The Tribune

The Opposition’s finance spokesman yesterday urged the Government to “stop bragging” about its $852 million VAT revenues, as this represented monies sucked away from Bahamian consumers and businesses.

K P Turnquest told Tribune Business that it was “incredibly shallow and insensitive” for Cabinet ministers to continue touting their Value-Added Tax (VAT) collection success given the impact it was having on Bahamians’ disposable income.

He was responding after Michael Halkitis, minister of state for finance, told the Bahamas Institute of Chartered Accountants (BICA) conference on Wednesday that the Government had collected $852 million in gross VAT receipts for the 18 months to end-June 2016.

“It would be wonderful if they would brag about how responsible they’ve been in spending and the application of those revenues, and how they’re spending the tax dollars extracted from the Bahamian people,” Mr Turnquest told Tribune Business.

“It would be wonderful if they would say how it’s been put into reducing the debt, improving government spending and improving the ease of doing business. That we’d appreciate them doing.

“But instead they’re bragging about taking more money out of your pocket, my pocket and everybody’s pocket,” he added.

“It’s an incredibly shallow and insensitive position to take; bragging about VAT collections, because it’s another dollar somebody has not had to put food on the table to take care of their children.”

While VAT collections have exceeded the Government’s expectations to-date, the money received by the Public Treasury and Consolidated Fund highlights the extent of the ‘wealth transfer’ that has taken place from Bahamian consumers and businesses to the public sector.

The Bahamas has effectively paid for the fiscal profligacy, and consistent deficit spending, of both FNM and PLP administrations, which has left the country with a $6.695 billion national debt.

However, while the numbers revealed by Mr Halkitis were largely well known, and available in the public domain, they have again ignited questions as to how the Government is spending its VAT revenue windfall.

For while its income has increased, the Government is continuing to run deficits and grow the national debt, albeit at a slower pace than in previous years. As a result, many observers have questioned whether VAT is being employed to pay down the national debt.

The Bahamas’ debt-to-GDP ratio, as measured by the Central Bank’s revised 2016 second quarter report, currently stands at just below 75 per cent - a figure that is still in excess of the 70 per cent ‘danger threshold’ established by the IMF.

With Hurricane Matthew having inflicted a $600 million repair bill, according to Prime Minister Perry Christie, the Government’s Budget projections and medium-term fiscal consolidation projections have been massively thrown off.

The Christie administration has already been forced into $150 million of unanticipated borrowing to finance Matthew-related infrastructure and public building repairs, plus assist uninsured Bahamians and small and medium-sized (SME) businesses.

And its revenue collections will also have been hit by the hurricane, and subsequent duty and VAT exemptions granted to assist storm-ravaged Bahamians with their rebuilding and restoration.

Mr Halkitis, though, has argued that Bahamians are misunderstanding how the Government is using the VAT monies.

With these revenues going into the Consolidated Fund, the Minister has previously explained that they are being used like any other government income stream - to pay salaries and finance essential public services.

Mr Halkitis added that the monies have also been employed to reduce the deficit shortfalls, which were running consistently at $400-$600 million for several years.

The Government had initially projected that the GFS fiscal deficit would shrink to just $100 million, equivalent to just over 1 per cent of GDP, this fiscal year. Hurricane Matthew, though, is likely to have blown this off course.