The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

“High-end” Bahamians and companies are the biggest tax dodgers, the deputy prime minister revealed yesterday, adding: “Poor people pay their taxes.”

K Peter Turnquest, speaking at a post-budget briefing, said it was those who can afford to pay but choose not to that present the greatest compliance challenge for the government as it moves to enforce all tax laws.

Emphasising that the government was not seeking to be “punitive”, or engage in a “gotcha exercise”, as it pursues all revenue due to it, Mr Turnquest warned: “We do intend to collect the government’s revenue. For a number of reasons we have been relatively lax, and in some instances slack, in the enforcement of tax laws.

“That has had its effect. Each of us as citizens have an obligation to pay our fair share. We do not have a progressive tax system, and so that requires that those of us who have an obligation - and particularly those of us who have more - should pay.

“You would be surprised to find the class who don’t pay their taxes,” he continued. “It’s not the poor people; poor people pay their taxes. It’s normally the high-end people who can traditionally afford it that don’t pay.

“We are willing to enforce the laws on the books. This is not a punitive exercise. It’s not a gotcha exercise. It’s very much a partnership where the Government does its part and the citizens do their part, and together we get positive results from each of us following the rules.”

Mr Turnquest said the Government is still paying down its $360m in unfunded arrears inherited from past administrations. “We are unfortunately still paying bills. In last year’s budget we indicated that there was roughly $360m of arrears we had committed to address over the next three years,” he added.

“We had budgeted $172m for this current fiscal year, and we have addressed $129m of that to-date. We will see where we get to at the end of the year. In the upcoming year we have budgeted another $100m. In the next year we will address the balance.

“The idea is over the next three-year period we will liquidate all of those arrears. The idea is that that will be money that is freed up for us to give back to the Bahamian people in the way of further duty reductions, in the way of new programmes to stimulate economic activity, build infrastructure and to provide the social support that we need.”

Addressing concerns over the Government’s ability to meet revenue projections, Mr Turnquest said: “One of the things that I think is fundamental is that GDP growth and projections are exactly that; projections. It’s very difficult to pinpoint a number.

“We make these projections based on factors we are aware of in our global economy, that are happening in our marketplace, in our major sectors of our economy, and based on plans and investments we are aware of. Any number of factors can affect and slow down that growth profile.

“GDP growth is a factor of a number of things. It’s not only internal economic factors but also external economic factors, and they all play a role. The main thing, though, is to look at that bottom line and, this year, when you look at that deficit number coming in at our target, which means that we are doing a fair job in managing the fiscal affairs of this country.”

Marlon Johnson, the Ministry of Finance’s acting financial secretary, said: “The job of fiscal management is managing the deficit. The budgetary revenue projections are just that; they’re just revenue projections. When you look historically, very few countries hit their revenue targets because there are so many factors involved.

“What all governments have a responsibility for is managing the deficit; your balance, your surplus. Part of the work we have been doing is managing the explosion in expenditure growth. That is what you can manage within the year. Ultimately, what is important is that you meet your fiscal goals with respect to your deficit targets, your debt targets and the like. That really is the determinant of fiscal stability and fiscal success.”

Mr Turnquest had confirmed that revenues for the 2018-2019 fiscal year are now projected to come in some $238m, or 9 percent, lower than budgeted at $2.413bn due to the areas that the Government now hopes will drive its income in the upcoming fiscal year.

He said during the Budget statement: “All told, we project that the remaining two months of the fiscal year will perform positively. For the fiscal year as a whole, revenue is estimated to come in at about $2.4bn, some $238 million or nine percent lower than what was budgeted at the start of the fiscal year, largely on account of the new agreement with the gaming operators, the delayed implementation of the Revenue Enhancement Unit (REU), and the concessions granted to hotels and contractors in respect of the introduction of the higher rate of VAT.

Addressing the issue of over-budgeting for civil service salaries and benefits, Mr Turnquest said yesterday: “This is an ongoing exercise for us. What we found is that the budgeting system we inherited is very inefficient. It has not been very scientific. As we go through line items comparing actual expenditure and the known commitments, we adjust the allocations accordingly.

“Whatever savings are derived are either eliminated or reallocated. At the end of the day, the important thing to note is that there is no head count out, and it does not stop ministries and agencies from hiring the talent they need in order to ensure they are efficient.”