The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value’s president has warned that “the well will run dry” if the government imposes new and/or increased taxes in next week’s budget, adding: “We have to get the economy rolling first.”

Rupert Roberts told Tribune Business that “the government cannot get their full pound of flesh” out of an economy where thousands of workers, especially in the tourism sector, are either unemployed or furloughed and consumer spending is depressed.

Arguing that Bahamians and businesses are “taxed out” in an environment where tourism and foreign currency inflows remain well below pre-pandemic heights, he added that imposing new and extra levies now to help ease the government’s fiscal crisis would merely further frustrate and delay an economic recovery to the detriment of all.

“I don’t know how the Government can put any more taxes on us because people are taxed out,” he told this newspaper. “I don’t know what taxes they can come up with that will not affect poor people. It eventually gets down to the poor paying taxes. Businesses don’t pay taxes; they collect it from the individual.

“I don’t see any more taxes coming until the economy revives. The more money you take out of the economy, the worse it becomes. Unless we have extra income coming into the economy we can’t take on more taxes. The well will run dry. In a good economy you can tax, but if it’s not in the bucket you cannot take it out.

“You cannot get what’s not there. If people are not working and fully employed, the Government cannot get their full pound of flesh out. You8 have to get everybody back to work, get the pandemic behind us and get the economy rolling before you talk about taxes,” Mr Roberts continued.

“You tax me, I have to get it from somewhere. I have to get it from the public. We’re just an agent. It comes in and we pass it on.”

Mr Roberts urged the Government to hold-off on any new and/or increased taxes in the upcoming 2021-2022 Budget despite initial projections it will incur around a $950m deficit to add to the $1.327bn in additional debt taken on during this fiscal year, with the two sums combined set to push The Bahamas’ national debt well beyond the $10bn mark within the next 12 months.

“Not until we have improvement in the economy,” he added of the possibility of tax increases. “The tourists have to bring it in. It has to come in. I don’t see taxes without hurting the people. They [the Government can’t budget to spend it because they don’t see how they can collect it from this economy.

“I don’t know if the Government feels and sees the way certain people are hurting. They are to the point of not taking care of their environment. Their broken spirit has given up when they don’t take out their own garbage. They’re not taking care of their environment, not taking care of themselves. Because I’m in the food business I hear about it and see what pressure they’re under.

“The private sector is also concerned and worried about servicing the debt. The debt servicing also takes out of the economy. The bigger the debt, the bigger the servicing costs, and more comes out of the economy to service the debt, so that’s a big concern.”

The Government faces a variety of competing pressures as it prepares next Wednesday’s Budget. It has to balance the need for fiscal prudence, and ensuring the deficit and national debt do not completely get out of control, and become a spiral that feeds on itself before collapsing, with protecting Bahamians in need and ensuring the economy recovers from COVID-19.

While taxes remain one option for slashing its fiscal ‘red ink’, this would risk further delaying and stalling the economy’s recovery. However, the pressure from the credit rating agencies and International Monetary Fund (IMF) for increases and/or new levies should not be discounted, while the Government will also have one eye on the upcoming general election.

The Government’s $878.2m deficit for the nine months to-end March 2021, which measures how much its spending exceeds its income, is equivalent to 66.2 percent, or two-thirds of the full-year’s projected $1.327bn.

Total revenues, at $1.23bn, are 69.8 percent of the forecast $1.763bn full-year income, which - given that three-quarters of the fiscal year has passed - indicates that the Government may come in slightly short of the 12-month projection.

However, total expenditure at the same point was $2.108bn or 68.2 percent of the full-year forecast, indicating that the deficit target remains in reach if the Government is able to continue containing its outlays.

Still, the deficit is more than triple, or 249.5 percent greater, than the prior year comparative’s $251.2m, which was incurred in a period that was largely COVID-19 free while still featuring the impact from Hurricane Dorian.

“Compared with the same period in fiscal year 2019-2020, total revenue declined by an estimated $527.4m (30 percent) to $1.23bn, equal to 70 percent of last year’s collection, and representing 69.8 percent of budget,” the Ministry of Finance’s latest “fiscal snapshot” said.

“Consistent with the sharp downturn in economic activity, decreased collections were recorded for VAT (down 36.4 percent), excise taxes (down 38.3 percent), license to conduct special business activity, mainly business license and communication levies (down 15.5 percent), customs & other import duties (down 31 percent) and immigration fees (down 7 percent).

“However, the yield from property taxes increased by $11.6m (up 13.6 percent),” it added. “Aggregate expenditure firmed by $99.5m (5 percent) to $2.108bn, boosted by substantial increases in social assistance benefits ($145m), finance charges ($43.5m), public debt interest ($21.8m,) and subsidies ($19.2m).

“Yet, the increase in overall expenditure was offset in part by reductions in outlays for compensation of employees ($61m), supplies & materials ($11.5m) and services ($10m).”