||Last Updated: Jun 6, 2018 - 5:37:51 PM
-Budget is evidence of lack of economic growth plan
-Consultation is a little too late
-Need to trim fat first before raising taxes
-Economy too fragile for proposed revenue measures
-Government must go back to drawing board
In the lead up to the May 10, 2017 general election, the Free National Movement (FNM) convinced many that voting for them will usher in the people’s time. While it was clear that the FNM had no plans for the governance of the Bahamian economy, the people voted for what was perceived as the lesser of two evils. In the absence of a plan, the current administration while in opposition took positions for political expediency without regard for their ability to deliver if they were successful at the general election. After just one year in office and the tabling of what they termed “the people’s budget”, the danger of electing individuals without a plan is apparent for all to see. The proposed budget has the fingerprints of international rating agencies and multilateral agencies; it is those people’s budget.
The Government has blamed the former administration for its own indiscretions and convenient change of views espoused while in opposition. This is despite having control of the Public Accounts Committee while in opposition and being ineffective as the Official Opposition. We have seen this cycle of blame play out over successive administrations and the Bahamian people have become weary of this game. It is common knowledge that our fiscal position is a culmination of years of fiscal mismanagement by both the PLP and the FNM. Bahamians are aware that the Bahamian economy was downgraded 3 times under the last FNM administration and 4 times under the recent PLP administration.
The level of disrespect displayed by the Government in not consulting with stakeholders and the Bahamian people in the devising of the 2018/19 budget is unacceptable. This action is unbecoming of a government that professes its commitment to accountability and transparency. The uproar, anxiety and backlash created by this ill-advised approach to governance was avoidable. An attempt to consult after the conclusion of drafting of the budget demonstrates a lack of appreciation for the importance of collaboration and a disregard for stakeholders.
In 2014, the current Prime Minister and Minister of Finance both voted against the implementation of VAT on the premise that they were concerned about the impact it will have on the poor. It is startling that the current administration has sought to increase the tax burden by proposing a 60% increase in the broad-based but nevertheless regressive value added tax and extract some $500m in new revenue from the Bahamian economy to satisfy its tax, spend and borrow policy. It is basic economics that an increase in tax rate does not necessarily produce an equivalent increase in tax revenue.
The DNA notes the following from the proposed budget:
- This budget was prepared for the haves and not the have nots;
- This budget was not prepared for business owners and increases the cost of doing business;
- The concessions provided in this budget serve more as a trick rather than a treat for the Bahamian people in the face of a proposed 12% VAT increase;
- Recurrent and capital expenditure is projected to increase by $555M in FY 2018/2019
- In one fiscal year, the net borrowing by Government amounted to $823M in 2017/2018
- Significant increases under certain heads particularly in the Ministry of Finance and the Office of the Prime Minister are noted in salaries and emoluments, travel, housing and responsibility allowances;
- The FNM seeks to expand the size of government with the establishment of additional units and departments;
- The FNM squandered one year in office by not passing fiscal responsibility legislation and strengthening freedom of information legislation;
- The FNM has shown no true commitment to implementing an equitable and progressive system of taxation that ensures the burden of meeting government expenditure does not prejudice a specific social class;
- More than 2/3 of government revenue continue to be raised by regressive taxes which places the poor and middle class at a disadvantage;
- This budget fails to adequately provide for the risk of natural disasters which would derail/frustrate any plan to achieve a balanced or surplus budget; and
- There is no demonstrated commitment to address the approximately $400M subventions to State Owned Enterprises (SOEs). Instead, SOEs have been given an order in futility to become self-sufficient in 3-5 years and additional funds have been earmarked for more consultancy on this issue albeit comprehensive studies have been carried out in the past.
A fragile economy
The FNM government must note that the Bahamian economy remains fragile, unemployment figures remain in double digits in New Providence and Grand Bahama. Despite liquidity within the banking system being approximately two billion dollars ($2B) dollars, individuals and business owners are either unable or unwilling to access capital. This dire state of affairs is worsened by uncertainty created within the Bahamian economy which is fuelled by adhoc Government policies and its lack of demonstrated commitment to curtailing spending amidst revenue shortfalls.
The Bahamas did not get in this position overnight and the aggressive timeframe of 3 years for eliminating the GFS deficit (in time for the next general election) which is the driving force for the proposed significant increase in VAT seems to be politically motivated rather than focused on the welfare of the people. This short-sighted plan highlights the need for statesmen/stateswomen that focus on the next generation rather than politicians that look to the next general election.
The Bahamian people should not be made to correct this malaise in the time proposed by the Minister of Finance which imposes unnecessary burden on Bahamian taxpayers at the risk of disrupting the economy. A review of the expenditure portion of the national budget will reveal that the current administration is more talk than action when it comes to tightening its belt and trimming the proverbial fat and reducing its spending appetite. The Government must go back to the drawing board. The Government’s request for alternatives from the Bahamian people when they did not come to us for suggestions in drafting the budget or spending plans is disingenuous and convenient.
It is generally accepted that we need to get our fiscal house in order; however, caution should be exercised in direct comparisons with other countries. The reference to the predicament of other nations within the Caribbean and evoking fears of devaluation is inappropriate and insensitive. It amounts to nothing more than scare mongering and manipulation of facts. While we can learn from the experiences of other nations, we implore the Government to desist from resorting to instilling fear in the Bahamian people in an attempt to justify its proposed draconian measures.
People’s budget of misery
This budget is indeed the people’s budget of misery as the poor will become poorer amidst rising prices in oil, food, energy and services. The services industry which account for more than 60% of Gross Domestic Product will be the biggest victim in this latest assault on the middle class to cripple the Bahamian economy in a vile attempt to rectify their collective sins of the past. The Minister of Finance described the budget as a landmark and transformational budget. We submit that this is a landmark budget of hardship with the potential to transform the lives of Bahamians for the worse.
Like the rest of the nation, the DNA awaits the economic analysis and strong economic plan that supports the government’s projection for 2.5% growth understanding that increased taxes and a move to balanced budgets alone will not serve as a panacea or substitute for recovery of the Bahamian economy.
Arinthia S. Komolafe
Deputy Leader, Democratic National Alliance
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