Minister of Finance Peter Turnquest delivers the Budget Communication. Photo: Terrel W Carey/Tribune staff
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By RASHAD ROLLE
Tribune Staff Reporter
rrolle@tribunemedia.net
DEPUTY Prime Minister and Minister of Finance Peter Turnquest said the government withheld its intention to increase value added tax until last week because it did not want to influence the consumer behaviour of Bahamians.
People everywhere have lamented the short time they have to prepare for VAT's hike to 12 percent from 7.5 percent. Why the Minnis administration gave just a month's notice about the increase has been one of the outstanding questions since last week's announcement. The Tribune spoke to Mr Turnquest about the matter after his appearance on the Kiss FM 96.1 radio show, "Ed Fields Live", where he also addressed the issue.
He said: "When it comes to government revenue measures, you have to be very careful about what you say. Yes, it would be nice if we could have open consultation but that comes with risk in terms of persons wanting to engage in arbitrage, trying to take advantage of the situation, which could cause a run on the bank literally when people want to buy import materials or goods or even services at the lower rate. That could cause a run on the foreign reserves. Fortunately, we do have a high foreign reserve at the moment but you can't take that kind of risk. Similarly, if the rate is going down, people wouldn't buy anything so all of a sudden, your tax revenue falls out of the bottom. Governments have historically held revenue measures very close to the chest as a hedge against that kind of activity.
"Even now, we've given a month's notice that the VAT rate is going up," he continued. "You could imagine what's happening between now and then and that's a risk we have to take in the particular circumstance because again we recognise that merchants have to change their systems and then there are people who are making contracts that need time to transition to the new rate. Ordinarily you wouldn't want to do that because it can cause a bit of a problem for you and you may not earn the return that you thought you would earn because everyone has front loaded you."
VAT's rate is increasing by 60 percent in the next fiscal year and the Minnis administration's budget forecasts a simultaneous 60 percent boost in revenue that will be gained after the hike.
Mr Turnquest said though VAT was originally implemented after a lengthy consultation period, that can't be compared to the current situation.
"When VAT was first introduced it was a new tax altogether and so that would have required a lot of consultation," he said. "It's the same as if we were to introduce corporate tax, you would have to have a long consultation period with respect to that because you're talking about a whole new taxation model. What we are doing is changing the rate."
The Bahamas Chamber of Commerce and Employers Federation has said it cannot support a tax hike without a comprehensive economic analysis report, but Mr Turnquest does not believe the government needed to commission such a study.
"We've done our internal modelling," he said. "We have our own economist and this isn't about a wholesale introduction of a new tax, this is an adjustment of a rate and we do this all the time. Yes in a perfect world we can go out and get the dynamic modelling and all of it. In this particular circumstance, we feel comfortable with the data we have and the modelling we've done."
Asked if the administration will release its internal reports, he said: "We'll have to consider. We'll see."
Comments
sheeprunner12 6 years, 5 months ago
We already been down the road of the PLP government "consultation by Committee" process with Perry dem ............ and where did that get us?????????
TheMadHatter 6 years, 5 months ago
Turnquest said the government’s 2018/2019 budget could mean that in three years the country could have a balanced budget and finally “take control of its own destiny”, but the business community is not sharing government’s vision and has called for a meeting with Ministry of Finance officials to express their concerns.
Concerns? Oh yeah. Concerned that black people may achieve REAL independence and whites will no longer have as much control. Oh yeah. Concerns. They prefer to keep us in debt forever. The FNM plans to get rid of the debt. I like that.
Hopefully African-Bahamians will finally realize this government is trying to cut the shackles OFF their ankles.
Well_mudda_take_sic 6 years, 5 months ago
The tired old race card you are trying to play went out the door with the old corrupt PLP and their multiple showings of the movie Roots around election time for the purpose of manipulating our grandparents.
licks2 6 years, 5 months ago
Nothing sensible to contribute as usual. . .
Chucky 6 years, 5 months ago
you do realize that a balanced budget is far from debt free We will be in debt forever! Notice that debt is always discussed as a percentage of GDP, not so much in amount of debt, this is because it's never an intention to pay it off, but rather to manage the debt level at the "appropriate" percentage of gdp. And no, the shackles will never be removed. Instead of chains, you be a debt slave, and will always be.
The_Oracle 6 years, 5 months ago
Do you really believe that tripe MadHatter? yikes that's scary if you do. So, KPT seems to not understand that unlike duty, VAT cannot be "front loaded" If I import heavily @ 7.5%, before the increase, I will pay 7.5% on landed cost upon entry, but will have to remit to Government the difference in not only the traditional retail balance Portion but also at the highest rate, 12%. Consumer still pays tot total! However, the typical government Duty rate secrecy, WTO, OECD, CARICOM, IMF and God Knows who else negotiation secrecy continues as the norm, which has helped create the outrage in the private sector. We are following rail tracks owned by the above! I will add, maybe the Chamber elected will now realize, being in the room, supposedly being consulted with is giving silent consent, you input will be taken or discarded without recourse. I'd rather not be in the room.
proudloudandfnm 6 years, 5 months ago
Freind of mine spent the last month getting prices and researching licensing to open a new restaurant in Nassau. Now since the increase he's decided to wait and see...
Business will most definitely be negatively affected.
Black owned and white owned hatter..
DDK 6 years, 5 months ago
One thing we can ALL understand, KPT truly is one of the Phat Katz! He could care less about The People. Far too disconnected.
sheeprunner12 6 years, 5 months ago
Former GB Chamber of Commerce CEO ...... Businessman ..... Millionaire
bogart 6 years, 5 months ago
......Multi millionaire
DDK 6 years, 5 months ago
The other descriptive words that come to mind at this time are not very flattering!
TalRussell 6 years, 5 months ago
The 12% VAT is just another method likes 'spy bill' to instill fear, apprehension and intimidation into the hearts of people public. Why no 12% VAT on spying?
Here's my 'spy bill' warning advice. if you have security cameras inside your household - remove them. Your outside security cameras are safe from spies but you don't want the comrade red shirts spyman's and spywoman's, pushing buttons back spy headquarters - be looking in at your private genitalia's.
BahamaPundit 6 years, 5 months ago
It's the people's time!!! If this is the people's time, we should have been consulted on VAT. Does Minnis even know what his words mean? He seems to be one of the most secretive PMs ever. Good Sir, keeping secrets from the people is the diametrical opposite of it being the people's time.
sheeprunner12 6 years, 5 months ago
But .......... did not the People elect them to manage our Treasury responsibly??? ...... Can you remind me of the PLP last slogan??
We will see if the FNM will keep their word to the People.
bogart 6 years, 5 months ago
These wealthy politicians just seem to live in a different world. In 2017 elections the majority just had enough and voted in a historic 35 to 4 victory for politicians for change. Some 50,000 below ppverty line, 75 - 100,000 people struggling depemding on family and charity to survive, crime killings the leading cause of death, HIV at the highest levels, most ever people on welfare, unemployment spme 10,000 jobs promised never reached.1 in 8 going to bed hungry., mmass advertising by web shops decimating Family island communities where unemployment done high........and get dis govt Budget to increase taxation on the aforementioned poor (pronounced pore by the poor peole) plans kept in secret as of ....get dis as though they pore done scrappin catchin hell....gon a amazingly find money to stock up.....dese politicians have no clue whatsoever the people (historic 35- 4) was voting for after some 2 billion dollars VAT was efficiently extracted fron the people pockets....goin through... Nice try Doc Sands for trying to help the Finance Minister out. ........... On another note keeping the budget a secret until the last minute without imputs from knowledgable sources like , Messrs Myers, Moura, Gowan Bowe and the peoples other elected Representatives is a black eye for representation of the people ....this is just as bad as the people voting no to the gambling referendum and a few in govt went against the democractically held majority people voting no.
sheeprunner12 6 years, 5 months ago
POOR .............. POOR ................ POOR
licks2 6 years, 5 months ago
SO DO YOU THINK THAT "SELF INTERESTS" LIKE BOWE, MYERS AND MOURA WOULD HAVE PARLEY IN THE BEST INTERESTS OF THE SMALL MAN OR FOR THEIR OWN POCKETS?? AND FOR THE TOP PART OF YOUR POST. . .I COULD NOT MAKE A BETTER CASE FOR THE NEED FOR RAISING TAXES. . .OUR MULTIPLE DOWN GRADES SHOW THAT FELLA. . .YOU FORGET THAT WE ARE STILL AT JUNK STATUS AYE. . .ON ADVICE FROM PERSONS LIKE BOWE, MYERS AND MOURA, FRANK SMITH AND WILSON. . .ALL WHO GOT STINKING RICH FROM KEEP THE STATUS QUO!!
DDK 6 years, 5 months ago
Oh well, it's all over but the crying and shouting! But Comrade, we get tuna now when we get tired of corned beef, or maybe we can go buy a whole salmon! Brownies for everyone!
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