The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday “warned very strongly” against implementing new or increased taxes to fund Hurricane Matthew relief, the Chamber arguing such a move will be “counter-productive” to the Bahamas’ recovery.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, told Tribune Business that it had informed the Ministry of Finance that such a move would be “a poor decision” - especially given the timing.

Apart from further depressing the economy just when many businesses are struggling mightily to recover from Matthew’s impact, Mr Bowe said new or increased taxes would hurt most the very people the Government wants to help - ordinary Bahamians.

The Prime Minister yesterday floated the idea that the Government could impose a new, or ‘special’, tax to help finance storm-related repairs, restoration and relief, suggesting any such move would have “minimal impact on people”.

“I think the Ministry of Finance has raised that as a potential option to the Prime Minister in his role as Minister of Finance,” Mr Bowe told Tribune Business.

“We certainly, from the business community perspective, have cautioned very strongly against that, primarily because increasing taxes at this point in time is going to be counter to efforts to restore and build the economic recovery quickly.

“The increase in taxation will also be very damaging to the persons it intends to benefit, as most taxes are borne by consumers. If you’re trying to raise funds to help consumers restore their lives to normal, increases in taxation are going to be counter-productive to that initiative/effort.”

Mr Christie, speaking to the media during a tour of the New Providence communities hardest hit by Matthew, said the Government needed to examine “a more effective way of financing the loss that the country has experienced”.

With the Government still paying to repair the damage inflicted by Hurricane Joaquin in the southern Bahamas last year, and now having to content with Matthew’s much larger multi-million dollar bill, Mr Christie said it may have to “tax some item of minimal impact to people”. He suggested Cabinet might consider the proposal today.

This idea, as Mr Bowe indicated, is likely to meet with fierce resistance from most Bahamians, and not just businesses.

The economy has had to absorb significant tax and cost of living increases in recent years, not least the 7.5 per cent Value-Added Tax (VAT) that was imposed last year.

Together with high utility and other costs, taxation and bureaucratic impediments to the ‘ease of doing business’ and commerce, most in the private sector will argue that the Bahamian economy cannot take any new or increased taxes for the time being.

Another concern would be that the prospect of new or increased taxation deters businesses, which have been forced to close their doors by Matthew and/or its aftermath, from ever opening again. Employment levels would be further hit.

“Following such a devastating creature of nature,” Mr Bowe said of Matthew, “we certainly need to be mindful that, just like with an economic recession, that we don’t try to lift ourselves out by increasing taxation, which is counter-intuitive.

“While the Prime Minister is probably floating the proposal to see what takers we have, I would hope [they note] our communication back to himself and the Ministry of Finance; that at this point in time it would be a poor decision, as it will not yield a great increase in tax revenue, and would cause great damage to the end-consumer who they want to benefit from the restoration effort.”

Mr Christie’s comments, though, could be interpreted as an indication of the damage Matthew has inflicted on both government infrastructure and buildings, plus the scale of the restoration efforts needed on North Andros and Grand Bahama.

They also possibly give an insight into just how difficult it will be for the Government to obtain the necessary monies, given its already-strained fiscal position and potential pressures from the credit rating agencies.

Mr Bowe, though, told Tribune Business that the private sector had emphasised the key aspect with any restoration borrowing/expenditure was how the Government intended to pay for it.

Acknowledging that borrowings, such as the proposed $150 million Hurricane Restoration Bond, were “a balancing act” given the Government’s fiscal position, the Chamber chairman said they needed to be “managed appropriately”.

The interest rate (debt servicing costs) and maturity period, he argued, were critical, but if structured correctly, then the Government could see a “payback period over time”.

Mr Bowe also warned Bahamians against expecting a ‘quick fix’ of all Matthew-related damages, drawing a distinction between the provision of immediate life-saving supplies, such as food and water, and longer term repairs to physical infrastructure.

“If there’s one theme to remember, Rome wasn’t built in a day,” he told Tribune Business. “While persons are looking for immediate relief and restoration efforts, this may require strategic and prudent decision-making.”

He emphasised that returning devastated communities to normal could take months, even years, and would not produce immediate results.