Telecoms 'ripe' for increased taxation says former Chamber of Commerce president Dionisio D'Aguilar

Telecoms 'ripe' for more taxes
By NEIL HARTNELL
Tribune Business Editor:


Telecommunications is an industry "ripe" for increased taxation, a former Chamber of Commerce president yesterday urging the Government to "come up with innovative ways" to raise revenue by increasing fees on industries that paid "negligible taxes", such as banks/trust companies and the numbers business.

Suggesting that the Government impose a 1-2 per cent tax on making/receiving telephone calls, which is effectively a Bahamian national pasttime, Dionisio D'Aguilar said that if the Ingraham administration sought to raise revenues in its 2010-2011 Budget, it needed to look at fee increases that had the "least effect on the average person in the street".

Urging the Government to "come up with innovative ways to raise additional revenues", Mr D'Aguilar, who is also Superwash's president, told Tribune Business: "There are sectors of our economy that pay negligible taxes. Telecoms, that's a ripe one. Everyone pays a tax on their incoming calls. That's a totally undertaxed sector."

Mr D'Aguilar said such telecoms taxes were already levied in many other countries, and said a 1-2 per cent tax on telephone calls was "negligible to the consumer", especially since many Bahamians treated their cellular phones as a luxury.

Adding that he disagreed with fellow businessman Franklyn Wilson, who yesterday told Tribune Business that legalising gaming would result in net outflows from the Public Treasury, as a result of "gambling breeding poverty" and other adverse social consequences, Mr D'Aguilar said taxing the numbers business would raise millions of dollars per year in government revenue.

"Banks tend to be under-taxed compared to other businesses," he added. "It's a heavily under-taxed industry" compared to the income that Bahamian banks and trust companies generated per annum.

Mr D'Aguilar also pointed out that the Government was "not taxing services one bit", even though this was the sector accounting for the largest amount of economic activity in the Bahamas. He suggested, though, that the Ingraham administration was unlikely to do anything about this in the 2010-2011 Budget, and was likely to save it for a more comprehensive introduction of Value Added Tax (VAT).

"All you're looking at are fees, raising revenues from avenues that have the least effect on the average person in the street," Mr D'Aguilar said of the Government's efforts to plug the fiscal deficit and reduce the national debt.

"Look at the whole fee structure. There's a whole host of fees that are charged, but have not been amended, for four million years.

"They have to look at taxes that are easy to collect. Gasoline taxes are easy to collect because they are paid at the border when the fuel comes in. But property taxes are a nightmare to collect. Increasing property taxes could increase revenue, but not the Government's cash flow. And that's what we need to increase.

"The Government will not be able to get increased taxes from its traditional sources. Import duties are already high enough."

While all Bahamian governments were reluctant to cut spending and reduce the size of government, the former Chamber president suggested that the Ingraham administration now had to seize the moment offered by a public mood that was more prepared for austerity measures, and set the public finances back on track.

Arguing that the Government would find it impossible to accommodate the wishes of the likes of the Nassau Institute, which would like to see departments closed down and employees released, Mr D'Aguilar suggested that the administration "tackle" the generous pensions and benefits civil servants/public sector employees enjoyed.

Emphasising that this did not involve changes to basic salaries, the former Chamber president said: "They've got to get their house back in order. We don't want to go the way of the Greeks.

"The Government needs to look at the generous benefits it gives its employees. Salaries are one thing, but those generous and lucrative defined benefit pension plans for public sector workers and civil servants have to be tackled. That whole issue has to be tackled, as it will come home to roost one day."

May 07, 2010

tribune242

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