The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Democratic National Alliance’s (DNA) leader yesterday argued that the Bahamas “would not have needed Value-Added Tax” (VAT) had successive governments cracked down on tax cheats and enacted other key reforms years ago.

Branville McCartney told Tribune Business that the Government’s own forecast of realising an extra $400 million within two years via its clampdown on tax dodgers suggested there would have been no need for VAT had it acted earlier.

“It should have happened prior to VAT, and should have happened some time back,” Mr McCartney said of the tax evasion ‘crackdown’ that started in November 2016.

Adding that he “agreed 100 per cent” with those who believe VAT would not have been needed had such policies been implemented by previous governments, the DNA leader said: “I’ve always said that had the Government done several things, this government and previous administrations, we would not have needed VAT.

“That was to ensure we collected our due taxes, stop the wastage, jumpstart the economy and cut down on the corruption. We would not have needed VAT. VAT is here because of this and the previous administration. They are the reason for VAT coming into play.”

VAT has become the Government’s main revenue generator, producing more than $1 billion in new taxes during its first 21 months, due largely to its self-enforcing paper trail and the onus being placed on the private sector to collect it.

The filings by the 6,000-plus VAT registrants are now playing a key role in the crackdown on tax cheats, as the Government - having a much better handle on economic activity occurring in the Bahamas - is able to compare the figures to companies’ Business License payments, and detect any discrepancies.

Simon Wilson, the Ministry of Finance’s financial secretary, told a Chamber forum last month that the clampdown had generated an extra $15 million in revenue per month on New Providence alone since its launch.

The initiative was likely undertaken only after the Government realised the extent of the ‘hole’ blown in its finances by Hurricane Matthew.

However, the results to-date, and Mr Wilson’s forecast of $400 million in extra revenues within two years, have prompted some observers to suggest - like Mr McCartney - that VAT would not have been necessary had the Government undertaken serious tax enforcement decades ago.

Mr McCartney, meanwhile, said the Government would “no doubt” seek to blame the $314.2 million deficit incurred during the 2016-2017 fiscal year’s first half on Hurricane Matthew.

He argued instead that the causes were numerous, and said: “The Government has failed to reduce their spending, and all the international agencies have said they must rein in their spending.

“The Government has failed to take heed. They’ve been fiscally irresponsible. They’ve failed to deal with the deficit, and the wastage coupled with the corruption. All of these add to the figures we see today.”

The DNA leader added his voice to those expressing concern that rather than try and rein in the deficit, and curb spending, during the 2016-2017 fiscal year’s second half, the Christie administration may be tempted to increase it ahead of the upcoming general election.

“This government is desperate,” Mr McCartney told Tribune Business. “They will do anything and everything, including spending the last dollar, to try and stay in power. It won’t work.”

He added that the next administration, regardless of which party wins the election, could be faced with having just weeks to prepare a Budget on the back of fiscal year where $600 million-plus in ‘red ink’ has been incurred.

“The next government is going to be faced with a daunting task, trying to rebuild the economy in light of the spending going on now,” Mr McCartney said. “This government is going to leave the country in perhaps one of the weakest states in the last 50 years.

“The figures don’t lie. The new government is going to have to be very honest and open with the Bahamian people and show them how we got here.”

Pointing out that the Government’s fiscal projections “have not been accurate” since it took office in May 2012, Mr McCartney expressed concern that the international rating agencies may again downgrade the Bahamas’ creditworthiness if the nation remains on its present fiscal track.

“It’s downright scary; it’s scary where we are, and these guys want to govern again,” the DNA leader told Tribune Business.

“We have a broken economy. It has not been stimulated by this government, which has not done anything to ensure it bounces back.”