The Government has been warned not to become “too enamoured” with Value-Added Tax’s (VAT) relatively successful start in preparing next week’s 2015-2016 Budget.
Gowon Bowe, the Coalition for Responsible Taxation’s chairman, told Tribune Business that the private sector was looking for “tangible evidence” of “cost containment” and spending reductions when Prime Minister Perry Christie unveils the Government’s fiscal plans next Wednesday.
He called for the Budget to focus on wider fiscal reform, not just “how well” VAT was performing, and urged the Christie administration not to use its new revenue stream to finance increased spending.
The Tax Coalition chief suggested the Government draw up its Budget as if it did not have VAT, and not be tempted to bring previously-shelved spending programmes on to its agenda.
“I don’t want them to get too enamoured on the revenue side,” Mr Bowe told Tribune Business in a recent interview. “It’s more important that fiscal reform takes priority, not tax reform.
“I’d not want the Budget to focus on how well we’re doing with VAT, but how well we’re doing with reforming the overall fiscal picture.”
Both Michael Halkitis, minister of state for finance, and John Rolle, the acting VAT comptroller, have consistently reported that the Government’s key tax reform is “exceeding expectations” when set against their revenue targets.
Mr Halkitis recently told Tribune Business that based upon VAT’s performance to-date, revenues generated by the 7.5 per cent levy may come in closer to $350-$360 million per annum, comfortably ahead of its initial $300 million target.
Sceptics will likely point out that such sums represent a ‘wealth transfer’ from Bahamian consumers and the private sector to the Government, as the latter seeks to dig itself out of its deficit and $6 billion-plus debt hole.
Mr Bowe, though, emphasised that the private sector was now eager for the Government to deliver on its side of the fiscal reform ‘bargain’ - via spending reductions and restraint, and greater accountability and transparency via a Fiscal Responsibilities-type Act.
“There has to be tangible evidence of cost containment progress,” Mr Bowe said, adding that he had been encouraged that the Prime Minister did not shirk the issue in his address to the recent Chambers conclave.
He called on the Government “not to bury” its VAT income among its other revenues, as this might give a misleading picture that could justify public spending increases.
“We should be treating costs [spending] as if we did not have those VAT revenues,” Mr Bowe said. “They should not Budget to increase costs simply because they have increased revenues.
“We should simply be maintaining existing policy programmes, making them more efficient, reducing the deficit and the debt, but not spending money coming into the pockets of the Treasury.
“It’s very important that we don’t see a rush to look at policy programmes, which were put on the back burner because of a lack of resources, now rushed to be put in place because of more revenue.”
Mr Bowe acknowledged that the Government and its officials often became “sensitive” when the private sector “harped on” about the need to control, and reduce, its now $1.8 billion-plus recurrent (annual fixed cost) spending.
He added that the Tax Coalition now wanted the Christie administration to “ramp up” consultation over whether the Bahamas should implement Fiscal Responsibilities legislation, and what form it should take.
Mr Christie promised in his mid-year Budget to issue a consultation paper by early summer, with consultations completed - and recommendations in to the Government - by year-end.
“It’s one that has to come,” Mr Bowe said of a Fiscal Responsibilities Act. “If that dialogue is going to be constructive and meaningful, we need to see something soon.
“We have a little lead time, but don’t wait until politics gets in the way.” That is a reference to the 2017 general election, the run-in top which will likely begin in less than a year’s time, with all the temptations to loosen the public purse strings to sweeten voters.
Mr Bowe said that if Mr Christie made good on this issue, “fiscal responsibility will be the hallmark of his Prime Ministership”.
He conceded that this might erode some of his political capital with the electorate, but added that Mr Christie would have the security of “a legacy-defining success” by putting the Bahamas on “the right path to fiscal success”.
Comments
Well_mudda_take_sic 9 years, 6 months ago
California is more likely to experience very heavy rainfalls over the next decade than Christie is likely to stop the spend-spend-spend nature of his government. Not only have the VAT revenues emboldened the government to grow itself and be overly generous early on to all unions and other voters in the run up to the next general election a couple of years away, but the regressive nature of this new tax burden is pounding the poor in our country right into the ground. You and many like you Mr. Bowe took the wrong fork in the road by not opposing the horribly regressive VAT given the spend-spend-spend history of Christie; they had you afraid of the rising level of our national debt, but, as you can now plainly see, our Prime Minister and his henchmen in the Ministry of Finance had no such real fear. Too late to cry foul now....our PM likes to wag his tongue but he never responds well to one wagged back at him.
duppyVAT 9 years, 6 months ago
Do Gowon Bowe and Edison Sumner have any credibility left after falling hook, line and sinker for VAT??????????
The Superwash guy has far more credibility because he doesnot bow to the politicians ...... he tries to separate the political and financial issues in the best interest of the country
asiseeit 9 years, 6 months ago
The way The Government of The Bahamas spends money makes one wonder if these politicians ever have balanced a check book or if they understand the debt this country is in. We are lorded over by financial morons.
duppyVAT 9 years, 6 months ago
Yes they are mostly millionnaires .................... just look at how most of them made their money. Then translate that into how they treat OUR money ................... just follow the money trail
Zakary 9 years, 6 months ago
themessenger 9 years, 6 months ago
When did we ever get out of the rabbit hole called debt that we've been trapped in for the last forty years? What crab hole you livin' in?
John 9 years, 6 months ago
The reason there was so much compliance to VAT from the business community is the VAT team (task force), headed by Mr. John Rolle, won the confidence of these people. For the first time in history of government they did not push individuals into a small poorly lit room, make them sit in a chair what look like if fall off the Ark, force them to fill out forms and tell them how much to pay. Early in the game John Rolle and his team realized that he was dealin with, for the most part, a group of patriotic, mostly honest and cooperative, hard working and professional people who had the country's welfare and future at heart. And so John Rolle's team worked with them on that same level taking them to lunch and allowing input from these business persons. Input that was acted on and feedback was given and adjustments made. John Rolle, because of his sincerity and the hard work of his team won the confidence of the business community. Now he must go to his boss, Mike Halkitas, and to the Prime Minister and tell them in no uncertain terms, that VAT money must be used for the purpose for which it was intended. Not only should it be used only for that purpose but it must be properly accounted for and under a light of transparency. Failing that the level of confidence in the business sector will erode and so will the level of compliance. Many of these persons have gone about collecting the governments money when their own businesses are experiencing cash flow problems and lack of profitability.
B_I_D___ 9 years, 6 months ago
That is one of the funniest things I have read in a long time John. LOL
ThisIsOurs 9 years, 6 months ago
John Rolle is an absolute Bahamian treasure, i.e. a smart man. Sorry he's in with the crew around him. He's not a conniving, thieving, extortion peddler, , crown land stealing and subdivision building, crooked politician.
asiseeit 9 years, 6 months ago
How about if Government does not do as it said it would, pay down our debt, we stop paying VAT? If the government does not do as it said then they have committed FRAUD. They will have lied to the Bahamian people and therefore we must have recourse. Is there a way to sue the government? There must be some way to hold them to their word.
duppyVAT 9 years, 6 months ago
Then Perry will pull the webshop referendum precedent out of the hat and say that he doesn't have to abide by the results of the .................... wateva
Well_mudda_take_sic 9 years, 6 months ago
Throughout the great global recession that began in 2007/8, and from which the Bahamas has yet to show any signs of meaningful or sustainable recovery, neither the Ingraham led government nor the Christie led government made any effort whatsoever to shrink the size of our public sector payroll. Sadly, both Ingraham and the FNM party, and both Christie and the PLP party, hold the same view that our public sector payroll should serve as a welfare safety net for loyal voters to be supported by taxing the private sector. This has been the "Great Saviour" or "Moses" complex that every prime minister since Pop Symonette has suffered from and which has resulted in our inefficiently run non-productive public sector crowding out our much more efficiently run and productive private business sector. This crowding out of the private sector by the public sector has become so extreme that it now acts as the triggering event or reason why Bahamians are so dissatisfied with their economic and social well-being that they are inclined to vote for a change in their government every 5 years. Contrast Ingraham and Christie with David Cameron, the UK's PM, who's conservative government laid off more than 500,000 civil servants during the height of the Great Global Recession and was still able to win the majority of seats in the UK parliament in the recently held general election. The contrast is a most stark one indeed! Cameron did the right thing notwithstanding that it could have dealt both him and his party a fatal political blow; instead though, he and his party ended up gaining the respect and admiration of many UK voters for having done what needed to be done for the UK as a whole. Don't expect Christie to ever have the political balls necessary to do the right thing by the Bahamian people. Therein lies the great rub - for Christie it's all about winning the next general election no matter what and be damned what's good for the Bahamas as a whole!!
Reality_Check 9 years, 6 months ago
VAT revenues are being used to: (1) fund the Social Services Debit Cards that our Social Services Minister Melanie Griffin is handing out to thousands and thousands of Bahamians, including many who should be be considered too well-off to qualify for such welfare support; (2) keep the public sector unions happy through the adding of generous additional benefits to their re-negotiated union agreements (e.g. Bahamasair); (3) grow just about every department of government (e.g. bloated new Central Revenue Agency within the Ministry of Finance and hiring of new regulators to regulate the now 'legal' illicit gambling and other criminal activities of the web shops and their racketeering foreign mobsters and Bahamian front-men); (4) provide senior government officials with new luxury cars and increased generous foreign travel allowances for them and their entourages; and so on and so on. This is the reality of our Christie led spend thrift government and his mouth pieces within the Ministry of Finance (i.e. Halkitis, Rolle, etc.) who quite frankly have never given a damn about our National Debt and Debt to GDP Ratio, other than to use these financial statistics to scare the public into accepting horribly regressive taxes and fees like VAT that put more revenue into the government's coffers to fuel their spend-spend-spend initiatives directed at staying in political office and making themselves and their select elite friends and business cronies filthy rich by graft and corruption.
duppyVAT 9 years, 6 months ago
Are you serious??????????????????
Reality_Check 9 years, 6 months ago
As serious as a Bahamian who likes bird pepper with his scorched conch and a cold beer to wash it down!
John 9 years, 6 months ago
The Turks and Cacios islands have a $72 million budget surplus this year. It's a matter of fiscal management. This country must night the bullet somewhere and pay down the national debt. The more it increases the more tax dollars will have to go to service it. Some say the world may see another recession before it climbs out of this one. You know what they say will happen to the U.S. Dollar. But can you imagine what will happen to this country if the economy falls and we have this type debt to service?
asiseeit 9 years, 6 months ago
They probably have real leaders in The Turks and Cacios islands. Here in the Bahamas we have a bunch of lawyers who would like to be royalty playing like they understand how to govern while they fleece the public treasury for all and any the can get their hands on all the while trying to enrich their friends/family/and lovers. No bid contracts are the norm, shoddy workmanship is expected, fleecing of taxpayer moneys is encouraged, and corruption is everywhere. It's better in The Bahamas, if you are a corrupt politician!
digimagination 9 years, 6 months ago
This is a very interesting: http://www.bbc.com/news/business-327934…
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