The Tribune

By RASHAD ROLLE

Tribune Staff Reporter

rrolle@tribunemedia.net

DESPITE threats that private sector representatives might withdraw their support for value added tax (VAT) if a Fiscal Responsibility Act is not implemented, State Minister for Finance Michael Halkitis said yesterday that the government has no plan to introduce such legislation as part of its fiscal reform initiatives and VAT rollout plans.

Some Bahamians partly blame this country’s fiscal situation and the pressing demand for fiscal reform to secure economic stability on what they believe are years of poor spending habits by the government.

Calls for a FRA have therefore been at the centre of protests against VAT and demands for greater government transparency. Such legislation would specify principles that guide fiscal management and demand that the government explicitly report its fiscal actions and performance to the public.

While Mr Halkitis did not discuss whether the government’s fiscal management is adequately guided by clearly identified principles, he highlighted the government’s current reporting of certain fiscal issues.

“What is a Fiscal Responsibility Act?” he asked. “If you go on to the government website right now, every time we do the budget, you can see line by line everything the government spends. We have a financial administration to address a lot of that stuff.

“Maybe at some point (we will bring on the FRA), but (New Zealand) did theirs years after (VAT was introduced),” he said, referring to the country whose VAT experts visited here in April. At the time, those experts told the press that the passing of a FRA and a Freedom of Information Act (FOIA) were important in establishing trust in their government’s efforts to implement VAT.

In fact, a FOIA was passed in New Zealand five years before VAT was introduced while a FRA was passed there eight years after the rollout of VAT.

“The Fiscal Responsibility Act is one that the Chamber has been calling for as part of fiscal reform of the country,” Edison Sumner, chief executive officer of the Bahamas Chamber of Commerce and Employer’s Confederation (BCCEC), said yesterday.

“With all this recent talk about transparency, a Fiscal Responsibility Act would assist the government in fulfilling its mandate. The government has often made reference to the New Zealand consultants who made recommendations about VAT. They were who the government contracted to advise on that. But in New Zealand, a Fiscal Responsibility Act goes hand in glove with proper fiscal management of that country. We’ve made similar recommendations to the government.

“If we want to avoid missteps in the future and questions about fiscal responsibility of any government, putting an Act like this is certainly recommended so I think it’s incumbent upon us to make the case that this would be an important step for them to consider and for us to show them the wisdom of putting such an Act in place.”

He added: “Line items may be there (in the budget) but often times I think the whole idea of recommending a FRA is not only so people could see what has happened after the fact but to be involved in some degree of collaboration before the fact and to ensure a level of transparency and disclosure of certain information. It’s really about being able to assist with the efficiency of operations in government and the private sector. For example, the private sector has to report to a board of directors and if things aren’t being done to conform to stated policies then people must be held accountable.”

VAT is expected to be implemented on January 1, 2015.