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By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Deputy Prime Minister last night said the government "remains open to all viable" alternatives to a 12 percent VAT, despite private sector fears that "the train has already left the station".
KP Turnquest indicated to Tribune Business he was willing to listen to credible alternatives to the 60 percent value-added tax (VAT) rate hike, which the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) has voiced its "objection" to in the strongest possible terms.
The Chamber, in a May 31 letter signed by both Michael Maura and Edison Sumner, its chairman and chief executive, respectively, warned that the increase - projected to suck an additional $400m from Bahamian consumers and businesses - was especially ill-timed with the economy and investors starting to show signs of renewed growth and confidence.
Hitting out at the lack of consultation over the budget's revenue-enhancing measures, the Chamber branded this "unacceptable and not in keeping with the transparency, accountability and collaboration promised by the Government of The Bahamas".
It added: "As we communicated today, the BCCEC cannot support any tax proposal which is not founded on comprehensive economic analysis and has not received BCCEC and private sector review and feedback.
"At a time that the Bahamian economy is beginning to show some signs of recovery, we have serious concerns that the proposed increase in VAT will negatively impact investor confidence, reduce consumers' disposable income and further challenge a shrinking middle class."
Messrs Maura and Sumner also warned that the one month's notice given to the private sector to implement the VAT-related changes by July 1, 2018, was "unrealistic and impractical". They contrasted this with the year-long period granted to prepare for VAT's initial introduction in January 2015, and the further six months allowed for all businesses to come into compliance.
The rate change, and numerous new VAT 'exemptions', mean businesses - especially retailers and wholesalers - are faced with having to reprice thousands of items on shelves and in inventory, as well as alter computer software and point-of-sale systems.
"The BCCEC respectfully offers that an increase in the VAT rate, along with the expansion of the exemptions under VAT, will be economically disruptive to the nation, commercially challenging to businesses and complicate the current system of VAT," the Chamber said in its letter, issued after it met with Mr Turnquest and his officials on Thursday afternoon.
"The proposed increase in exemptions goes diametrically against the recommendations of the BCCEC as well as the Government of the Bahamas' own VAT consultants." The Chamber letter also noted that the Government had committed to sharing the economic and fiscal analysis leading to the 12 per cent VAT increase.
Mr Turnquest yesterday conceded to Tribune Business that the VAT rate increase might reduce the level of Bahamian economic growth projected for 2018 and 2019, but would not completely wipe it out.
He based his optimism on the fact growth was being driven through the tourism and foreign direct investment (FDI) sectors, both of which are led by external factors unlikely to be as heavily impacted as the domestic economy by increased taxation.
"Although there may be some moderation in consumption, the good news is that the economic recovery is led by several significant investments in our export sector, meaning tourism," Mr Turnquest said.
"That means that there may be a slight fall in the level of growth, but we anticipate that the trajectory will remain and that we will continue to see positive economic growth."
Pre-Budget, the Bahamas was projected to see 2.5 per cent and 2.2 per cent GDP in 2018 and 2019, respectively. However, the VAT rise will reduce consumer spending power and disposable incomes, further pressure the middle and lower income classes as a result of the tax's regressive nature, and risks having a negative effect on business and investor confidence.
The Government appears to be 'betting' that external factors largely unaffected by domestic tax developments, such as Baha Mar's full opening; the 18 per cent stopover visitor rise in the first quarter; and FDI pipeline will help offset VAT's domestic impact and keep the economy moving.
Sources familiar with the Government's thinking, speaking on condition of anonymity, told Tribune Business it felt there was still sufficient capacity in the Bahamian economy to absorb the VAT increase - especially after the Department of Statistics increased its size, as measured by GDP, to nearly $11 billion in real terms.
And they added that much of the $172 million arrears that the Government plans to pay in the 20180-2019 fiscal years is owed domestically to Bahamian businesses and vendors. Bills such as $10.751 million in VAT refunds, and an extra $1.5 million for the National School Lunch Programme, will now be paid and the money circulate in the economy, boosting economic activity in theory.
But Mr Maura, the Chamber's chairman, warned that it was "difficult to see" how the Bahamian economy could escape a new recession given the magnitude of the planned VAT rate hike.
Lamenting the Government's failure to consult, he told Tribune Business: "There's no doubt in our [private sector] minds that if we had been given the opportunity, and are still given the opportunity, to sit with government; there is no doubt in our minds we could make their plan even better than it is today."
Asked whether he felt there was still sufficient time to persuade the Government to change course, Mr Maura replied: "The concern many of us have is that train has left the station. We would hope the Government stops for a moment, takes a pause and listens because this will give us the opportunity.
"We want our economy to turn around, we want our debt to come down, we want a balanced Budget, we want social programmes to support the most vulnerable, we want tax and incentive policies that promote local and foreign investment, and we want to support our government.
"If we partner together we can address these challenges, and arrive at a much more effective economic and fiscal plan."
Comments
Well_mudda_take_sic 6 years, 6 months ago
Neither Turnquest nor Minnis are open to viable alternatives because there is only one alternative and they have absolutely no political appetite for it. Rather than introducing a well laid out plan of serious austerity measures aimed at significantly reducing the grossly over-bloated size of our largely non-productive public services sector, Minnis and Turnquest opted to take the same easy road of additional taxation that previous governments have taken, thereby electing to simply kick the can down the road. The only problem is, our nation has now run out of road down which the can can be kicked by incompetent and/or cowardly politicians like Minnis and Turnquest. The draconian hike in VAT to 12% will likely be the final nail in our nation's coffin and give rise to the IMF taking charge of our destiny within the next couple of years. And we all know what that means for us - think Argentina, Venezuela, etc.!
Dawes 6 years, 6 months ago
Perhaps change the law so if you don't pay your real property tax the Government can take your house. Then enforce that. Might not get you the whole $400 million but if you got half of it then you would only have to increase VAT to 10%. Or get rid of all the loss making state entities where there are already other private sector operators in the business (Bahamasair). Also make the civil service fund at least some of their pension liabilities. Oh and reduce MP's and Prime Ministers Pension to 10% of what it is,.
sheeprunner12 6 years, 6 months ago
For ALL of you who say that the FNM was wrong for increasing VAT ........ Consider this:
They could have introduce Income Tax on the same sliding scale format as the new webshop taxes????? ................ OR
They could have cut Government expenditure by $400 million (how much pensions, jobs and rents would that be)???? .................. OR
They could have sold off SOEs and make that $400 million ..... BPL, Bahamasair etc. .............. OR
They could have increased Sin Taxes on sodas, rum, cigarettes, sugar, junk food, fast food etc to make up the $400 million............... OR
Charging 5% real property tax on every Bahamian home value, 7% on all Bahamian commercial properties and 10% on every foreign home property value with AirBNB
Any other ideas????????
WATSAYU???????
Dawes 6 years, 6 months ago
At least the income tax is fairer to those that can afford it. As to all others why not a mix of them? If the civil service is overstaffed then reduce it. The private sector should not be forced to downsize due to these tax increases so that the Civil service can be OK. On real property, you don't even need to increase it, just collect what is owed.
jamani2 6 years, 6 months ago
Quite simply, we need to get out of the "business as usual" syndrome, and embrace doing what is necessary to salvage this potentially great country. The Bahamas can be a great small country! In order to become that, however, we must base all that we do in terms of rebuilding the economy of the country, on the twin pillars of shared responsibility and accountability. The third thing we must do--and this is vital--is create a safety net that will ensure the protection and sustainability of those in our country who find themselves at the bottom. This will positively impact crime. We must partner with investors, foreign and local, to develop our basic infrastructure like roads, bridges, transportation, and telecommunications, literacy. The terms foreign investors, foreign investment, and social development must go hand in hand. They should be synonymous! We have to once and for all destroy the thinking that we have nothing to offer the foreign investor, that we need to lure them with land giveaways and unbelievable perks. I'm not sure we need another just touristic development-- another Baha Mar, Atlantis, or Sandals. The big question must be to China and everyone else who see the variety of potentials for doing business here must be: "What can you do for us?" This whole budget debate should give us all cause to pause and reflect. I meet people almost every day who when they learn that I am from the Bahamas, they go: "You from the Bahamas? Why would anyone want to leave a place like that?! In my mind, I am going...how long do you have. You see, it's a long story. But, that's a fair question.
Porcupine 6 years, 6 months ago
Great post!
DDK 6 years, 6 months ago
Let's hope KP, Minnis, et al see the light before plunging the entire economy over that precarious cliff! THEY need to cut spending on all fronts and stop playing games with The People with ridiculous so-called budgets. Successive Bahamian Governments have caused this mess, THEY need to feel some pain themselves. Perhaps SOMEONE can teach THEM the meaning of the word "austerity".
BahamaPundit 6 years, 6 months ago
Dawes made some excellent points. Enforce Real Property tax! Pay RPT or your property is sold. Amazing how simple solutions are the answer to the Bahamas' money problems, and it's because the Bahamas Government fails at simple things that there is no hope for them, no matter how much VAT we pay. Another solution is taxing IBCs. Another solution is legalizing marijuana and taxing it heavily. The marijuana industry could raise the money in the first year.
DDK 6 years, 6 months ago
So many good suggestions! The thing is, they don't like the WORK involved in implementing new measures! Tax increase easy way out!
Dawes 6 years, 6 months ago
According the the article by James Smith they can already take the homes of people who don't pay real property, however as usual those who don't pay are rewarded by the system and they just make it harder on the ones that do pay.
OldFort2012 6 years, 6 months ago
Here is one suggestion. First lower the maximum salary in Government and the Civil Service to 2 times the national average. That would make the maximum salary $50,000.
Then work out how much that would save and fund the remainder with VAT increases.
Don't like the suggestion, do you, KP?
DDK 6 years, 6 months ago
He might not, but I do!!!!!!
akbar 6 years, 6 months ago
How about this. Tell us first where the already collected tax is going...besides the Consolidated Fund. Better yet formulated and table and pass A Freedom of Information Act (yall remember that) so that you as a Govt. will be legislated thus compelled to tell the Bahamian people how every dollar is spent so we don't have to be "kicking the can down the road". People while these are all good advice my only concern is that at one point VAT collection at 7.5% was at $1bill at one point then Minister was bragging that in one quarter the govt. was collecting some $200 mill! The FNM claim they wanted to see where the monies were all they while hinting that the PLP was stealing it.....only to come and say ,when they came to power,they never said they steal but it right there. What kind of madness....now no mention of what has been already collected just a bunch of political rhetoric and a further tax increase...lunacy,smokescreen. With no mechanism to reign in govt. spending we will be going through this same cycle again and again as the learned Minister is mentioning. You could collect taxes until Thy Kingdom and the same effect. Our problem is we arent use to this sort of tax collection so any man in a suit can run some game on us. Bahamians demand more!
DDK 6 years, 6 months ago
Mr. Turnquest, why can you, the PM and your elected buddies not get used to Governmental austerity? For starters:- - Cut the civil service, obviously by attrition; give all employees exams and if they are unable to perform, give notice. Change the law to accommodate this move, if necessary. - With immediate effect, make ALL pensions to ALL persons on the public payroll, on a contributory basis, payroll deductible, no exceptions. - All MP's STOP jet-setting around the world like there is no tomorrow. Learn to make use of conference calls. Ensure all M.P.s travel economy when absolutely necessary to travel. LEARN TO ECONOMIZE! - Eliminate the pomp and frills at Government House until such time as the Bahamas can afford to lavishly host a Governor. - Eliminate customs duty on all items purchased by those with Business Licences in Good Standing. This will help stimulate the economy. - IF duty-free MUST be increased, increase it to $350.00. Give Bahamian business a chance to survive in spite of all the obstacles. - Do NOT dream up tax exemptions for cronies while taxing the poor man to death. ELIMINATE NEPOTISM.
-Eliminate "web shops" . This will stimulate the economy and improve family life. - Initiate The Bahamas National Lottery. Like now. This will provide funds to run the country. - Seriously investigate solar on family Islands. Upgrade BEC personnel and business methods. - Eliminate VAT on electric bills, This will help the private and business community to survive. - Do not touch VAT on your idea of what the lower income families should eat. - LEAVE THE VAT RATE ALONE, IT IS CRIPPLING AS IS. - Collect all debts from BOB Debtors. If they don't pay, seize their assets. - Reduce the size of Parliament. FEEL THE AUSTERITY! SET AN EXAMPLE! - Put on YOUR thinking caps. Burn the midnight oil for The People. Stop looking for cruel quick fixes. TRY TO BE A TWO TERM TEAM!
ThisIsOurs 6 years, 6 months ago
Juan McCartney's "hey honey I bought a house! You didn't tell me you were buying a house. (Why you have to be so negative) Well what's your alternative? Divorce" analogy fits perfectly
sheeprunner12 6 years, 6 months ago
Why did the marriage take place in the first place?????? ........ and what factors led to one party deciding to purchase the house????? ....... there are many options other than "divorce" ....... Who negotiated the transaction, and how the transaction was unilaterally closed must be initially considered.
ThisIsOurs 6 years, 6 months ago
"and what factors led to one party deciding to purchase the house?????"
Ahah! That's exactly what we want to know
sheeprunner12 6 years, 6 months ago
Did the couple need a house??????
bogart 6 years, 6 months ago
@ DDK nice points.
On the third point from the last BoB what is first needed is to determine....how many loans got through when bank policies are universally and commonly preset to mathematically etc qualify....and with the bank having the option to decline.
If examined and faults found then fraud must arise and bank officers must account for their actions. As a matter of fact if negligence or lack of due care and attention then persons need to be brought to justice. The Bank has all the files and this should not be a problem even after years later. 35-4
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