||Last Updated: Jun 6, 2018 - 4:11:31 PM
Good morning media and supporters and thank you all for coming.
I begin by again acknowledging the Labour Day tragedy. This has been a bloody holiday weekend indeed, with four dead at our annual Labour Day Parade, and over twenty injured. Additionally, two men were shot in Yellow Elder and another in Fox Hill. Another woman was abducted and raped in the Carmichael Road area and there were serious traffic and boating accidents, leaving one dead and one man missing at sea. And sadly, just this morning a young boy was shot to death. Our thoughts and prayers are with the families of the victims of crime and the deceased.
VAT HIKE FROM 7.5% TO 12%
Having governed this country, we were satisfied that the VAT revenue at 7.5% coupled with our revenue enhancement measures and a pro-growth economic strategy were sufficient to defray the government’s day to day operational costs. We felt that with opening of Baha Mar, the Pointe, the sale of the Lucayan Hotel complex in Freeport, the cruise port in East Grand Bahama, the Ocean Cay development etc, there was no need for a hike in VAT. Let me be unequivocal in our opposition to this tax hike. It is a mistake and can induce a double dip recession.
A note about this Revenue Enhancement Unit (REU). This unit within the Ministry of Finance collected $25 million to $30 million per month and their work was commended by international credit ratings agencies. This unit was not floundering. The Minister of Finance dismantled the unit and revenue collection suffered; the REU should be immediately re-established to its full manpower strength to carry out its important mandate.
Additionally, independent assessments on real property tax identified some 200 unregistered commercial properties in New Providence. Once registered, this would yield an additional $30 million annually in real property tax revenue to the public coffers, but registration mysteriously did not take place. Why is that? Did politics play a role in this?
Consultants identified collection gaps of between $400 million and $600 million and the REU was tasked to close this huge gap.
Let’s go back to May 2017:
The incoming government said that the initial $722 million were borrowed to pay off old PLP bills and provide the government with a $400 million fiscal cushion. Later, the $750 million raised attracted a lower interest rate which saved the government money according to the Finance Minister.
Then, thousands of workers were severed from the public service. The Attorney General said that downsizing exercise would save the government another $75 million – and this was within the first six months.
The government also introduced austerity measures in each Ministry, mandating them to cut spending by 10%.
So when the government admitted through its Financial Secretary that it had borrowed over $2 billion in one year and now seeking to raise an additional $400 million through tax hikes and new taxes,
We are now asking the Government to explain to the people of the Bahamas where the money went. This is a new budget, the excuse that it’s the PLP’s fault is stale and used up, we summarily reject this excuse. You promised accountability and transparency, its time to deliver.
I point out that when we assumed office in May 2012, the budget deficit was in excess of $500 million with a road works project that was $100 million over budget, from $112 million to $204 million.
The bill for the construction of the private road leading to and around Baha Mar, a PPP, was also unpaid; it was in excess of $80 million. We rolled up our sleeves and went to work bring down on the deficit and had it not been for the devastating hurricanes Joaquin and Matthew in 2015 and 2016, the government would have realized a balanced budget by 2018. We achieved this with a balanced approach of spending cuts, tax reform and economic growth. A country cannot tax itself into prosperity as this government seems to think; It has to grow the economy, create jobs, create new industries and expand existing ones.
The Prime Minister said that the VAT hike is intended to avoid a currency devaluation. The Finance Minister boasted in Parliament that the country had a healthy 23 weeks supply of foreign reserves or about $1.5 billion at the end of 2017. The Financial Secretary said that the VAT hike was designed to avoid a sovereign credit downgrade. The three principal fiscal personalities in the government are singing three different tunes and contradicting each other so the nation has every reason to be confused, suspicious and not supportive of major components of this budget.
For the record, currency devaluation is a monetary policy instrument in the purview of the Central Bank, an independent financial regulator; it is not a fiscal policy instrument such as raising taxes. Further, the Bahamian dollar is pegged to the US dollar and is not a floating currency. Some 90% of our inputs in this service driven economy are imported and purchased with US dollars.
350% TAX HIKE ON GAMING HOUSES
It was reported in the media that the Gaming House Operators Association intend to challenge the government on this new tax policy, characterizing the tax hike as “unconstitutional, discriminatory, irrational and inequitable.” In light of the tax structure assessed in every other industry, what could be the possible rationale for the 350% tax hike on web shops other than to drive them out of business and place more than 3,000 Bahamian jobs at risk.
Another collateral damage to the financial services industry from this harmful tax policy is the fall away of the smaller gaming houses and the creation of a possible gaming monopoly. I do not believe in the circumstances that the smaller gaming operators would go quietly into that good night.
They may very well decide to return to the underground informal economy which takes the sector back to the undesirable pre-regulatory era. The 50% tax is an incentive for new entrants to enter the informal gaming industry. The PLP government worked hard and long to regularize this industry and make it compliant with the requirements of the OECD, FATF, CFATF, FAF and the US State Department. I point out that the unregulated gaming industry was mentioned in the US State Department’s annual report on The Bahamas for its vulnerability to the proceeds from crime. We call on the government to revisit this tax hike in regard to the reputational damage and possible black listing this policy can cause to the financial services industry. It is redundant for The Bahamas to fight that battle again because of incompetence.
5% STAMP TAX ON WEB SHOP DEPOSITS AND WITHDRAWALS
The PLP raised the alarm of inadequate banking services in the Family Islands in the wake of the restructuring exercises taking place in the domestic commercial banking sector. Today we remain concerned about the effect of the imposition of the 5% stamp tax on deposits and withdrawals at gaming houses. This will adversely affect many persons in the Family Islands who in the face of the collapse of banking services in their communities, rely on these accounts to receive cash transfers from families and friends. Instead of dealing with the return of banking services in the Family Islands, the FNM government proposes to tax the poor for their own money. We cannot support this.
LACK OF CONSULTATION AND PROCESS
On the issue of the VAT, I wish to talk about the importance of process and consultation because VAT is arguably the largest public private sector partnership undertaken in this country’s history. Since the private sector collects the taxes on behalf of the government, it only made sense for the government to consult and plan with them before any decision was made.
The PLP for its part consulted widely and asked the private sector to conduct their own independent studies so a consensus could be reached based on objective and scientific data. The minimum wage was also increased by 40% to assist the most vulnerable workers among us. This process was not followed by this government and its to the detriment of the public.
- How will their inventories be affected by this sudden and unilateral tax imposition with little to no notice?
- research was conducted and what did the scientific empirical data say in support of this hike?
- Will it cause a recession or expand the level of poverty in the country?
- Should these hikes be complemented with a corresponding hike in the minimum wage?
In 2015, just three years ago when VAT was implemented, the Prime Minister said the following:
"IT IS A CRYING SHAME THE OLD AGE PENSIONERS STRUGGLE FINANCIALLY IN THEIR GOLDEN YEARS ARE FORCED TO GIVE BACK $7.50 OUT OF EVERY $100 DOLLARS THAT THEY RECEIVED MONTHLY TO PAY VAT"
Can old age pensioners expect a hike in their pension? As fate would have it, under Dr. Minnis’ leadership, old age pensioners are forced to give back $12 out of every $100 that they receive monthly to pay VAT. All, I can say today, is flip flopping can’t seem to stop.
It is also a crying shame that unemployed persons are now subjected to pay $20.00 for a police certificate. This is in addition to the payment for a medical certificate, pictures, copies of documents that are required. In essence to submit an application for a job, an unemployed person must find at least $50.00 for each application. If this is the people’s time, again, I ask, which people?
When one looks at the budget heads, we see the issue of VAT refunds.
- What is this?
- Why is this a line item?
- Why the need to change the definition of “transhipment”?
- Who is it to benefit?
- Have some friends received Millions in VAT refunds against the law and legal opinion which the government is seeking to legitimize?
The Auditor General is encouraged to look into this matter as they raise suspicion.
THE PLIGHT OF GRAND BAHAMA CONTINUES
Grand Bahamians have demonstrated in the streets and taken to social media urging the government to fix Grand Bahama. That island delivered five FNM MPs, three senators and three ministers, yet all they have to show is a closed hotel property with no prospects for opening; more foreign labour at the Grand Bahama Shipyard as Bahamians are displaced and a 12% VAT hike.
They showed their disappointment during Labour Day when the DPM addressed them; they got up and left. Each week families in Freeport are migrating to Nassau in search of better economic prospects. Families are still sleeping in their cars on beaches. Since the raise in VAT was announced two Freeport small businesses have said they are closing their doors for good. Yet Peter Turnquest said in the House everybody is happy in the country; only the PLP is unhappy.
What is interesting to note, there is not one mention of Grand Bahama in the budget!!!
CANCELLATION OF THE EMPOWERMENT PROGRAM
I suppose the workers are also happy with the cancellation of the Empowerment Program prior to Labour Day which put hundreds of young Bahamians on the unemployment line. This program was designed to improve the skill set in the labour force and hundreds benefitted. This was no 52 programme. These were jobs given to Bahamians to assist in making productive citizens.
This budget is taking this country in the wrong direction. There are too many contradictions and inconsistencies and greater transparency is needed by this government if it is to recover lost public confidence. I say again that governance is serious business and not a public relations or marketing exercise.
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