The Tribune

THE government of The Bahamas is asking the Bahamian public, many of whom are barely able to make ends meet, to accept a very bitter pill, a nearly 40 percent increase in VAT from 7.5 percent to 12 percent.

We fully appreciate the need. The government is even more cash-strapped than the segment of the population that lives hand-to-mouth and day-to-day. Successive governments have borrowed and wasted funds like drunken sailors and now we are being asked to pay the price. Borrowing was so out of control that in some years only a few countries in the world – Greece, Portugal, Japan, Italy among them –- exceeded our level of what we owed relative to our Gross Domestic Product (GDP), that is, the value of our economy. The World Bank and IMF set an acceptable rate to debt to Gross Domestic Product at 60 percent for fully developed nations and 40 percent for developing or emerging economies. In 2016, our debt-to-GDP was 67.8 percent and we were advised that we were in a “a very, very dark position”.

One year later, in September 2017, it rose to 90%. We owed $76bn when our entire economy is just over $8bn. In the five years between 2012 and 2017, government rang up another $2bn in outstanding balances. To service that debt, interest only without even reducing principal, means payments of $350m a year. Imagine what that money could do if it were available, build new schools, hospitals, but now we are borrowing another $70m for infrastructure improvements, including airports in Exuma and Eleuthera. We do not question the need for such improvements, but we seriously question the how and the timing. The country can ill afford to borrow and repay any more until the debt is whittled down and the debt service does not create a need to continually tax a people dealing with individual struggles in an anaemic economy.

Overspending is a particularly Bahamian cultural phenomenon. Bahamians are notoriously poor at saving – just like successive governments – and any increase in a consumer tax, which is what VAT is, is going to hurt the poorest among us who spend the greatest proportion of their salary or wages on goods and services.

But if the government wants the public to swallow a bitter pill, it needs to do two things. First, it must demonstrate in a clear and measurable way, how it will make us better. When we go to the doctor and she says, “Take this medicine. It won’t taste good, but you will see improvement in seven days,” we believe the doctor and we swallow that pill. Why? Because the doctor examined us, looked at our symptoms and diagnosed our condition, then shared the information along with the prescription. Unfortunately, the current administration has said “Take this pill because if you don’t we could lose the nation,” which, by the way, we do not buy. But it has not said, “Here is how the pill will make you better.” It has not shown us a way forward. It is desperate to collect for borrowing sins of the past and there have been many. Yet it has not presented any clear evidence of how it intends to grow the economy overall.

Before the government asks any Bahamian to swallow a 12 percent VAT, it must do two things. It must show restraint on its own part and it must show how it is going to grow the economy.

Whether through real property tax or other incentives, small to medium size businesses, developers, light industry manufacturers must be encouraged and must, above all and most importantly, not be discouraged from continuing to invest. There are a lot of serious rumblings in the marketplace that could cost hundreds, if not thousands, of jobs to be lost. We know of local business people talking about taking their money and ideas to other destinations because they worry about a nation with ever increasing taxation and no vision for economic recovery and growth.

It is not often that we quote the Bible in our editorial positions but this is one time we feel compelled to remind decision-makers who hold our future in their hands that Proverbs 29:18 in the King James Version, counselled that “Where there is no vision, the people perish, but he that keepeth the law, happy is he.”

We have seen incremental progress, especially in Grand Bahama where MP Kwasi Thompson has been working diligently. But we have yet to see a creative and carefully conceived vision for growth, only a grabbing for more money to service the bad habits of the past while those same bad habits continue unabated.

Where is the overall business model with a projected growth rate? Where is the National Development Plan that started under the PLP with the specific guidance of then Minister of Investments Khaalis Rolle and that has been nurtured with passion and determination by Dr Nicola Virgill-Rolle and her small, but impressive team?

Tell us, Prime Minister Dr Hubert Minnis. Tell us, Deputy Prime Minister and Minister of Finance K Peter Turnquest. Give us a reason to believe there is restraint and there is a vision and then we can swallow the bitter pill of a slightly more acceptable VAT of 12 percent.