The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Tax Coalition co-chair yesterday described improving the Government’s financial reporting to meet international standards as “non-negotiable”, and urged the Bahamas to follow New Zealand’s lead by legislating fiscal responsibility.

Robert Myers told Tribune Business that New Zealand’s Fiscal Responsibilities Act was a key component to that nation’s overall fiscal and economic reform package, ushering in the Government accountability that was desperately needed in the Bahamas.

He added that bringing the Government’s financial reporting up to international best practice benchmarks, and passage of a Freedom of Information Act, were also “things that have to happen” as part of the Bahamas’ reforms.

And Mr Myers urged the Christie administration’s final decision on fiscal reform to be guided by the economic studies itself and the private sector were currently conducting, warning that anything which “slowed” the economy would undermine the Government’s objectives.

While the Government has confirmed what many people have long known - that VAT will be brought in at a rate of either 7.5 per cent or 10 per cent, with the implementation date pushed back until at least the 2014 fourth quarter - Mr Myers said it was the ‘devil in the detail’ that remained of most concern to businesses and consumers.

“We cannot continue to have government financial controls and reporting without international standards,” the Coalition for Responsible Taxation’s co-chair told Tribune Business.

“That has to change. Outside of whatever the rate is, we have to clean up our act. We have to have financial reporting that meets international standards. We have to have a Freedom of Information Act.

“Those are almost non-negotiable that have to go along with fiscal and tax reform. We have to have more accountability in the Government.”

Reiterating the need for greater accountability and transparency from the Government when it came to spending the Bahamian people’s money, Mr Myers suggested New Zealand’s Fiscal Responsibilities Act as a model for this nation to emulate.

“It was introduced specifically for that reason. It mandated the Government must be fiscally responsible,” he added. “That was part of their total fiscal and tax reform.

“If we don’t do that immediately [pass a similar Act] - and we should have it as a long-term objective - for God’s sake let’s get our reporting up to international standard. Let’s enact and pass the Freedom of Information Act.”

Mr Myers said that rather than continually agonise about making such a Bill 100 per cent perfect before it is passed in Parliament, the Government needed to simply shepherd the Freedom of Information Act into law and adjust it afterwards if necessary.

Pointing out that both the International Monetary Fund (IMF) and Inter-American Development Bank (IDB) had reported on the inadequacies of government financial controls, Mr Myers said it was imperative that this change if fiscal reform was to succeed.

Noting that the Government was the largest publicly-owned business in the Bahamas, Mr Myers contrasted its reporting systems with those employed by BISX-listed companies.

“Public companies have higher reporting standards,” he said. “How is it public companies have higher reporting standards than the Government? This is non-negotiable; it has to happen.

“Successive governments have gotten us into a real fine mess financially, and it’s high time we clean up our mess, clean up our act.”

Mr Myers also reiterated that fiscal reform would ultimately fail if the chosen policies either stifled economic growth or pushed the Bahamian economy back into recession.

Pointing out the long-established connection between economic growth and rising tax revenues, he said “preliminary results, the numbers” from the Coalition’s dynamic modelling, being conducted by Oxford Economics, should be available by week’s end

Calling on all sides to wait on empirical data to determine what was the best taxation method for the Bahamas, Mr Myers again hinted that this nation should follow New Zealand’s example.

That nation “eliminated a huge chunk of taxes” when it brought in VAT, with the latter giving it a much broader tax base and higher compliance rate.

While the Christie administration initially contemplated doing something similar, reducing Business Licence fees to a flat $100, it has backed off from this position.

“In the grand scheme of things, when one considers the need for tax and fiscal reform, sticking VAT on top of existing taxes is going to be destructive,” Mr Myers told Tribune Business.

“Companies and citizens are already hurting. What we have to be very sensitive about is how fragile the economy and consumer is.”

The modelling efforts by the Government and private sector, Mr Myers said, would help determine what tax - and rate of tax - the Bahamian economy and people could bear.

“If it says that a 5 per cent rate is what the economy can tolerate, maybe a payroll tax would be better from an efficiency, timing and administrative,” the Coalition co-chair said.

“You’ve got to be flexible in your approach. The final objective is to grow the economy and get it to improve, and if that doesn’t happen it doesn’t matter what we do.

“If we don’t grow the economy and improve the economy, we’re going to collect less taxes. If you shut down the economy, you’re going to collect less taxes, not more. That’s been proven again and again.

“If we can all agree that we can tax at ‘x’ rate, no one in the private sector will oppose doing that tomorrow, if we can assure ourselves of economic growth and fiscal reform.”