The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government must "make the same sacrifices" it is demanding of Bahamian taxpayers, a top accountant yesterday warning that past lax spending habits will no longer be "tolerated".

Craig "Tony" Gomez, the Baker Tilly Gomez accountant and partner, told Tribune Business that the government needed to show it will match the increased tax burden imposed on the Bahamian people by eliminating wasteful and unnecessary expenditure.

While acknowledging that the budget's tax hikes were "necessary" to fill a $400m financial hole, Mr Gomez said the government could demonstrate it was fulfilling its side of the bargain in tangible ways - such as cutting back on the number of "red-plated" vehicles seen on the roads at the weekend.

He added that the public sector could not continue to be immune from the hardships felt by private sector workers, such as hotel employees already facing reduced work weeks as summer approaches, arguing that "the pain" from the VAT rate increase and other measures needed to be shared equally.

Emphasising that the government now needed to fulfill its pledges of full fiscal transparency and accountability, Mr Gomez said it had to deliver the benefits it promised from its fiscal consolidation plan to Bahamians in ways they can see and feel.

The Baker Tilly partner also warned against using the projected $400m VAT revenue increase to simply increase government spending, as the former Christie administration had done, and echoed other observers in pointing out that The Bahamas cannot tax its way to growth.

Mr Gomez argued that the government needed to lay out a clear, achievable near-term growth plan, adding that any further hike in the VAT rate within the next three years would be unacceptable to Bahamian taxpayers.

Yet he backed assertions by KP Turnquest, deputy prime minister, that The Bahamas is one major hurricane away from financial disaster, with the government possessing "no wiggle room at all" should a Hurricane Matthew-type event occur.

"With regards to the budget, my own view is that it is necessary," Mr Gomez told Tribune Business. "Not everyone is going to agree, but if you're comparing it to a home budget where you're asking everyone in the home to make a sacrifice, not everyone is going to be happy but it is being done for the good of all.

"The government, by virtue of passing the budget, has taken on the responsibility of carrying it out for the benefit of The Bahamas and Bahamians. But this is not to say you can add income where there is no responsibility for accounting.

"It seems we have tolerated that in the past. But the Bahamas is a maturing financial country where things tolerated in the past are not tolerated today. In much the same way we are being asked to make a sacrifice, the Government is being asked to do the same thing," he continued.

"We are making a contribution, but the contribution is a two-sided event. In much the same way the country is facing financial trouble and challenges, and the sacrifice we are making is for the betterment of all, we expect the Government to do likewise. It is necessary for citizens to see the Government making sacrifices."

VAT is a regressive-based consumption tax and, while all Bahamians and residents will feel the 60 per cent hike to 12 per cent, those on lower incomes will be hit more than the wealthy because an even greater, higher share of their income is being taken in taxes.

The Budget tax increases will reduce consumers' disposable income and lower living standards, while also raising living costs, but the Government argues the hikes are essential if the Bahamas is to put the public finances back on a sustainable footing, eliminate the fiscal deficit by 2020-2021 and pay off $360 million in unfunded arrears.

The Minnis administration is also likely to argue that its spending will be constrained by the Fiscal Responsibility Bill, but this legislation has yet to be passed in Parliament. Many observers feel the Budget was light on expenditure controls, although the Deputy Prime Minister said half the 'line items' were reduced or held constant for 2018-2019.

Mr Gomez yesterday said there were simple, yet tangible, ways for the Government to demonstrate it will share the fiscal consolidation burden by eliminating waste and inefficiency in its spending.

Dr Glen Beneby, the chief medical officer, previously said up to 25 per cent of the Government's annual healthcare budget - close to $100 million - is squandered on such practices, but the Baker Tilly partner recommended cutting back on the use of 'red plated' public vehicles for non-work purposes.

"These are not necessarily the real needs, but they are perceived needs for the Government to be perceived as cutting back on waste," Mr Gomez told Tribune Business. "For example, the cry I often hear is - a low-hanging fruit the Government can address - the sight of so many government red-plated cars moving around at non-essential hours, particularly on weekends, where children and family are riding around in these vehicles.

"While there may be a justifiable need for the use of government vehicles on weekends and holidays, Joe Public sees all this. He may be making a sacrifice, having to park his car more because gas has gone up, so why is the Government not managing its affairs and budgeting in the same way."

Mr Gomez said the public sector could no longer be immune from the hardships experienced by their counterparts in the private sector. Taking the hotel industry as an example, he revealed that the rosy performance and outlook created by Baha Mar's opening and a strong winter season was not necessarily being felt on the ground.

"If one were to question employees at a couple of these hotels, what is said is that what is being communicated is not necessarily happening at ground level," he told Tribune Business. "Many employees are working three to four days a week, and with VAT going to 12 per cent they are going to be taking on additional responsibilities.

"I have spoken to a number of them, and while their hours and days have been cut back they understand the challenge the country faces. These people want to see the same kind of sacrifice being made at the government level.

"I have spoken to those who run and manage some of the golf courses of the country. The golf market is not robust. Employees are working less hours, and there are less rounds of golf being played. There are sacrifices being made."

Mr Gomez added that the Government also needed to address perceptions surrounding the Budget's "formula", especially the perception that the 2018-2019 version was making certain Bahamian families wealthier - a notion frequently heard "as you move about town".

Turning to the Budget's economics, the Baker Tilly partner praised the work done by the Deputy Prime Minister and his Ministry of Finance team, but urged it to avoid the former administration's pitfall of using the VAT revenues to finance further spending increases.

"The Government has to be sure the increase in revenue is not offset by a corresponding increase in expenditure," Mr Gomez told Tribune Business. "And it has a challenge because the economy must get started outside of tax measures.

"Bahamian citizens want to know where the economic growth of the Bahamas is coming from in the next few years, the short-term. They do not want to see an increase in VAT from 12 per cent to 14 per cent next year or any time thereafter. They want to know there will be a decrease in the VAT rate because of government's concerted effort to attract new business to the Bahamas."

Mr Gomez added that the Budget was "extremely tight", and said: "It has no wiggle room. It has no wiggle room at all in the event of a major hurricane", echoing concerns expressed by Mr Turnquest.