The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s plan to part-finance National Health Insurance (NHI) by singling out “sugary drinks” was yesterday blasted as “unfair”, amid calls for such “sin taxes” to be more widely based.

The Bahamas Chamber of Commerce and Employers Confederation (BCCEC), in its position paper on the revised NHI scheme, said such a tax should be spread across all unhealthy foods and drinks rather than just one product.

Dr Duane Sands, minister of health, previously told Tribune Business that a tax on “sugary drinks” could raise between $4-$10m annually to help cover NHI’s projected $100m total cost, but the private sector organisation yesterday said imposing this by itself would “be tantamount to the Government making a selection of market winners and losers”.

“It is widely acknowledged that a diet high in sugar and salt increases the risk of diabetes, hypertension and other non-communicable diseases,” the Chamber paper acknowledged, saying it “understands the philosophy” behind the Government’s proposal.

“However, we do not support the implementation of additional taxes on the private sector in the immediate aftermath of a significant increase in VAT and other taxes,” it said. “Furthermore, we are not in favour of a tax that is applicable to only one of many ‘unhealthy’ foods that are part of the Bahamian diet.

“While we concur that healthier food choices are imperative in the reversal of trends relating to non-communicable diseases in The Bahamas, the solution must be multi-faceted and should not appear to victimise one sector of the business community.

“The optimal approach should also take into account the considerable investments made by manufacturers in this sub-sector and the potential impact on sales revenue as a result of the proposed taxes.”

The Chamber paper continued: “The imposition of sin tax limited to sugary drinks is unfair, and will serve as an extra burden on a small sub-set of businesses when that burden could otherwise be spread across a broader base of unhealthy products.

“This would be tantamount to the Government making a selection of market winners and losers, and be a significant departure from free market principles by which we stand. If the Government insists upon the development and imposition of sin taxes (which we do not endorse), then that tax regime should be such that the tax burden is spread across all unhealthy or hazardous products and consequently reduce the risk of adversely impacting a single sub-sector.

“The [Chamber] further urges the Government to simultaneously consider and implement policies that would reduce the cost of healthy alternatives, and incentivise consumption of those healthy alternatives.”

Drinks manufacturers lashed out at the “sugary drinks” tax when it was first floated in the NHI Authority’s consultation paper, arguing that their products cannot be blamed for The Bahamas’ health crisis.

Walter Wells, Caribbean Bottling Company’s president and chief executive, in a forerunner of the Chamber’s response told Tribune Business last month that such a tax was “too narrowly focused” on a sector that cannot be blamed for obesity and other chronic non-communicable diseases (NCDs).

The bottler of Coca-Cola, Fanta and other soft drinks added that it was wrong to “single out” one particular sector, and warned that the imposition of such a tax will further “hurt” its business just as it struggles to recover from the budget’s VAT hike.\

The Chamber’s position paper, meanwhile, warned that the Government cannot divorce its National Health Insurance (NHI) scheme from the economic “big picture” - particularly its fiscal consolidation strategy and the likelihood of a major near-term National Insurance Board (NIB) contribution hike.

“It has been widely noted that projections show the National Insurance Fund being exhausted within the next 10-15 years,” the Chamber said. “The ninth actuarial report projects the fund being depleted between 2028 and 2033.

“That being said, there is a concern that this [NHI] tax will be imposed and there would also be an increase in the NIB contribution rate. Accordingly, the Government should not make a policy decision on NHI that is divorced from its future plans with NIB, and is urged to publish a National Social Security Policy that considers these programmes and any other applicable programmes in a comprehensive manner.”

The Inter-American Development Bank (IDB), in its latest country strategy report, warned that NIB contribution rates must more than double to over 20 percent to prevent a long-term Bahamian pension crisis, rising from 9.8 percent to 20.3 percent. NIB contributions, which take the form of a payroll tax, are currently split 3.9 percent/5.9 percent between employee and employer, respectively.

The Chamber position, paper, meanwhile questioned whether increased spending to finance NHI was in keeping with the Government’s fiscal consolidation strategy. And, while acknowledging NIB’s “bloated administrative costs” at around 22 percent of contribution income, it questioned whether the social security system - rather than the NHI Authority - would be a better bet to supervise the scheme.

“We question whether the NHI Authority’s administrative function could have been rolled into NIB for a marginal increase in expense that would cost Bahamian taxpayers far less than it is costing the Government to establish a new agency whose administrative functions mirror that of NIB,” the Chamber’s position paper said.

“It is possible that if NIB can add this to their portfolio and contain its costs to below the amount that NHI Authority would cost, then from a net perspective, the Government and Bahamian public purse may be better off. It would stand to reason that the Government would seek to leverage all of the resources at its disposal rather than reinvent the wheel, serving only to increase bureaucracy and overall costs borne by Bahamian taxpayers.”

Calling on the NHI Authority’s projected administrative cost ratios for the next five years to be disclosed, the Chamber pointed out the historical inefficiencies, costs and mismanagement associated with state-owned enterprises (SOEs).

“The Chamber is therefore concerned about the future efficiency of the NHI Authority, and fears that the NHI Authority as another SOE will deliver a similarly dismal level of value as its counterparts,” it added.