The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Attempts to justify the Government’s use of the $1 billion-plus Value-Added Tax (VAT) revenues are misplaced, a governance reform campaigner said yesterday, accusing it of “irresponsibly kicking the can down the road”.

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), said the PLP convention speech by Michael Halkitis was more a list of capital expenditures than a proper VAT accounting.

The Minister of State for Finance, addressing his party’s supporters on Tuesday night, repeatedly said ‘that’s where the VAT money gone’ in listing numerous expenditures and capital projects undertaken by the Christie administration.

Mr Myers, though, said Mr Halkitis’s address missed the mark in terms of most Bahamians’ concerns, which were centred on whether the Government was using VAT revenues for the purposes stated in the run-up to the tax’s January 1, 2015, introduction.

VAT had been billed as a necessary levy to reduce the Government’s annual $400 million-plus deficits, and to start paying down the near-$7 billion national debt.

However, the IMF has estimated that another $300 million deficit was incurred during the 2015-2016 fiscal year, while the national debt has continued to increase - albeit at a slower pace post-VAT.

“He’s giving a quick account of capital expenditures, but that’s not telling you where the VAT monies have been used,” Mr Myers said of Mr Halkitis’s much-publicised speech.

“I think that when people are saying: ‘Where’s the VAT money gone?’, they’re in effect saying it was supposed to reduce our debt and pay down on our debt. That’s not been happening.

“Because that’s not happening, what are we spending it on, and are these things priorities? Some of the things he’s talking about are certainly worthy, but what they’re not doing is looking at inefficiency and accountability in many of the Government ministries and agencies.

“All the while we’ve not reduced our deficit and not reduced our debt. Again, the irresponsibility of not living within our means and kicking the can down the road is going to lead to our inevitable demise,” Mr Myers added.

“I’m not asking them to stand up and give an accounting on what capital expenditures are. I’m asking them to be fiscally responsible and accountable, and that’s not happening. For five years we’ve been saying get your fiscal house in order to avoid collapse.”

Mr Halkitis identified numerous government projects and expenditure as recipients of VAT monies, such as the $232 million and $100 million upgrades of the Royal Bahamas Defence Force’s and Bahamasair’s fleets, respectively; a $150 million healthcare outlay in preparation for National Health Insurance (NHI); and investments in scholarships and the University of the Bahamas transformation.

Tribune Business research, though, shows that the Defence Force and Bahamasair enhancements were financed by project-specific loans, from Deutsche Bank and Credit Suisse/CIBC respectively.

The Princess Margaret Hospital Critical Care Block, too, was financed by loans from Royal Bank of Canada and CIBC, the former of which was latter paid out by Public Hospitals Authority (PHA) bonds.

K P Turnquest, the FNM’s finance spokesman, told Tribune Business: “In short he [Mr Halkitis] outlined a list of projects that are demonstrably unconnected to VAT collection and payment, as they were covered by specific loans or grants.”

He argued that another way of interpreting the Minister’s speech was that it amounted to an admission of how VAT was financing increased government expenditure, paying off new loans and financing the ongoing rise in the national debt.

“It’s funding the 4,000 person increase in government employment, and all the wasteful spending we’ve seen over the last four-and-a-half years,” Mr Turnquest said.

Although the broad-based, low rate VAT model agreed with the Bahamian private sector has exceeded the Government’s revenue expectations, the Christie administration has yet to fulfill several other fiscal promises that it made.

Chief among these are the initiation of consultation on whether the Bahamas should have a Fiscal Responsibility Act, which would increase transparency and impose more oversight on government spending, plus the effective elimination of Business Licence fees to a nominal $150 per annum.

Mr Myers said successive governments since Independence had failed to achieve a ‘balanced Budget’ and put “the Bahamas’ fiscal house in order”.

He reiterated: “For decades they’ve been kicking the can down the road, and its damn well got to stop.”

Describing Mr Halkitis’s address as “a political speech” targeted at the Government’s supporters, Mr Myers also pointed to the millions of dollars in liabilities removed from the Government’s balance sheet by the use of ‘special purpose vehicles’ or SPVs.

“Let’s see some proper international accounting standard and transparency applied to our fiscal issues,” Mr Myers told Tribune Business.

“Let’s start having some meaningful discussions about how to effect a change in this; make changes to our fiscal health.”