The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Tax Coalition’s co-chair yesterday reiterated that the Bahamas “cannot tax our way out of” the current fiscal crisis, as he urged this nation to avoid the “disturbing” example set by Barbados.

Robert Myers called on this nation to develop a “blended plan” that mixed tax and fiscal reform with economic growth and attracting foreign direct investment (FDI), adding that cutting the public sector workforce by 30 per cent was “not the way to go”.

Barbados, in fiscal desperation, last week moved to do something similar, unveiling a plan to lay-off 3,000 public sector workers - almost one out of every eight employees - between January and March next year.

Urging the Bahamas to learn from a country that was “ahead of us on the negative curve”, Mr Myers said this nation needed to remain in control of its destiny and “not go crazy” like Barbados.

“It’s very disturbing and we should be very mindful of it,” he told Tribune Business of the example set by Barbados, which has a debt-to-GDP ratio over 100 per cent despite implementing Value-Added Tax (VAT) over a decade ago, along with other revenue raising measures.

Many in the Bahamian private sector believe Barbados’s traumas prove that VAT, and relying solely on revenue-side reforms, are no panacea for fiscal woes. One, observing the developments last week, said unequivocally: “VAT has not saved Barbados.”

The Christie administration’s solution to $400-$500 million fiscal deficits, and a $5.5 billion national debt, to-date has focused almost exclusively on VAT and other revenue enhancements designed to generate an extra $500 million in government income by 2016-2017.

Talk of spending cuts/restraint has, to-date, been relatively vague, and many in the private sector are reluctant to give the Government a ‘blank cheque’ for fear the extra VAT and other monies will not go towards deficit/debt reduction.

Implying that he agreed with their sentiments, Mr Myers said: “We have to make sure this is about fiscal reform and not just about tax reform.

“We’re not going to tax our way out of this problem. That’s what we need to be focused on; not going down that [Barbados] road. We can learn from it. They’re ahead of us on the negative curve, so let’s put it together and make sure we don’t head down the same road.

“Let’s do it when everyone can remain calm, sort this thing out, be sensible about it, make sure this economy moves forward, attract foreign direct investment and plan our way through, not go crazy like Barbados has,” the Coalition for Responsible Taxation’s co-chair added.

“We want to cut back government spending, but not cut 30 per cent of government.

“Government needs to start talking to the public, unions and the civil servants about how we reduce costs or hold them at bay, drive efficiency, create accountability, remain competitive and enforce the rule of law. Tax is but one element of the fiscal reform needed to get this country out of the mess we are in.”

The Bahamas, added Mr Myers, needed to strike a balance between fiscal reform and raising revenue on one side, and reduced government spending, economic growth and job creation, and increased foreign direct investment (FDI) on the other.

“Let’s work our way out of this, not tax our way out of this, and if we can do that we will be very successful,” he told Tribune Business.

“If you look at Barbados, it’s scary and they don’t have a choice, while we have. Let’s get our act together, make sure we make the right decisions for our economy. I couldn’t shout that loud enough from the highest hill in Nassau.”

Mr Myers also pointed to Barbados’s inability to pay businesses their due VAT ‘refunds’, one company having complained it was owed $32,000 going back some two-and-a-half years.