The Tribune

By Riel Major

OPPOSITION leader Philip Davis yesterday released predictions for the upcoming 2019-2020 budget, questioning if there will be an increase in taxes as well as a drastic cut to recurrent and capital expenditure.

The Progressive Liberal Party leader insisted the government’s options for the budget are limited and further forecasted economic challenges will hasten the country’s descent into a recession. At a press conference at the PLP’s headquarters, Mr Davis said his party has no confidence in the Free National Movement’s ability to effectively and practically manage the public’s finances.

He said this is “because they have missed critical fiscal targets for the last two budgetary cycles and because they have failed to present realistic budget estimates”.

He said the increase in value added tax last year, “shook consumer and investor confidence and promptly hampered both investment and consumption” during the fiscal year. 

Mr Davis said: “As a result, the modest economy recovery has stalled, and unemployment remains stubbornly high due partly to labour policies of government. Crime is still a huge problem, indicating a level of desperation of our people in their economic circumstances.

“We again point out and underscore the importance of the Central Bank’s survey that 50 percent of Bahamians earning $30,000 or less annually…cannot make ends meet.  

“The government has refused to increase minimum wage, notwithstanding imposing a 60 percent increase (in) VAT last year.”

Mr Davis said the Department of Statistics recently confirmed an economic growth rate of 1.6 percent, well below the more than two percent projected by the government.

He also said the Department of Customs’ revenue is down compared with last year at the end of the third quarter.

“Overall, the government’s revenue is also down against projections at the end of the third quarter primarily because of the ill-considered 60 percent increase in the VAT rate imposed during last year’s budget and meddling with tax structure of the web shop gaming industry,” Mr Davis said. 

“The dismantling of the Revenue Enhancement Unit within the Ministry of Finance was another poor politically motivated policy decision. Empirical data and objective research revealed that there was over $400m in uncollected taxes and hundreds of high-end properties unregistered and no taxes were being paid on these properties. No explanation was given for this rookie mistake.”

According to Mr Davis, the National Insurance Board is also at risk partly due to the changing demographics of our population.

“More importantly because of the ill-advised policy of de-linking business licence renewals from NIB compliance, a policy designed to assist the oligarchs. As a result, the minister for national insurance is warning that contributions must go up sooner rather than later,” he said.

“The government’s inability to meet its revenue targets has resulted in the government’s failing to meet many of its expense obligations on a timely basis. This is imposing a secret and invisible tax on those affected businesses and individuals who can at least afford it. This phenomenon has an add-on effect to the misery index.”

He added: “The government can only extract so much funding from businesses and consumers through these payment deferments, the unaltered truth about the fiscal and economic health of the country must be revealed sooner than later. As no lie lasts forever.”

Mr Davis said the FNM has abandoned the “well-considered plans” for the modernisation of the Bahamas left in place by the last PLP administration.

He claimed the government will, in the upcoming fiscal year, transfer public buildings to a fund to “minimise the ability of other Bahamian individuals and entities such as the National Insurance Board, churches and ordinary Bahamians” from renting to the government; eliminate business licence fees for all banks; and ensure that business licence and VAT is calculated on the same tax base to reduce the business licence fees of large food stores, pharmacies, Morton Salt and others with large zero-rated or exempt supplies.

He also said the government will “reduce the deficit to one percent of GDP in the absence of a pro-growth strategy - that is, reduce and starve much needed recurrent and capital expenditures by approximately $100 million.”

The opposition leader asked, “Will there be an increase in taxes to offset this revenue loss as a result of the promises listed above? Will VAT be increased to 15 percent as a result?”

He also said: “The above proposition represents a foolish list, which could send the economy reeling into a prolonged recession.

“With 1.6 per cent economic growth, a looming and real trade war between the two largest global economies, US and China, and with no money on the ground nor short term strategic growth prospects on the horizon by this government domestically, this is clearly not the best of times.

“The Bahamian economy, notwithstanding the one-time uplift in tourism arrivals and expenditure because of the opening and operations of Baha Mar coupled with a strong US economy, is not doing well.”