The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The new Government was yesterday urged to "come clean" over the Bahamas' true fiscal position, amid calls for it to slash recurrent spending by 5-10 per cent in the upcoming Budget.

Rick Lowe, an executive with the Nassau Institute think-tank, told Tribune Business that public expenditure cuts were one of the recurring themes in discussions among private sector players over how to get the Bahamian economy growing again.

He suggested that a 5-10 per cent spending cut across all government ministries and departments would be a good place for the Minnis administration to start, given the growing tax and bureaucratic burden placed on the private sector to fund a bloated Government.

"Lots of ink has been spilled detailing the ever-increasing regulations as a result of the new tax regime of Value Added Tax (VAT), so the new government has a major task with streamlining the bureaucracy and excessive burden on business," Mr Lowe wrote to Tribune Business.

"First of all, it appears that businesses pay and collect more taxes on behalf of the Government - import taxes and VAT - than the government collects with all other taxes combined, so there is a fine line between taxing and regulating businesses out of business, and the benefits that accrue to the Public Treasury."

Mr Lowe added that among the numerous questions and issues being raised by a nervous, uncertain private sector was whether the Minnis administration would reform Business License fees or even eliminate them.

Its Christie government predecessor had pledged to reduce Business Licenses to a flat $100 fee once revenues derived from VAT were predictable, but despite the latter tax exceeding expectations it showed no inclination to follow through on its promise.

Mr Lowe suggested the new government, if unable to eliminate Business Licensee fees entirely, could make them "more equitable" by basing the calculation on business profits instead of gross income.

And he added: "With a Budget to be presented in a [week], will the new government look to cut every department's expenditure by 5-10 per cent for starters, then hold the line on spending at lower levels for a couple years at least?"

Calls for the Government to cut and control its spending have become increasingly loud in recent months, amid concerns that the Christie administration was squandering the revenue 'windfall' from VAT by increased expenditure on social programmes and pre-election 'gifts'.

Despite VAT's introduction for the last two years of its tenure, the former government continued to incur $300 million-plus annual deficits (which were blamed on the hurricanes) and pushed the national debt up to $7 billion-plus.

The new government now faces a difficult balancing act between controlling spending, and getting the deficit and debt under control, while at the same time fulfilling its campaign promises and not suddenly increasing the unemployment numbers by slashing the public sector.

Based on the 2016-2017 fiscal year's $2.262 billion recurrent spending, a 5-10 per cent expenditure cut as suggested by Mr Lowe would slash that figure by between $113.1 million to $226.2 million.

While such a move might create 'job security' alarm in the public sector, many observers feel there are substantial enough inefficiencies and wastage in government that could be cut without endangering employment.

Mr Lowe suggested the Government cut the number of overseas trips taken by ministers and officials, or at least reduce the size of delegations, and that it move to accrual accounting.

He also called for it to lift the burden created by Tax Compliance Certificates (TCCs), adding: "There are legitimate questions about its legality, but there are numerous laws that cover methods of collecting taxes rather than adding more red tape to hand-cuff businesses that pay their taxes."

"The Minister of Finance will have a full plate considering these are just a few items that have become the bane of business that need resolving with the upcoming Budget," Mr Lowe said. "It does not help the Government or the country by putting business out of business."

Mr Lowe yesterday told Tribune Business that it was in the new administration's own best interests to "come clean", and lay out in next week's Budget presentation the true fiscal position of the Bahamas and the dangers it presents.

"They've got to let the true liabilities be known," he said. "They can't keep covering this stuff up. It's figuring into a real problem. They need to bring home what the situation is."

By doing so, Mr Lowe said the Minnis government would be able to manage voter expectations, and explain why it may be delayed or limited in delivering on its manifesto promises.

The 'Speech from the Throne' indicated the Government is already narrowing its VAT 'exemption' and Over-the-Hill tax breaks plan, and Mr Lowe said: "If they don't come clean and give the details on what the fiscal position is, they're going to be expected to do so much more as people won't believe the country is in dire fiscal straits.

"They've got to find a way to lay it on the line. What are the payables, because we're constantly hearing rumors that the cheques have piled up on the table desperately waiting for the VAT money to come to release a few of them.

"Lay out the true fiscal position and the timelines for people to see, so if they're not able to do things that's the reason why."

Mr Lowe also urged the Government to draft future legislation such that the responsible minister is not all-powerful, with the ability to individually overrule decisions and be "the final arbiter of everything that is anything".

"That's a bane of the business community," he told Tribune Business. "It's typical of the legislation written for decades. It puts all the power in the hands of the Minister or, in the case of VAT, it seems to be the Financial Secretary who can make all the regulations they want without deference to Parliament."