2012/13 BUDGET COMMUNICATION
It is my honour to present the 2012/13 Budget Communication.
With this, the first Budget of the new mandate with which the Bahamian
people have entrusted my Government, we launch our programme to
transform the Bahamian economy and society for the benefit of all
Bahamians. The key policy thrusts of the 2012/13 Budget are faithful to
the major themes that we enunciated in both our Charter for Governance
and last week’s Speech from the Throne.
I would like to state at the very outset of this Communication that we
do not propose to increase any taxes on Bahamians in this Budget.
This Budget unequivocally sets us on the course of change that we
pledged to initiate and pursue with diligence and dedication. However,
in light of the very short time since our return to Government, this
Budget is but the very first step in that process of transformation.
I would highlight that we have already implemented two of the actions
that are in our Charter for Governance and that we committed to
implement in the first 100 days of our coming to office. Specifically we
have already created the Ministry for Grand Bahama and re-established
the Ministry of Financial Services.
As we move forward, we will be guided by
the vision for the future set out in the Charter. That beacon will
illuminate the way and ensure that we make steady and concrete progress
in securing the overriding economic and social objectives that are vital
to a prosperous and harmonious society.
I will note at the outset that our room
for manoeuvre is, at least in the short-term, severely constrained by
the dire fiscal situation that has been handed to us by the previous
Administration. As I will set out in detail below, the Government’s
deficit and debt levels at this time are much worse than we had
anticipated. We have been left with sizeable, ongoing capital
expenditure commitments and a legacy of contracts entered into in the
final days of the former Administration.
We are committed to putting an end to
such practices.As we stated in the Speech from the Throne, we will table
legislation to prevent the entering into of Government contracts,
including contracts of employment, or the payment of public monies
therewith, between the date of dissolution of Parliament and the date of
a General Election unless such contracts or payments are pre-determined
by an independent statutory body to be absolutely essential for the
maintenance of essential services.
In addition, as a matter of priority, we
will do whatever is necessary such that, going forward, the Government
is properly positioned to more efficiently and effectively function and
ensure that public monies are properly spent and accounted for and that
we avoid the types of cost overruns that have recently been witnessed.
We will pay particular attention to the
large capital expenditure projects that are already in the pipeline. We
will monitor these closely to ensure that contract terms are respected
and that the Government is receiving full value for money in respect of
these significant expenditure commitments. We also face the carry-over
into 2012/13 of certainrecurrent expenditure commitments of the previous
Administration in respect of the promotions exercise, back pay, salary
increases and the payment of insurance benefits.
Accordingly, as my Government is firmly
committed to fiscal prudence and the return of the fiscal accounts to
more desirable and sustainable positions, we will need to adopt
flexible, innovative and fiscally responsible approaches as we initiate
our comprehensive programme of legislative proposals and policy
initiatives to address the key economic and social challenges of our
country. In particular, with our fiscal flexibility as constrained as it
is, we will focus our efforts on promoting the expansion of the private
sector, which holds the key to the creation of sustainable job
opportunities. We will eschew job programmes of the type introduced by
the previous Administration, which ballooned from an initial estimate of
$25 million to some $48 million, all the while lacking any focus on
viable, long-term employment creation.
We fully appreciate that it will be
imperative to rebuild the fiscal buffers over time. The significant
structural fiscal reforms that I will propose in this Budget, especially
in respect of the Government’s revenue base and revenue administration,
will be critical in this regard. The stronger, sustainable fiscal
position that will result from these measures will facilitate the full
implementation of our agenda for change and will underpin enhanced
confidence and more buoyant growth and job creation.
IMMEDIATE INITIATIVES IN OUR PROGRAMME OF CHANGE
Building A Safer Bahamas
We have unambiguously expressed our firm
commitment to the implementation of a national crime agenda as one of
the two central priorities of our programme of change. As a first step,
we are immediately following up on our commitment to reinstate and
re-invigorate the Urban Renewal Programme to foster a beneficial and
effective relationship between the Police and the community.
Within the fiscally responsible Budget
allocations presented in this Budget, we will begin to develop and
implement the many legislative, policy and programme initiatives in our
agenda to combat crime, namely:
Amendments to the Police Act;
The creation of a National Intelligence Agency;
The development of a National Firearms Control Strategy,including the establishment of a Firearms Department and Database;
The reintroduction of the Swift Justice Initiative;
The reintroduction of the Witness Protection Programme;
Amendments to the Rehabilitation of Offenders Act;
The reintroduction of school-based policing;
The revitalization of the Tourism-Based Police Initiative; and
The re-equipment and repositioning of the RBDF to more effectively control our borders.
Both our Charter for Governance and the
Speech from the Throne speak to the need to determine the extent of
interest, among the Bahamian population, in establishing a national
lottery and/or decriminalizing and properly regulating the webshop-type
gaming business. It is estimated that this area holds the potential to
make a significant financial contribution in support of Government
expenditures on the nation’s economic and social priorities in the years
ahead. Accordingly, we will soon present the details for a national
referendum on the issue. Should it be deemed that it is in the national
interest, development work on the necessary legal and administrative
framework will be finalized.
Promoting Industry and Creating Jobs
The second core imperative of our
programme of change is the strengthening of the domestic economy and the
attendant creation of jobs, the broadening of Bahamian ownership in the
economy and the attainment of a higher standard of living.
To that end, the Government will
re-focus the mandate of the Bahamas Development Bank and the Bahamas
Agricultural and Industrial Corporation to broaden their range of
activities, beyond merely lending money, to include the provision of
equity, credit guarantees and marketing and accounting support.
We remain faithful to our commitment to
explore all lawful means by which majority ownership of BTC can be
restored to the Government and the Bahamian people. We shall very
shortly arrange a timetable for discussions that we propose to undertake
in this regard with the present owners of the majority stake in BTC and
other interested stakeholders.
As a means of stimulating the real
estate market and the construction sector, the Government is following
up on its commitment to reduce the stamp duty rate on conveyances over
$250,000 from 12 per cent to 10 per cent. As for the other rates of
stamp duty, I would note that first-time homeowners already benefit from
the existing exemption from stamp duty. The Government will, however,
review the entire structure of stamp duties on conveyances in the
context of its overall programme of fiscal reform.
In addition, we are introducing a cap of
$50,000 as the maximum real property tax payable on an owner-occupied
residence as a means of further stimulating the construction sector.
In order to stimulate near-term job
creation for small contractors, we are also announcing that an
allocation is being made in this Budget for home repairs and community
improvements under the auspices of both the Urban Renewal Programme and
the Ministry of Housing.
I am also announcing that Exuma is being
reinstated for eligibility under the Family Island Development
Encouragement Act. Assistance to Homeowners in Distress
The loss of a home or threat of a loss
is emotionally devastating for any family. We therefore reaffirm our
commitment to a mortgage relief programme that will help save the homes
of those persons who, by reason of involuntary job losses,
underemployment or chronic illness, are no longer able to service their
mortgage loan obligations as they were previously doing.
Preliminary discussions with
representatives of the clearing banks and other institutional lenders
have already been initiated and these discussions will continue with a
view to arriving at a mortgage relief programme in the shortest possible
In the meantime, we wish to reiterate
that the programme was never intended to assist homeowners who have the
means to pay their mortgage obligations but simply decided not to do so.
We therefore strongly urge all homeowners who have the means to do so,
to continue to meet their mortgage loan obligations as and when they
The first draft of a Bill to administer
and regulate Pension Funds is now complete and will be presented to
Parliament shortly. As was stated in the Speech from the Throne, we will
ensure that employees have access to their pension savings for
emergency purposes, including mortgage relief. We will do so within the
broader context of the revised Bill to which I have just referred.
Rescuing Grand Bahama
The economic plight of Grand Bahama is
painfully evident and the unemployment situation there clearly attests
to this reality. The Government has firmly expressed its commitment to
addressing the needs of, and rescuing, Grand Bahama in a meaningful
manner. A new Ministry for Grand Bahama has already been created, with a
mandate of ensuring that Grand Bahama receives maximum benefits from
all Government initiatives. The Ministry will also develop proposals for
the extension of duty-free concessions to East and West Grand Bahama.
The Minister for Grand Bahama will
engage in wide- ranging discussions with the various stakeholders in
Grand Bahama, as well as with other Government Ministries, to advance
our priority of restoring the economy of Grand Bahama. This will entail
an evolving process as we go forward and the Ministry’s organization and
budget allocation will evolve and grow accordingly.
As well, in this Budget, we are
immediately implementing certain tax measures to promote the
revitalization of Grand Bahama. For existing properties in Grand Bahama,
the hotel occupancy tax is being reduced by 50% for five years for all
properties filing returns under the newly-introduced electronic
reporting system. And, to assist in ensuring the success of new hotels,
the hotel occupancy tax will likewise be reduced by 50% for ten years
after opening. To access these concessions, it will be necessary for a
hotel to register online with the new electronic reporting system, as is
required of all hotels in the country.
A Renewed Commitment to National Health Insurance
Our commitment to National Health
Insurance remains solid and we will pursue preparations for the
financially sustainable implementation of such a plan. In addition, we
are allocating funds to the Public Hospitals Authority to facilitate the
acquisition of new cancer screening technology to ensure that Bahamian
women have access to state-of-the-art mammogram machines at both the
Princess Margaret and Rand Memorial Hospitals.
Securing an Adequate Revenue Base and Strengthening Revenue Administration Tax Reform
It is clear that, if we are to restore
the nation’s public fiscal affairs to a more desirable and sustainable
state, we will need to place particular focus on securing an adequate
base for sustaining and enhancing the annual level of revenue.
It has been noted by many observers that
our tax system is inadequate to finance a 21st century public
administration. At a level of 18.6 per cent of Gross Domestic Product
(GDP), Recurrent Revenue in The Bahamas pales in comparison to that in
many other countries, where the Government revenue-to-GDP ratio is in
the mid-20% to 30% range.
Our tax base is much too narrow,
focusing as it does on goods to the exclusion of services. This is
simply unacceptable in a modern economy where the consumption of
services is predominant. The present tax system is also difficult and
expensive to administer and subject to abuse and evasion.
As was presaged in the Charter and
highlighted in the Speech from the Throne, it is important that we now
address the issue of tax reform. To that end, a White Paper will be
prepared and will serve as the basis for extensive public consultations.
The paper will also serve to underpin the work on tax reform to be
under taken by the Council of Economic Advisors that the Government
will appoint following the enactment of the enabling
legislation foreshadowed in the Speech from the Throne.A Centralized Tax
A modern tax system can only be
successful if it is widely accepted by taxpayers. In turn, to be so
accepted, the system must be administered effectively, efficiently,
transparently and equitably. The current tax administrative structure is
disjointed, inefficient and inequitable in many respects. There are
currently more than 30 departments and agencies collecting a variety of
taxes and fees that constitute both tax and non-tax revenue. In order to
remedy this situation, my Government will proceed with the plans for
the creation of a new centralized Tax...
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