By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The proposed National Health Insurance (NHI) scheme’s financing mechanism could wipe out Bahamians’ disposable income and “hurt the economy”, the Chamber of Commerce’s chairman warned yesterday.

Robert Myers told Tribune Business that the funding for NHI, likely to come from increased employer and employee contributions to the National Insurance Board (NIB), would be an impossible burden for many consumers coming so soon after Value-Added Tax (VAT).

Calling on the Government to publish the Costa Rican consultants’ report on NHI “as soon as possible”, Mr Myers agreed that it was necessary to examine healthcare costs in the Bahamas.

Yet he argued that the inefficiencies within the existing healthcare system needed to be dealt with before implementing NHI, and warned that the burden of financing the scheme would fall on the formal economy - those businesses that already paid 100 per cent of due taxes.

Again urging the Government to tackle the ‘informal economy’ and tax dodging businesses, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman said this was among the “fundamental issues” that needed to be dealt with before January 1, 2015.

He told Tribune Business that the private sector would be seeking “stern measures” from the Christie administration over the next three-and-a-half months to deal with subjects vital to fiscal reform, arguing that “not enough action” was coming from the Government.

The Christie administration is hoping to implement its long-awaited NHI scheme in January 2016, just 12 months after it ushers VAT into being as its tax reform centrepiece.

Apart from representing an ambitious legislative/reform agenda, Mr Myers yesterday warned that NHI would burden Bahamian consumers and employers with a further cost increase following swiftly behind the VAT-induced cut in living standards.

The BCCEC chairman said initial indications were that the Government would seek to finance NHI via a 5 percentage point increase in NIB contributions, split 50/50 between employer and employee.

This, he added, would fall on top of a 7.5-9 per cent increase in the cost of goods and services as a result of VAT’s implementation, further slashing consumer disposable income while simultaneously increasing the cost of living for all Bahamians.

“I am very worried, very concerned,” Mr Myers told Tribune Business. “NHI is going to be a 5 per cent deduction out of salaries. That’s significant, coming on top of a 7.5-9 per cent increase in the cost of goods and services.”

The Government has estimated that VAT will result in an initial 4-5 per cent increase in living costs, less than Mr Myers’ estimate, but a rise nonetheless.

And the BCCEC chief emphasised: “When you add these up, it’s a 5 per cent tax on payroll and 7.5-9 per cent on the cost of goods and services. Add that to all the existing consumer debt, and you’ve got a problem.

“They’ve [consumers] got no disposable income. It hurts the economy. It may boost the medical and pharmaceutical profession, but it’s going to hurt the rest of the economy.”

Studies by the College of the Bahamas (COB) economics department have shown that around two-thirds of Bahamian economic activity (aggregate demand) is generated by consumer spending, so adding NHI to VAT’s likely effects creates all the ingredients for a potential economic slowdown.

Mr Myers said how NHI payments were split between employer and employee, and whether one paid 100 per cent, made no difference to the end result.

“It doesn’t really matter where it’s coming from. It makes no difference. It’s still going to have an effect,” the BCCEC chairman explained.

“It’s still coming out of the pockets of the consumer, and doesn’t matter to the informal economy as they are not paying anything.”

Mr Myers warned that the impact from NHI and VAT was likely to be exacerbated for legitimate Bahamian businesses if those operators in the ‘informal’ or ‘underground’ economy continued to avoid paying their fair share of taxes.

“What is the informal economy going to pay [in relation to NHI],” Mr Myers asked. “They don’t pay NIB, Business Licences. You tax the formal economy and not shut down the informal economy?

“We’ve got some fundamental issues to deal with between now and January, and need to get some stern measures from Government.

“There’s not enough talk about fiscal responsibility, focus on compliance, establishing the rule of law and eliminating the informal economy. There’s not enough action being taken on these problems.

“You can be assured that the volume from the private and public sectors on VAT is going to increase. They [the Government] can either deal with it now or when people start screaming about it, but my suggestion would be to be proactive rather than reactive.”

The BCCEC has representatives on the NHI committees established by the Government, but Mr Myers said they had yet to see the costing report which ministers have now received from Sanigest International.

“I’m not quite sure why it’s so secretive,” he added, backing the need to examine Bahamian healthcare costs, especially given that these would increase due to VAT.

Agreeing that the unemployed, elderly and Bahamians who were unable to afford health insurance needed to be protected, Mr Myers said this nation first needed to determine why healthcare costs in this nation were twice those of other Caribbean jurisdictions.

“Before we address a NHI system, we have to address the inefficiencies in the system. They have to be eliminated,” he told Tribune Business.