The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known businessman yesterday warned “talk is cheap but money buy land” as he questioned whether the Public Treasury can afford a VAT rate cut given the “dismal” fiscal outlook.

Branville McCartney, the former Democratic National Alliance (DNA) leader, told Tribune Business he was unsure whether a rate cut to 10 percent was “practically feasible” at this time although agreeing it would be welcomed by all Bahamians and businesses.

Speaking after the Government effectively doubled-down on its pledge of an “across the board” two percentage point VAT rate cut during yesterday’s Parliament opening, he said: “It sounds good, and I would hope that they are able to implement it. But, practically, where are you going to get the money from?

“I think the Prime Minister mentioned a few days ago that our fiscal status is ‘dismal’. I would like to give the Government an opportunity towards implementing what they have promised because ultimately it would be good for the country and, by extension, the Bahamian people. But how it is done practically is a different story. Talk is cheap but money by land.”

Mr McCartney said he was “curious” to understand how the VAT rate could be cut in the absence of the newly-elected Davis administration explaining how it would make up the foregone revenues.

“A VAT could be welcome, but to make it happen, I don’t know. I can’t see how it will be fiscally practical for the country at this stage looking at it as a whole,” he added. “Nothing has been said or indicated to say how those funds will be replaced.

“And if you are going to replace them, you don’t want to replace it with something that is revenue neutral and keeps you in the place you are in. You need to replace it with something that will generate funds for the country, and exceed what we get with VAT. I want to replace it with increased income and surpass what we are getting with VAT.”

The Progressive Liberal Party (PLP), while in Opposition, had argued that the VAT cut would actually increase revenues by stimulating more economic activity and therefore increasing the volume of taxable transactions. However, several observers said this was unlikely to happen due to the unemployment and income reduction stemming from COVID-19.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, yesterday said the Government had given itself flexibility by not setting out a timeline for when the VAT Act will be amended to facilitate a 10 percent rate.

“I think the Government is taking time to understand the consequences and intended objectives behind it to see if it can achieve them,” he explained, noting that both revenue and spending will be impacted.

The Speech from the Throne traditionally lays out the barest outlines of the Government’s policy and legislative agenda, while giving few details. It also indicated that, in some areas, the Davis administration has modified or stepped back slightly from the agenda set out on the election campaign trail.

For example, its Blueprint for Change manifesto promised to “repeal the Commercial Enterprises Act, and grant work permits where no qualified Bahamian can be found”. However, the Speech from the Throne only talked about “amending” the Act “to ensure that when jobs are being filled, Bahamians receive the highest priority”.

It could be argued that only the language, and not the objective, has been changed. When in Opposition, the PLP attacked the legislation as “a work permits Bill” and argued it would deny Bahamian entrepreneurs and workers opportunities in their own country.

The Act, which was intended to apply to Bahamian and non-Bahamian companies, provides a ‘fast track’ work permit process for companies in select industries that made a minimum $250,000 investment.

The sectors targeted by the Act are niche financial services offerings, including captive Insurance; nanotechnology; computer technology; software design; data storage; maritime trade; aviation registration; wealth management; and select manufacturing enterprises.

Elsewhere, the Government pledged to strengthen legislation passed by the former Minnis administration. This included the Public Procurement Act by “strengthening provisions for Bahamian participation in government procurement at all levels, and changing the Fiscal Responsibility Act to boost the Fiscal Responsibility Council’s independence.

Numerous aspects of the PLP Blueprint for Change were included in the Speech from the Throne, including a reaffirmation of renewable energy goals and a focus on the creative industries, plus the orange, blue and green economies.

And several initiatives planned by the former Minnis administration have also been retained, such as transforming the Bahamas Investment Authority (BIA) into a proactive investment agency, Invest Bahamas, which is modelled on Jamaica’s Jampro.