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Last Updated: Feb 13, 2017 - 1:45:37 AM |
Nassau, Bahamas -
Remarks by Hon. L. Ryan Pinder Member of Parliament for Elizabeth
2014/2015 Mid-Year Budget Communication February 19th, 2015:
Mr. Speaker,
Today I rise on behalf of the good and loyal constituents of Elizabeth to debate the communication and associated legislation related to the Mid-Year Budget. In doing so, I want the good people of Elizabeth and the Bahamian public at large to know that I remain committed to the people and community of Elizabeth. I will continue my representation of the people of Elizabeth throughout this term, and God willing, into the next term of this PLP Government after 2017. Elizabeth remains a part of my family, as many would know, dating back to when my father, Marvin Pinder, was the Member of Parliament for the same general area from 1987 – 1992.
Speaking of the commitment and connection of Elizabeth, I want to bring personal condolences from this place to Maurice Tynes and his family on the passing of Paula Tynes. Many might know that Paula Tynes was my personal assistant as the Minister of Financial Services. She transferred to be my assistant the day after I was sworn in as a Minister. Some might consider this as odd, but those who know me and my family would not expect anything less. Paula Tynes was a constituent dating back to when my father was a Member of Parliament for Malcolm Creek. Paula was my father’s right hand, campaigning with him, and as a Minister became his personal assistant. During these years Paula was a second mother for me and my siblings, Holly and Benjamin. Paula helped raise us. After leaving politics, Paula left the civil service and ran my father’s law office. I grew up with her children and was part of the family.
I remember when I was being considered as a candidate for the Elizabeth constituency for the bye election in 2010. Paula was the one to first stand to her feet during a PLP council meeting in support of me as the PLP candidate for the election. Paula was my family, my second mother. Her death was very hard for me and my family, just as it is very hard for Maurice and his family. I want to personally on behalf of my entire family, on behalf of the Elizabeth family give personal condolences to Maurice from this place and express how much it meant to me to bring remarks at her home going ceremony in my capacity as a friend and family member. God rest her sole and we should always remember “we never lose our loved ones. The accompany us; they don’t disappear from our lives. We are merely in different rooms.”
Today I provide my contribution to the mid-term budget debate. This is an exercise where we each have an opportunity to analyze the financial implications for our country, and discuss opportunities that might exist for our great country. Today I want to discuss some observations from the Mid-Year Budget Statement by the Prime Minister and Minister of Finance, emphasize the state of fiscal responsibility by our Government, and speak to certain matters related to fiscal and tax reform. I also want to speak to some of the positive decisions and achievements of this PLP Government that will fundamentally change the way forward, in doing so I will also fix some of the misstatements and misleading positions of the woeful FNM opposition that were put forward in this debate.
Fiscal Prudence
I want to personally congratulate the Minster of Finance and the Minster of State for Finance and their team in the Ministry of Finance for doing just as they said they would do, to promote fiscal prudence and responsibility. For the first half of this 2014/2015 fiscal year the Government realized an aggregate of $35 million more in revenue than the first half of the 2013/2014 fiscal year. This is an extraordinary accomplishment for this PLP Government. Having recognized this exceptional financial accomplishment by this Government, I want to discuss some of the misleading observations that were presented to the Bahamian people by the deputy leader of the FNM, the Member for East Grand Bahama.
The Member for East Grand Bahama in a very partial and unfair manner isolated certain line items of revenue and tried to make the argument that things were bad and that revenue was down and this was a direct result of poor performing economy. I cry shame, the Member is a more intelligent person than that. Let me clarify for the Bahamian people, and after I do so the Member for East Grand Bahama should withdraw his entire contribution.
The Member highlighted that Import and Export Duties revenue had decreased by approximately $10.8 million and tried to draw the parallel that this was evidence of a retracting economy. This is completely inaccurate. If you look at the revenue from Excise Tax just for that line item revenue was up approximately $26.7 million, far in excess of the reduction for duties. To be fair if you are going to use import revenue as an indicator of the performance of the economy, you have to aggregate revenue from Import Duty and Excise Tax, this is because more than 90% of Excise taxes are a result of imports. So, assuming that the Member for East Grand Bahamas is correct in that import revenue is an indicator of economic performance, import revenue increased for the first 6 months of this fiscal year as compared to the first 6 months of last fiscal year by $15,887,620, more than a 5% increase in revenue in one year. As the Right Honouorable Member for Centerville would say, member for East Grand Bahama, don’t be bashful, you can applaud for that, after all, based on your determination on the direction of the economy, we are doing well, growing by more than 5% year over year.
But what is equally as shocking as the Member for East Grand Bahama’s inability to properly assess the growth of the economy based on imports, is his absolute neglect to address Government revenue from the top industry in our economy, tourism. One would think revenue from these industries would likewise be reflective on the health and growth of the economy of the Bahamas, yet no mention at all. I can only assume this is the case because the indications are good, and certainly celebrating the good is not what this FNM opposition believes in. Revenues from tourism tax were up for the first six months of this fiscal year as compared to the first six months of last fiscal year by $11.4 million, or more than 16.6% - certainly according to the logic of the Member for East Grand Bahama this would indicate economic growth. Again, I quote the Right Hounrable Member for Centerville as I speak to the Member for East Grand Bahama and all of the FNM Opposition, don’t be bashful, you can applaud for that too! Aggregate tax revenue for the Government likewise increased by almost $35 million, an increase of 7% during the same period from the fiscal year prior. Someone please now explain to me, and the Bahamian public, what was the Member for East Grand Bahama talking about, certainly not the facts. He should withdraw his entire contribution.
The Prime Minister in this and prior budget debates set out the details of the various components of our Government’s fiscal reform strategy in the form of a Medium-Term Fiscal Consolidation Plan through 2016/17. As the member for Golden Isles reminded us earlier, the plan consists of four key parts: growing the economy; restraining expenditure; enhancing revenue administration; and securing new sources of revenue. When the Prime Minister detailed the fiscal goals, the members opposite said it could never be done, the fiscal results today demonstrate they were wrong, and we are a fiscally prudent government. The Prime Minister in represented to the Bahamian public in his contribution that “as we approach the end of year 2 of our fiscal consolidation plan. I am pleased to report that my Government has met its initial commitments to reduce the deficit and increase revenue as a percentage of GDP. We have also succeeded in reining in the growth of public expenditure.” This should be congratulated by all and demonstrates that the FNM Opposition was wrong, wrong, wrong when they said it couldn’t be done.
The Prime Minister in his contribution likewise pointed out that real output in our economy is expected to be over $600 million larger in 2017 than it was in 2012. That’s an increase of almost 8 per cent in real terms over our current five-year mandate! The Prime Minister likewise pointed out that during the FNM Government, between 2007 and 2012, the size of the Bahamian economy actually shrank by $239 million, or 3 per cent, in real terms. Of course, again the Member for East Grand Bahama attempted to differentiate this comparison, but again, just like I have already discussed, the Member for East Grand Bahama fails to have a proper understanding. Yes, in all instances the economy of the Bahamas is influenced by external events, one would be naïve not to recognize this. Good governance, and fundamental decision making is to be done by a responsible Government in the face of these external influences, something that the FNM Government didn’t do, and in fact, by irresponsible governing placed the Bahamas in a worst position during difficult economic times globally. This is what is meant when the Prime Minister said in his contribution that we made the tough decisions when we had to, tightened our belts when we had to, and took our medicine when we had to. Let’s compare this to the comments by the previous bad governance FNM administration during the 2008 recessionary period that the Member for East Grand Bahama says should be the reason for the economic woes from 2007 – 2012.
By 2008 despite the onset of global economic warnings, the FNM Government was still “cautiously optimistic” about fiscal matters and our immediate to mid-term economic future. In fact, then Minister of State for Finance, in a presentation to The Bahamas Outlook Forum in early 2008, stated “I reiterate this administration’s belief that the Bahamian economy will perform admirably in 2008 and that its prospects for the medium and long term are promising.” Even after Standard & Poors downgraded the Bahamian economy late in 2008, that FNM administration still would not face the reality of where the country was headed. The former Deputy Prime Minister stated when questioned on the downgrade “Our current indicators are that our foreign reserves are still fairly high, unemployment – though it has increased recently – is also within limits that we feel can be managed, and we will adjust fiscal policy accordingly."
The delay in acknowledging and making the difficult decisions in challenging times exacerbated the economic effect of the global economic downturn. We have not, and will not make this mistake, a poor governance decision of the former FNM administration that we are working to reverse. When they finally recognized that they had to act, another example of poor governance was demonstrated through and intermingled with poorly thought and executed stimulus spending, and the wasteful abuse of the public purse, the Government embarked on a borrowing initiative, the likes of which at one time we might have thought our children might not be able to repay. Well as specifically mentioned by the Prime Minister, this PLP Government exercises good governance, especially in circumstances that are adversely imposed on or affects our country. This has produced the results and trends to fix the financial mess the former FNM Government put us in through poor governance.
For example, the Prime Minister informed us that through the plan, we expect the GFS Deficit in 2014/15 to decline to below $300 million, or around 3.2 per cent of GDP, from a level of $462 million, or 5.4 per cent of GDP, in 2013/14. This represents a one-year improvement in the deficit of more than $160 million. Furthermore, the Prime Minister informed us that since his administration took office, revenue has grown by 6.2 per cent, including this year’s projected revenue. In comparison, over the period 2007/2008 to FY2011/2012, recurrent revenue decreased by 1 per cent. Positive results as a result of difficult but necessary decisions and good governance of this PLP administration, reversing the reckless negative trend implemented by the former FNM administration. Clearly based on the above analysis of good versus poor governance, the Member for East Grand Bahama has no basis for his contribution, again it should be withdrawn in its entirety.
Tax Reform
The Bahamas is currently engaged in a program of tax reform measures through the passage and implementation of a value added tax in order to put the sustainable fiscal affairs of the government to be on sound footing we inherited a mess but are committed to righting the ship. The current model is unsustainable, there is not sufficient revenue to support the obligations of the government, the tax base is too narrow. I think we can all agree, no one particularly wants to pay taxes, and any tax people might think is too much tax, but the position that Bahamians are over taxed is not a correct statement. Again, the Member for East Grand Bahama is dead wrong by stating that Bahamians are being overtaxed. Unlike the Member, I will use facts to demonstrate that a more equitable broad based tax is necessary and that overall greater tax revenue is required and would still position the Bahamas as one of the least taxed countries in the region.
This is demonstrated by referring to the tax revenue as a proportion of GDP, a measure that is internationally recognized, just as debt to GDP is used to measure a country’s debt levels. The Bahamas’ measure of tax revenue to GDP is between 16.2% - 18.2%. This includes revenue from property tax, selective services tax, business license, and customs duties. In the context of tax reform enforcement of efficient collection of all taxes are necessary. The average tax revenue to GDP ratio in OECD countries was 34.6% in 2012. The average tax revenue to GDP ratio in Caricom countries is approximately 25%, the Bahamas representing the lowest ratio, after Haiti. The United Nations has said that a minimum level of 20% tax revenue as a percentage of GDP is necessary to achieve the Millennium Development Goals, which include fundamental social protections of the people.
Clearly we are a low, or under taxed jurisdiction, tax reform is necessary to not merely meet the obligations of a government, but to ensure that the resources are available to achieve the goals for societal and cultural advancement. Tax reform is necessary and we a responsible PLP Government have recognized this and embarked on what maybe the most significant governance decision in decades implementing a value added tax.
Tax reform is not easy, and it is not simple, I can speak to that first hand as a tax professional. Recognizing these challenges, I want to personally congratulate the Minister of State for Finance and his team at the Ministry of Finance for a successful rollout of value added tax here in the Bahamas. The Official Opposition has put forth a number of opinions of value added tax, most based upon conjecture and hypothesis, very little based upon facts. In fact, the Member for East Grand Bahama felt it necessary to rattle off companies that he represents have closed, many closing their doors prior to imposition of value added tax, yet tried to draw a connection between these closures and the implementation of value added tax. Again, this Member has felt it his duty to intentionally and recklessly deceive the Bahamian public. As the Member for Southern Shores stated – the sky isn’t falling, and we won’t sit here and permit the deception from the other side we will call out Chicken Little at every turn.
I want to reiterate my belief that value added tax was the correct tax policy to initiate, especially when one looks to the economic impact of alternative policies such as an income tax and employment tax. The underlying philosophy of a VAT is that it by nature expands the tax base, the portion of the economy that is subject to tax. VAT, unlike the current tax system, taxes the services industry of the Bahamas, an industry that largely goes untaxed. VAT has been implemented in over 140 countries throughout the world. We have heard arguments that a VAT is a regressive form of tax that is harmful to economic growth, however, the OECD has found that VAT is less harmful to growth than personal income taxes, corporate taxes and taxes on capital.
The Member for Marco City spoke today about his opinion on the inequity of VAT as to who it affects the most. The argument can be made both ways. I can easily make the argument as well that VAT is applied on services, and the rich are the highest user of services and therefore pays VAT on more expenses. When you can make persuasive arguments on both sides of an issue, one can conclude that it is an equitable position, and that VAT is an equitable tax. Before concluding on VAT, I want to make clear that compliance is fundamental, for those who are making a good faith effort to comply, it is not the intention of the Government to be draconian, however, for those who refuse to comply or seek to sabotage the implementation of VAT, appropriate enforcement measures are in place.
International Revenue – VAT doesn’t have to be the only, and shouldn’t be the only form of revenue reform. I would also propose a review of external fees for the purpose of revenue generation. An example of this is immigration fees on work permits and permanent residency. A review and balance must be achieved that generates additional government revenues while not making the Bahamas non-competitive to foreign investment and business. A comparative study of other similar jurisdictions shows there is some headroom here. Immigration should be a revenue generation for the country, not a hindrance. We have something in the Bahamas that is desirable to others. Clearly the Member of Marco City and I have clearly differing opinions on this issue. The fact of the matter is we are an international economy and as an international economy there are numerous reasons to have foreign participation in our workforce. But the real emphasis on immigration being a revenue source for the country lies in residency products in the financial services industry. There are tremendous opportunities for revenue through this product. The conclusion that this is an anti-Bahamian position has no basis in fact, one does not mean the other.
I want to personally commend the Minister for Immigration on his efforts. The Member for Fox Hill has always been accommodating to the industry and to me in my prior role for developing synergies between industry and the Department of Immigration for predictable and efficient processes. Industry is prepared to invest in a efficient system in partnership with the Government, the expectation is that the process will be more efficient. This is a fair expectation and in fact a necessity in order to make immigration a profit center for the Government. As a part of industry, I look forward to advancing these synergies with the Member for Fox Hill.
Another option for additional government revenues is consideration of an International Operational Company Income Tax. This will require careful review and intense consultation, and will require detailed analysis on revenue versus affect on business. The concept is those businesses that are designated as "non-resident" by the Central Bank will be subject to a Corporate Income Tax. By definition these institutions are operational entities from within the Bahamas that are foreign owned and provide services exclusively to foreign clients. This model can only work if the Bahamas can successfully negotiate double tax agreements with countries where the owners or parent company of these companies are from / taxed. If this is accomplished, however, it provides a predicate for extensive economic growth, providing a tax platform to attract headquarter and regional business operations to the Bahamas, substantial operations that will demand a variety of Bahamian employment to support.
None of the above suggestions, nor other revenue efficiencies can substitute for a VAT, however, consideration of different revenue measures and taxation of new industries can cause for the goals of the prominent business person that I discussed to be achieved, a lower rate of VAT implemented at a later date. Tax reform is not easy, but the Bahamas requires tax reform to be fiscally sustainable. Tax reform is not easy, the Bahamas Government has and continues to review options and approaches. Tax reform is not easy, but tax reform is necessary.
Economic Growth
I want to take an opportunity to highlight initiatives of this PLP Government, and that of the Prime Minister that set the stage for sustainable economic growth and reform in the Bahamas. Not only have we focused good governance to remedy the damage initiated by the prior FNM administration, our focus has likewise been focused on setting a platform for sustainable economic growth and diversification, something that is fundamental to our economic survival.
The first area I would like to discus and commend the Government on is the commitment to the National Economic Development Plan and the establishment of the Economic Development Planning Unit. My good friend and colleague the Member for Pinewood is spearheading the preparation of the National Economic Development Plan, and I can think of a better suited person to do so. I am convinced he and his team will be highly successful in this endeavor. There has been discussion about the need for such an Economic Development Plan over multiple administrations, but it is this PLP Government that has the dedication and focus to bring it to fruition. I applaud the Prime Minister for demonstrating the political commitment to ensure there is a sustainable plan and platform for the future economic development of the country.
There are many significant changes in the global economy and the place of the Bahamas in that economy. The requirement to be integrated into the global trading environment is a necessity, a reality that the Bahamas economic community is not accustomed to. The arena in financial services is an area of constant change and volatility and we must be prepared with a plan to stay in front. The economic empowerment of the family islands is imperative to survivability and requires innovation. Developing proper linkages and strategies to enhance the economic impact of tourist arrivals is fundamental to entrepreneurial activity in the country. All of these issues are related and interconnected to a certain degree. It is a well-crafted and sustainable National Economic Development Plan that will ensure that the economic future of the Bahamas is well crafted and prepared to take advantage of the new opportunities that will be presented.
To be effective, it is important that the National Economic Development Plan be administered in an effective and efficient manner. I want to congratulate the Prime Minister for having the foresight to know this and ensuring the bureaucratic infrastructure not only exists, but operates in a streamlined fashion. The Prime Minister explained in his communication that the newly created Economic Development and Planning Unit was formed within his office and will perform a critical “centre of government” coordination function as well, one that will help ensure that red-tape and bureaucratic bottlenecks and inertia are overcome and neutralized. The Bahamian people can be confortable that the future will be not only successful, but will be planned and well executed. We have only just begun, and through the remaining time in this term, and when we win in 2017, the next term the benefits of the National Economic Development Plan will be felt by all Bahamians.
Another major achievement by this PLP Government and the Prime Minister that can set the stage for significant economic development, diversification and opportunity is the approval by the People’s Republic of China of the Bahamas being an authorized jurisdiction for the trade in renminbi, the Chinese currency. I do not think the Bahamian public understand the magnitude of this achievement, and if we implement it correctly, which I have no doubt the Prime Minister will cause to happen, tremendous economic development and opportunity for Bahamians will result. I want to personally congratulate the Prime Minister for concluding and securing this agreement – job well done sir.
Not only will the ability to trade in Chinese currency cause for a new and diversified area of financial services to develop, which of course is something I support entirely. But, if we have a platform to convert from and into renminbi we have the financial ability to develop into a value added trade hub linking Chinese businesses to the Americas. This has the potential to cause an economic Renaissance to develop in Freeport. Imagine Freeport developing into exactly what it was intended to be, a logistical and industrial hub between the world’s largest economies. Imagine a scenario where people don’t leave Freeport to look for opportunity in Nassau, but flood from Nassau to become millionaires in Freeport. I believe that this is the magnitude and development of this achievement concluded by the Prime Minister. Executed correctly, and properly factored in the National Economic Development Plan, the financial trading of renminbi can be the predicate for widespread economic development and diversification, launching the Bahamas as a central point to the global economic platform. These are exciting times, and only this PLP Government can be trusted with implementation of these progressive and innovative plans.
The liberalization of the mobile telecommunications is another major initiative by this PLP Government and the Prime Minister that has the potential for developing a platform for economic growth and activity. The Prime Minister stated that having competition in this market is expected to cause improvements in service quality, coverage and network resiliency in The Bahamas. Moreover, competition in the cellular mobile market will create an environment for those services to become more affordable, thereby making mobile and broadband technologies more accessible to Bahamians. Such an environment would be attractive to investors as well while better positioning The Bahamas to benefit from, and participate in an intensely integrated global economy, I completely agree with the assessment of the impact by the Prime Minister.
I also agree with the Member for Fox Hill that the current company, despite the efforts of the current CEO, is providing unacceptable quality of mobile telecommunication services, quality that is not only frustrating to consumers, but causing economic stagnation. Bahamians and the business community alike I don’t think care who the winning bidder is, so long as efficient, cost effective and predictable service is achieved. If these goals are accomplished, the predicate for economic development is in place.
Financial Services
I would be challenged to conclude this contribution without addressing the financial services industry. I will not go into detailed discussion on my time as the Minister of Financial Services as the Member for Sea Breeze will address those policy issues. But before I address certain matters, I want to personally extend my congratulations from this public stage to my friend and colleague, Hope Strachan, the Member for Sea Breeze on her elevation to the Minister of Financial Services. I have the utmost confidence in her ability and desire to advance and further develop the industry, I don’t say this as just her colleague, but I say this as a senior member of the industry. My friend, you have my utmost support and confidence.
The financial services industry is growing, developing and diversifying. I want to encourage the Government to further develop and commit to the Latin American and North American markets. As we see slow or even retraction from the European market, we have to be firmly committed to the new markets of the Americas. Certainly this requires a firm commitment of profile building of the Bahamas in these markets, in partnership between private industry and the Government. It also requires the continued commitment to new product development for these new markets. This PLP government has demonstrated this firm commitment to the financial services industry, and The Member for Centerville has demonstrated that he is the most innovative and committed Prime Minister to this important industry of which I support completely.
We continue to look to developing the Chinese market for financial services. It does have its challenges given its distance, but there must be opportunities for the financial services industry to leverage the clear commitment of the Chinese in tourism. The opportunities extend beyond the authorization to trade in renminbi. The private wealth opportunities are enormous, there has been tremendous entrepreneurial growth in China over the last couple of decades, this is always the predecessor to private wealth opportunities in international financial centers such as the Bahamas. Fundamental to the advancement of the private wealth opportunities in China is the ability to be innovative and progressive in permanent residency options, while always being consistent to the longstanding policy of permanent residence of the Bahamas. I encourage the Government to do so, and I know the private industry is committed to work with the Government on such innovation.
I applaud this PLP Government and the Prime Minister in the commitment to the financial services industry. I congratulate and support the Minister for Financial Services. The financial services industry has been a major contributor to the middle class of the Bahamas, and I firmly believe that the growth and innovation opportunities are great, and I couldn’t have more confidence than I do in the PLP Government to bring these opportunities to fruition for the Bahamian people and the financial services industry.
Conclusion
I have covered a number of areas and issues today in my contribution. I am proud of this PLP Government, proud to have been a part of it at the Cabinet level, and proud to be a part of it as a back bencher. I am confident in the abilities of this Government and us as PLPs to provide a framework to remedy the wrongs of the previous FNM Administration, and provide a future of growth and stability for the Bahamian people. I am excited to be a part of the PLP Administration for the remainder of the term and to achieve the great things I know we will. I am even more excited to be a part of the PLP Administration from 2017 to 2023 where we will all feel the tangible results of much of the medium and long term planning and accomplishments that will come about. I am most excited to represent the great people of Elizabeth for this term and many more to come and ensure they receive the fruits of the labour, planning, development of this PLP Government. Elizabeth supports this mid-term budget.
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