By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading fiscal hawk has warned that Value-Added Tax’s (VAT) implementation does not mean the Government will “give up its juggling tricks”, predicting that the new tax’s rate will be increased within two years.

Rick Lowe, an executive with the Nassau Institute think-tank, expressed scepticism that VAT’s increased revenues would help curtail the Government’s fiscal deficit and the national debt, implying that the extra money would merely be used to increase public spending.

And he suggested that many others, besides successive governments, were responsible for the Bahamas’ fiscal crisis, with too many “going along to get along” rather than worrying about the bigger picture or doing what was right.

Describing himself as “very despondent” following last week’s release of the revised VAT package, Mr Lowe said capitalism’s ‘father figure’, Adam Smith, had warned of Government “juggling tricks” when he wrote his seminal ‘Wealth of Nations’ back in 1777.

“He talks about deficits, debt and debasement,” Mr Lowe said of Smith. Placing that in a Bahamian context, he added: “The deficits and the debt aren’t going to stop. They’re not committed to stopping the spending.

“As for the debasement of the dollar, that happens every time taxes go up as your $1 buys less. With VAT, that will be 7.5 per cent off the top.

“I can’t see any benefit to continually raising the tax burden. There’s got to be a different way, but they don’t seem to see any alternative to doing so. I’m not sure I understand their logic.”

Mr Lowe said the Nassau Institute, its members and others had frequently been “demonised” in past years for expressing concerns about increasing deficits and a rising national debt.

“We’ve all gone along with the deficits, debt and debasement to get along,” he added. “We don’t want to be the guys who appear to be mean, or who are demonised by the political class as ogres for not giving into their will to destroy the country for future generations.

“I’m willing to bet you my bottom dollar that within two years, if not before, we will see increased taxes, new layers of tax and the VAT rate will be increased.”

Mr Lowe cited occasions such as the Government’s decision to take what he called a 30-strong delegation to a recent CARICOM conference as evidence it was not serious about restraining spending.

The Nassau Institute executive said: “The Government has had the perfect opportunity to do this better. Nobody has proven otherwise, so it’s [VAT] simply a cash grab because they can’t make payroll.”

“We’ve just gone along to get along,” he reiterated. “We pat each other on the shoulder while sticking it to future generations. It’s not good enough. What’s better: A slow death or a massive heart attack and copping out?

“We go along, things get worse, we each cover our own ground and territory, keep getting our own exemptions and everybody else be damned. How can we keep doing that? I’m very despondent right now.”

Mr Lowe also expressed concern over the numerous fines and jail terms that the Government can levy for VAT offences, describing them as “a punishment instrument, and they will use that to their advantage”.

He added: “They will only target those that they want to quiet down or who are on the outs with them. It will be used as an instrument or force and coercion rather than an equal application of the law.”

Mr Lowe criticised previous legislation for leaving too much power in ministerial hands, and said the revised VAT Bill was no better than its November 2013 version.

Mr Lowe also warned that there would likely be a drop in participation, and funding, if the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) and its Coalition for Responsible Taxation started to “acquiesce” over the revised VAT plan.

“When you give into the Government saying they need more money, you’ve lost the battle. It’s not going to change,” Mr Lowe argued.

“We’re all going to roll over and comply. Some people will go out of business, some people will stay in business. It’s so discouraging when the people who are supposed to be leaders tax you into oblivion. It’s baffling.”