The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Every Bahamian must take responsibility for the Government’s financial mess, a co-chair for the private sector’s Tax Coalition yesterday warning there was “no quick fix” and that all would have to become “accountable” to mend the fiscal woes.

Robert Myers, who jointly leads the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) organised body, agreed that the Christie administration had to deal with the still-growing $5.5 billion national debt if its successor was not to be left “under the gun”.

Emphasising that the Coalition for Responsible Taxation would not engage in “a blame game” over the Bahamas’ fiscal crisis, Mr Myers said every Bahamian was at fault for letting the public finances spiral out of control.

And he warned that all residents would “have to be prepared to sweat and do the hard work” to turn around a fiscal deficit that, for 2013-2014, is projected to be $443 million.

Agreeing that the Christie administration was correct to prioritise a righting of the Government’s finances, Mr Myers described selecting - and implementing - a solution as “hugely important” and “massively urgent”.

“It cannot wait. We have to deal with it, and deal with it as quickly as responsibly possible,” he told Tribune Business.

“We get it. We understand it’s critical. This administration has got to deal with it, or the next administration will not be making decisions; it will be under the gun. That’s not a good place to be.”

Mr Myers placed special emphasis on the word “responsible”, suggesting that this did not apply to the Government’s plans to rush in VAT while making minimal information available to businesses and consumers.

And he reiterated that the Coalition, and private sector generally, were not necessarily opposed to the Government’s proposed Value-Added Tax (VAT).

Rather, its members were more concerned that it was the best tax reform option, and to ensure alternatives - such as income tax or a sales tax - which might have a less negative impact on the Bahamian economy, had not been prematurely excluded from the debate.

The Coalition is also urging more transparency from the Government over its fiscal and tax plans, that it slow down the VAT push, and is asking to be brought into the effort as a partner, playing a major role to shape the reforms for the common good of all without sinking the economy.

Mr Myers, meanwhile, said that since Bahamians had failed to hold both PLP and FNM governments accountable for excessive spending and poor revenue collection, all had to accept responsibility for the current situation. And, as a result, every Bahamian had a part to play in remedying the situation.

“It should have been dealt with a long time ago, but we were all asleep until it was too late,” the Coalition co-chair said of the Government’s fiscal position.

“It’s not their [government’s] fault. It’s all our fault. All of us. There’s absolutely no blame game in the Coalition’s language, none at all, other than blame ourselves for getting to this point, kicking ourselves for not dealing with it earlier.”

Mr Myers said issues of the Bahamas’ economic competitiveness, the rule of law and accountability were all inextricably intertwined with fiscal reform and key to its success.

“These are all reasons why we are where we are,” he added. “There’s no quick pill to make ourselves better. There’s no quick fix.

“But if everyone puts their head down and is prepared to do the work, including the public, we’ll be fine. But we’ve got to be prepared to sweat, do the work, be accountable and get ourselves out of this mess. The status quo is not going to work.”

Deficit spending has been a virtually unbroken trend among post-independence governments, with government unable to run a surplus even in good times, such as the 1994-2000 and 2003-2007 periods.

Excessive spending, combined with structural weaknesses and poor enforcement on the revenue side, were exacerbated by the 2008-2009 recession and subsequent weak recovery.

Data revealed by the Ministry of Finance at last week’s Bahamas Institute of Chartered Accountants (BICA) conference showed that the Government’s collective recurrent deficit for the past seven fiscal years, including the current one, will likely total $1.284 billion.

This is the massive gap that now exists between its fixed costs and revenues and, with a $1.74 billion capital deficit thrown in, the Government’s total deficit spending over those seven years has amounted to $3.024 billion.

Taking away the $565 million spend on repayment of debt principal over that time, the Bahamas’ is projected to add $2.459 billion to its national debt over the period between 2007 to July 2014.

With the ‘direct debt charge’ on government projected to be $4.857 billion by next July, this means more than 50 per cent of this sum has been accumulated over the past seven years.

The International Monetary Fund (IMF), in its report this week on Article IV consultations with the Government, said that if the country successfully implemented its fiscal consolidation programme, the debt-to-GDP ratio would peak at 60 per cent in 2014-2015.

That is just the ‘direct charge’ on government and, given that so-called guarantees and contingent liabilities account for another 7 percentage points, it seems that the Bahamas’ national debt is close to the ‘70 per cent of GDP’ danger threshold set by the IMF.

The joint statement issues yesterday by the Coalition and Ministry of Finance gives some hope that the private-public partnership, normally so elusive on key national issues, may actually be achieved.