burden will slow the economy even more. Something the government should studiously avoid.

The Nassau Institute is an independent, a-political, non-profit institute that promotes economic growth in a free market economy with limited government, in a society that embraces the rule of law and the right to private property.


April 5, 2010


caribbeannetnews

Bahamas Blog International