The Tribune

By KHRISNA RUSSELL

Tribune Chief Reporter

krussell@tribunemedia.net

WHILE outlining plans to steer the country in a new direction, Prime Minister Philip “Brave” Davis insisted the former government planned to increase value added tax to 15 percent.

Mr Davis told Parliament this was the suggestion of the International Monetary Fund’s technical report that either the structure of the tax be changed or it suffer a rate increase.

 He referred to former Prime Minister Dr Hubert Minnis’ comments last week which explained that he called an election eight months early because the former government was facing “headwinds.”

 Mr Davis said this was proof of the former government’s intention to increase VAT from 12 percent to 15 percent.

 “In the most recent IMF technical report, the scenarios recommended for consideration included this one: raising the overall VAT rate to 15 percent, while keeping the existing VAT exemptions and leaving in place the scenario where the government was paying VAT for wealthy foreign companies.

 “I want the Bahamian people to hear me very clearly. When we came to office, (an) analysis performed by the IMF indicated that if the government didn’t change its VAT structure, VAT would have to be raised to 15 percent. Imagine that.

 “Now, I know you all remember that the member for Killarney told the Bahamian people that he went to election eight months early because the country faced ‘headwinds’ and ‘tough decisions’.

 “We said at the time that he wanted Bahamians to vote before he raised their taxes, and this major tax increase appears to be what he had in mind. Raising VAT to 15 percent would have turned headwinds into a hurricane.

 “Raising VAT to 15 percent wouldn’t have been just a tough decision, it would have been a terrible decision that would have plunged our economy into a downward spiral, past the point of no return,” Mr Davis said.

 Standing on a point of order, Dr Minnis said “categorically” there was no consideration on the FNM’s agenda of raising VAT. He later said the government’s decision to reimpose VAT on breadbasket items will hurt the poor.

 Still Mr Davis maintained the IMF’s suggestion was never disclosed to Bahamians, adding: “But you know there are a lot of flies on walls and they fly around a lot, but sometimes they land on the wrong wall and guess what? Flies could talk too.”

 As he unpacked his government’s plans for the economy, Mr Davis said his administration’s plan was more progressive.

 “... Broadening the base also means that we now have the room to lower the VAT rate to 10 percent, a reduction that many Bahamians were eagerly awaiting. Once again, there were those who said that this was a promise that couldn’t be kept.”

 As for the 2021/2022 Supplementary Budget, Mr Davis said the government planned to meet all of its major objectives while not adding a single dollar to the national debt.

 “This budget seeks to stabilise our country’s finances while also providing some relief for the Bahamian people. The already poor state of the economy at the beginning of the pandemic, coupled with the blunt force use of lockdowns by the previous administration, made an already bad situation much, much worse.

 “With this new plan and vision to restore our country, this Supplementary Budget is designed to achieve three major goals: it provides much needed relief to the Bahamian people; it reallocates funding to match the ministerial portfolios of the government; and it provides funding for critical expenditures, which were neglected by the previous administration.

 “It is also important to point out that we are accomplishing these objectives while not adding a single additional dollar to the national debt that was forecast in the original FY2021/22 Budget tabled in May. In fact, this Supplementary Budget begins the process of reducing the extraordinary levels of borrowing seen under the former administration by reducing the government’s projected deficit for the fiscal year.”

 He continued: “I want to repeat that – we intend to take care of people and reduce the deficit at the same time. This balanced approach, of meeting the needs of the Bahamian people while practising fiscal discipline, reflects the competent and compassionate approach we are bringing to governing during these very difficult times.

 “Our Supplementary Budget recognises there is an urgent need for change in this country that cannot wait for the next fiscal cycle.”

 Mr Davis said officials in the Ministry of Finance were trying to ascertain where billions of borrowed dollars were spent.

 “Exceptional levels of borrowing, high and unsustainable deficit levels, and no plan to rectify this crisis. This is the economy that we inherited.

 “What makes the situation truly infuriating is that we still struggle to see what happened to all this expensive, borrowed money. There certainly is not a single major road, school or hospital to show for it.

 “Where did all the billions of dollars go? We are determined to find out, and when we do, we will certainly let the Bahamian people know.”

Mr Davis also addressed budget decreases at certain key ministries.

 He said there is a $2.1m decrease at the Ministry of Education. The decrease was the result of the findings of an audit to remove all inactive persons from the payroll. Other savings were identified due to the continuation of virtual learning, with certain expenses associated with in-person learning and thus not required for a portion of this school year. He said the operations of the ministry were not impacted.

 The Ministry of Youth, Sports, and Culture also saw a $1.9m decrease in its budget that represented savings due to there being no Junkanoo parade this year.

 The Ministry of the Environment saw a $7.8m decrease. The represented money transferred to the ministry related to the Bahamas National Trust, as well as the transfer of The Bahamas Public Parks and Beaches Authority to the Ministry of Works and Utilities.