The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister yesterday accused the former Minnis administration of disguising millions of dollars in VAT refunds as unpaid “arrears” that could be blamed on a former PLP administration.

Philip Davis, leading-off the supplemental Budget debate in the House of Assembly, said these payments to foreign-owned corporate giants in the transhipment industry - who he did not name - were paid for a period in which the companies involved were “not eligible” to receive them.

Explaining some of the more technical reforms to the VAT Act, which are due to be passed by Parliament imminently, he said: “VAT was originally exempt on transshipment services, which means they didn’t have to pay VAT and the Government, therefore, didn’t have to refund it. That is the international standard.

“The previous administration changed this treatment so the Government had to give a refund on services that did not generate VAT in the first place. In essence, Madam Speaker, the Government had to pay the VAT on these transshipment services. These foreign companies experienced a windfall of millions and millions of dollars on the backs of Bahamian families and companies.

“This was a classic move by the previous administration. Tax breaks for themselves, their wealthy supporters and favoured foreigners; tax increases on the backs of ordinary Bahamians.” However, Mr Davis tabled no evidence to support his assertions or give figures for the sums involved.

Several sources suggested the companies concerned are likely to be some of Grand Bahama’s major industrial conglomerates, with Buckeye Bahamas, owner of the former BORCO oil storage terminal, thought to be one.

Other contenders cited by sources familiar with the situation were the Freeport Container Port, Freeport Harbour Company and the Statoil oil storage terminal. The Container Port is jointly owned by Hutchison Whampoa and Mediterranean Shipping Company (MSC), while the Hong Kong-based conglomerate is partners with the Grand Bahama Port Authority (GBPA in the Harbour Company.

However, Mr Davis added: “Stranger still was the decision to pay refunds for the period during which these service providers were not eligible. These refunds were casually put into the Budget as prior year arrears.

“So, here you had the spectacle of the Government amending the VAT legislation to give refunds to non-Bahamian companies worth billions of dollars under the guise of an unpaid bill left by a PLP administration. This is indefensible; an absolute disgrace.”

K Peter Turnquest, former deputy prime minister and minister of finance, who would likely have been in charge during that period did not return Tribune Business phone calls seeking comment before press time last night.

The 2016-2017 fiscal deficit, the last year of the final Christie administration’s term in office, did balloon beyond projections to close at around $691m due to the discovery of what its successor termed as unpaid arrears.

Elsewhere, Mr Davis said of the VAT reforms: “The proposed Bill does not re-impose VAT on home insurance. Nor does it impose VAT on the rental of non-commercial properties.

“What the proposed Bill does is make the purchase of fuel for private planes a VAT-able expense. That was not the case under the previous administration. They don’t like to talk about how they made the government pay the VAT on fuel for private planes.”

The Prime Minister added that arrangements were also being made to refinance the $167m promissory note held by Bank of The Bahamas as part of its second government bail-out, which is due to be redeemed next year, meaning the Government has to replace it with an injection of cash into the BISX-listed institution.

Revealing that this, as well as the $246m loan that the Government assumed from Bahamas Power & Light (BPL), are included in the $1bn “difference in liabilities” between the Government’s alleged true financial position and the pre-election fiscal report, Mr Davis said the sum “contains debt maturities for which no refinancing arrangements have been made as of September 30, 2021”.

He added: “This would include the $246m loan assumed by the Government on behalf of BPL, and the $167m promissory note issued by Bahamas Resolve for the purchase of the distressed assets of the Bank of The Bahamas. I can, at this time, say comfortably that refinancing arrangements for those obligations have now been put in place.’

The Prime Minister continued: “The $1bn difference in liabilities discovered upon taking office is perhaps the most visible risk but it is not the only fiscal risk before us.

“We are awaiting the final report from a private sector accounting firm [Deloitte & Touche] on this matter, but I think I should be clear on a few things. The methodology used to derive this number is the same methodology which should have been used in the pre-election report, as specified in the Fiscal Responsibility Act.

“Hopefully, the accountant’s report will shed light on why this methodology was not used in the pre-election report. The $1bn figure contains liabilities that were known and immediately payable. For example, there was the underfunding of pensions and gratuities for retired civil servants, which have now been incorporated into the Supplementary Budget,” he added.

“The $1bn figure also includes contracts for which no funding was provided for in the May Budget. This includes over $100m in contracts executed by the Ministry of Works for which no funding was provided. A significant portion of the $1bn relates to contingent liabilities related to the Government’s breach of contracts, but this is not the lion’s share of the amount identified.

“Rather, the lion’s share identified relates to obligations known to the Government that were simply ignored, in a seeming violation of the Fiscal Responsibility Act. This is an important distinction which may have escaped some who have made simplistic and disingenuous public comments about the comparison of apples and oranges.”