Michael Halkitis
By KHRISNA VIRGIL
Tribune Staff Reporter
kvirgil@tribunemedia.net
AMID widespread resistance to the government’s revenue generation solution, Value Added Tax, State Minister for Finance Michael Halkitis said many Bahamians aren’t on board because the simply don’t know enough about it yet.
Admitting that the government has received considerable negative reaction to the move, Mr Halkitis said he is hopeful that the general consensus will improve once Bahamians fully understand VAT, thanks to education initiatives now underway.
“We never expected for everyone to be cheering on this tax reform. We knew there would be resistance and assume that will continue until people really start to understand,” he said.
“The fact of the matter is that we have had this customs duty system for too long and we can no longer finance this country because we are growing.
“I understand the noise and a lot of it will settle down when people understand more we have to do it. It is a must.”
Despite hints from the Prime Minister, Mr Halkitis said there are no plans to push back VAT’s implementation date of July 1, 2014.
He also addressed calls for the taxation of web shops, saying that even if the government were to implement this, the revenue expected would not be sufficient to solve the deficit.
This despite Prime Minister Christie’s suggestion that he had no choice but to introduce VAT, because the public rejected the gambling referendum.
“We have a budget deficit of more than $500 million and to tax web shops around $40 million is expected. So that is not the answer to our problems,” Mr Halkitis said.
“Also we would have to bring regulations to manage them and that within itself will take another year or so to be fully implemented,” he said.
Recently, Prime Minister Perry Christie said that if stakeholders could present viable alternatives to VAT, then the government would consider them.
Groups including the Bahamas Chamber of Commerce have responded to this, calling the move constructive.
Meanwhile, the business community remains largely opposed to VAT.
Comments
ohdrap4 11 years ago
And, pray tell me, whose fault is that? I am just writing my movie script, soon to be available for sale, "Dumb and Dumber , 9th dDegree"
banker 11 years ago
So you haven't released the details yet. The leaked details you say are wrong and out of date. And you say that we don't understand it? Are you another Fred Mitchell type who thinks that Bahamians are stupid and just ram it down their throats?
nationbuilder 11 years ago
these guys are revolting
MartGM 11 years ago
The education program they've started is still rather ineffectual. I went to one of those sessions just to see what they're saying. I could have saved my 1.5 hours elsewhere! These representatives for the government are simply puppets doing and saying just what they're told without any thought process.
I couldn't believe the utter nonsense they were spewing. Case and point...one government rep said "if we don't enact VAT the dollar will be devalued" WTH!! They also knew very little about the legislation, which businesses will be taxed, and what are the non-taxable items. They were even a bit shaky on how the tax itself works. They were also unsure about who will protect consumers once VAT is implemented. I sat there in complete awe as they answered very few questions from the audience. They reiterated that once legislation is released they'll be able to answer questions smt.
Can this government do anything right?
banker 11 years ago
Actually, what most Bahamians do not realise, is that with the economy sinking, the devaluation of the dollar is a serious and distinct possibility. In a very circular offhand way, what the government rep said is right. They need the $400 million per year, otherwise they will be downgraded, they will default on their debt, and the dollar will be devalued.
A lot of business men (Bahamian businessmen) are hedging their bets. I get phone calls (at least a couple a week) saying "I make a fair amount of money in Bahamian dollars, but I stand to lose it to devaluation. How can I protect my money, and how can I convert to American dollars in the most inexpensive way possible?"
The smart businessmen are already protecting themselves from the fallout of VAT and a possible devaluation.
I would post the answer, however someone from the Central Bank might be reading this, and close off the easiest way to do this.
johnq 11 years ago
In a circular, off hand way meaning what the government rep said is incorrect. We have a pegged currency regime, meaning that our currency is worth what we say that its worth and we have the foreign currency reserves to back that position. It will take a whole lot more than the government rejecting VAT to make the devaluation of the Bahamian dollar a viable/sensible option. It would take something cataclysmic in the economy before devaluation made sense. By that time devaluation would be the least of our worries.
JohnDoe 11 years ago
You are 100% spot on in your explanation! The government and its reps must stop the scare bogeyman tactics and begin to have a transparent intelligent conversation with the Bahamian people.
banker 11 years ago
All it takes for devaluation at pegged rate is a balance of payments crisis. We are already in a deficit with trade (relying on oil and food imports). If we stress the system to include debt service in reserve fiat currency (American dollars), such that we will have to dip into our currency reserves, then the money supply will outstrip reserves backing them, putting pressure on the Central Bank to devalue the peg rate. If they do not, then our rating goes down. You are right though that in a devaluation scenario, it will be the least of our worries. People will be breaking the windows of the supermarkets to get food for their families and there will be anarchy in streets.
JohnDoe 11 years ago
Without commenting on the merits, I think both of you are saying the same thing in that it would take a "crisis", as banker notes, or "something cataclysmic", as johnq notes, to bring about a devaluation. And in either case social unrest would by then be a raging fire out of control.
proudloudandfnm 11 years ago
“We have a budget deficit of more than $500 million and to tax web shops around $40 million is expected. So that is not the answer to our problems,” Mr Halkitis said.
How much do the numbers boys pay in licensing fees?
B_I_D___ 11 years ago
zero
john33xyz 11 years ago
Yep, 40 million is not even worth bothering with. That's chicken change. Not worth wasting our time. LOL.
The_Oracle 11 years ago
Deceit, confusion and secrecy are the hall marks of the incompetent. The double speak in this article alone, like every other utterance gives no Bahamian or foreign investor any confidence in Government. Welcome to the new Bahamian Police state! What is yours is ours.......
justthefactsplease 11 years ago
The headline should have read: "The Bahamian Government does not understand VAT" ... that would have been more accurate ... right now the blind leading the blind towards the precipice over the next rise.
John 11 years ago
Bahamians do not understand VAT and the government does not understand economics: Why is government still subsidizing tourism? 5 million tourist a year, if you can average $100 per tourist, then government can generate $500 million. Work to increase the amount of tourist spending and thereby increase the amount of tax dollars generated from tourism. Work more to grow and/or produce food and other items tourists and Bahamians consume and reduce the outflow of tax dollars. Reduce wastage and inefficiencies in government and reduce the tax burden on the public.
“As we peer into society's future, we -- you and I, and our government -- must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.” ― Dwight D. Eisenhower
ThisIsOurs 11 years ago
Wow, why didn't he just take his printed speech, whap Perry Christie on the side of his head and tell him to stop talking crap...?
john33xyz 11 years ago
As I said in a previous, similar article - WE DON'T NEED NO EDUCATION SEMINARS. Just put something official online that we can read.
Unless he still thinks we are living back in the days when black folk weren't allowed to read. Maybe he thinks that. Otherwise post the info and shut up.
ThisIsOurs 11 years ago
Unfortunately, some of us literally can't read, and some who can read can't comprehend. It's his job is to make sure all of us understand, it's a really weird admission from him, he's basically saying he's doing a lousy job rolling this thing out.
happyfly 11 years ago
Instead of implementing a disciplined and comprehensive collection of the taxes already on the books. Instead of curbing corruption, disengaging from the financial catastrophes of the public corporations and other wasteful spending. The government as always chooses the easy path, to place a bigger burden on the honest and hard working
Successive governments have borrowed and spent more money than they could ever hope to pay back and now this one is telling us we don't understand. Well they are right. We don't understand how they think they have earned or deserve any more of our hard earned cash just so they can go run the country deeper in to debt.
And don't you worry. They will be back looking for income tax when the VAT is all spent
ThisIsOurs 11 years ago
Exactly!!!! They could collect 500 trillion dollars , if they don't know how to manage it, it will all be spent on expensive iPads and new office furnishings. And they clearly cannot manage money, look at FM asking for a new office while we're so deep in do-do.
Liberty 11 years ago
VAT is not a tax that the Bahamian government is creating from scratch. There are several countries in the world that already have VAT. Stop waiting on the government, read up on the fundamentals of VAT yourself and see experiences of the VAT yourself because there will always be a sense of bias from the Government and the opposition.
The government is not only increasing taxes but supposedly reducing expenditure. I swear some Bahamian citizens act like they depend on government to do everything. We might as well become a socialist country.
JohnDoe 11 years ago
"Bahamians do not understand VAT" so says the deer in the headlight, as if anyone in our government understood the full ramifications of VAT when they were being lectured by the IMF. Halkitis and our government has once again misread the tea leaves. The issue is not that Bahamians do not understand VAT and this is evident by the critical and brilliant questions the Bahamian public has raised concerning VAT, most of which the government has yet to deliver a coherent, rational or intelligent response to. It is interesting to note that for the majority of VAT implementations that have failed the primary causes have been poor preparation, lack of consultation, poor education and hurried implementation. Classically, the politicians appear to now be deflecting blaming to the public for their lack of understanding, preparation and consultation. The real issue is that no one in government has even tried to intelligently explain to the Bahamian people the following: Why do we need to embark on an austerity program, during these hard times, to increase tax revenue and reduce expenditure; Why VAT, amongst all of the other options, is the optimal fiscal policy tool for our economy to accomplish this; Why the VAT rate must initially be so high at 15%; Why not an introductory lower rate; How will VAT impact other taxes already on the books and What are the short, medium and long term ramifications, positive and negative, for our economy in general and in particular for the businesses impacted and consumers. The reality is that our issues, similar to the issues of most countries in this region go way beyond ballooning debt and deficits. We are faced with two other equalling vexing issues of low to no economic growth and high structural unemployment where there are just not enough jobs in our economy for those who want to work. This is exacerbated by our business model that depends on exogenous drivers of economic growth including FDI and tourism. Introducing VAT will also likely be unhelpful to the latter two vexing issues.
watcher 11 years ago
Excellent post.
All it needs is a "Dear Mr. Halkitis" at the beginning and a "Yours faithfully, JohnDoe" at the end, and it could be a letter to which we all would like a full government response
johnq 11 years ago
Spoken like someone who understands economics. Couldn't have said it better.
The_Oracle 11 years ago
I have seen wonderful things done in the Bahamas, without massive cash infusions. In fact, the cash was an output of the efforts of a number of people, Bahamians working together. people who embraced trust. people who were shown trust, earned and returned it. People who still have that trust, and have not been betrayed. It is a pity we, the Bahamian people, cannot trust our elected. It is a pity, that they are incapable of nation building, with leaders satisfied instead to just spend, burn and dole out. Perhaps written history will put all our leaders since independence in proper perspective.
SP 11 years ago
My short definition and understanding of VAT is the PLP and FNM thoroughly mismanaged the country’s economy.
They borrowed Billions of dollars from global lending institutions which was also grossly mismanaged or otherwise disposed, and these institutions are now demanding repayment as per the loan agreements.
This leads to 3 important questions:
1) What dumb, stupid idiot borrows money with no clue as how they will repay the loan?
2) What lenders simply lend funds without any sureties of how they would be repaid?
3) Are there ulterior motives with all this careless borrowing and lending?
This whole thing does not pass the smell test!
Alex_Charles 11 years ago
wait the government screwed up and is pointing the finger at the people? That would never happen, the government loves us and would never lie to us. So we better line up in 2017 to collect our party t-shirts and free food/liquor, because nothing makes more sense than electing a government because they gave us free things!!!! you can't fix something was never designed to work in the first place, so why is this surprising to anyone? SSDD
GQ 11 years ago
Your Headlines "Bahamians dont understand VAT." these should have read "GOVERNMENT DONT UNDERSTAND BUSINESS." Politicians the world over only understand TAX, TAX and more TAX. It is said that politicians spend like drunken sailors but this is not accurate because a druken sailor can only spend until HIS money has been depleted then he faces the consequences of drinking i.e. "A TERRIBLE HANGOVER." The Bahamian politicians past and present continue to waste tax payers money and are burdening future generations with their incomptence. I qualify as a senior citizen and I feel sorry for the generations who will carry a burden for these incompetent idiots who govern us.
concernedcitizen 11 years ago
Does anyone understand that when 1 in 4 people work for government you have to keep borrowing and taxing .It really is that simple and we have been borrowing since the 70,s to keep it going .When you use the public purse to absorb a prolific birthrate the people that don,t survive off the public purse have to be taxed to death .I T REALLY IS THAT SIMPLE ,HAI KNEW IT ,PGC KNOWS IT BUT THEY,LL NEVER TELL THE UNDER EDUCATED MASSES THAT ,That would cost votes .............
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