Bahamas can’t afford ‘another five years’ of secretive governance

Friday, November 18, 2016

The Bahamas cannot afford “another five-year cycle” of unaccountable government spending, a governance reformer warned yesterday, arguing that a Fiscal Responsibility Act should have “preceded” Value-Added Tax (VAT).

Robert Myers told Tribune Business that having successfully implemented VAT, the Government had returned to its “normal ways” and was ignoring the calls for greater transparency and accountability in how it spend taxpayer money.

Agreeing that there needed to be more “control” and scrutiny over government expenditure, so that the Bahamas avoided “a bottomless pit”, Mr Myers said a Fiscal Responsibility Act should have been implemented within at least 12-18 months of VAT’s January 1, 2015, introduction.

He was commenting after Michael Halkitis, minister of state for finance, told an accountants’ conference on Wednesday that the Government had collected $852 million in VAT receipts during the tax’s first 18 months.

While these figures were largely already known, and it is unclear how much of a net government revenue increase this translates into, Mr Halkitis’s comments have renewed debate on how the Christie administration is spending its revenue windfall.

The Prime Minister, in his February 2015 mid-year Budget debate, committed the Government to producing a ‘white paper’ that would launch public consultation on whether the Bahamas should introduce its own version of a Fiscal Responsibility Act.

This ‘white paper’ was supposed to have been issued in summer 2015, with Mr Christie setting out a timetable that involved recommendations going to Cabinet on whether such legislation was appropriate by year-end 2015.

None of these steps has occurred, and no ‘white paper’ has been issued, despite a Fiscal Responsibility Act having been “number one on the list” of priorities when the private sector’s Coalition for Taxation Reform agreed in late 2014 to a broad-based, low rate 7.5 per cent VAT.

“Number one on the list when we came to that [VAT] agreement was that it had to be followed by Fiscal Responsibility; it had to be,” Mr Myers told Tribune Business. “That was number one on the list of the 13 conditions we had.”

Several private sector executives have subsequently told Tribune Business that the Coalition’s mistake was to agree to VAT without pinning the Government down on a Fiscal Responsibility Act, and that it should have conditioned acceptance of the new tax on such legislation being implemented.

Mr Myers, meanwhile, referring to Mr Halkitis’s comments on VAT monies, said: “The amount of revenue is important because it was supposed to pay down the debt and meet some shortfalls.

“But, more important, is more control as to how we’re spending our money. If we have more control over how we’re spending our money, we will not have a bottomless pit.

“In our opinion, a Fiscal Responsibility Act should have preceded VAT,” Mr Myers added. “It should certainly have come within 12-18 months after.

“Like every government they respond to the crisis, and once the crisis is over, they go back to their normal ways.”

A Fiscal Responsibility Act would force the Government to be more accountable and transparent in the management of the public finances, and require it to return to Parliament for approval to raise more money if it had to exceed the limits approved in the annual Budget.

Several observers have suggested that this Act should set fiscal targets and so-called ‘rules’, such as a maximum debt-to-GDP ratio the Government cannot exceed, but others have warned that this would lock or ‘box in’ the administration such that it would not be able to effectively respond to emergencies, such as Hurricane Matthew.

Mr Halkitis has argued in the past that the Government’s use of VAT revenues has been misunderstood, with the monies going into the Consolidated Fund to meet all manner of expenses, and cover shortfalls that were producing $300-$600 million annual deficits.

Yet while the deficits have reduced, they are still being incurred, and the $150 million in Matthew relief funding has already ‘blown’ the Government’s projected $100 million deficit for the 2016-2017 fiscal year.

The Government is projecting that the GFS fiscal deficit will be eliminated by the 2018-2019 fiscal year, but in the meantime, notwithstanding VAT’s implementation, the national debt has continued to grow throughout this administration’s tenure - albeit at a slower pace in recent years.

At end-June 2016, Central Bank data pegged it at $6.695 billion or 74.9 per cent of GDP - a ratio in excess of the so-called 70 per cent debt-to-GDP ‘danger threshold’ established by the International Monetary Fund (IMF).

As a result, the increase in national debt and continued deficits, despite VAT’s implementation, have raised concerns about the level of public spending, and whether the new revenues are being used to finance bigger government and more social programmes.

Mr Myers warned that open, accountable governance was “completely lacking” in the Bahamas, with “almost no transparency”.

“If they’re concerned Bahamians and concerned for their children, and concerned for the ongoing success of the economy and the country, then perhaps the only thing they should be concerned about is open, accountable, responsible governance,” he told Tribune Business.

“We do not have, in my opinion, room for another cycle of this type of unopen, unaccountable governance. If this continues for another election cycle, the country is going to be in dire straits.

“We have to fix this. We’ve got to change the culture of governance and have more collaboration between voter and government. Governments who do not want that have no business existing. The more successful countries have more open and accountable government.”

Comments

Sickened says...

What businesses have to do now is give the government a deadline to pass a Fiscal Responsibility Act or businesses will stop paying VAT. If the big importers agree to do this then government will be forced to act or run out of money.
IT IS TIME TO TAKE OUR COUNTRY BACK FROM GOVERNMENT CRIMINALS!!!

Posted 18 November 2016, 3:15 p.m. Suggest removal

John says...

Despite the government collecting close to a billion in VAT in 18 months, not even a small dent has been put in the national debt. More mysterious is the fact that government cannot explain what it is doing with your VAT!! Now there is talks in the wind that the government is looking to double VAT (to 15%) early next year, among other things. Puerto Rico's economy has collapsed and many natives of that island are running to the US mainland for security. Brazil booming economy has busted because of corruption and people in Venezuela can't even buy food when they have money because their currency in valueless. The government of India is recalling its currency because they believe there is more counterfeit in circulation than legitimate notes but Indians are reluctant to turn their money in. There's mass corruption and so they don't trust their government. Everyone knows what happened in Greece and a Trump election win put The economy of Mexico under great stress and some decline. How far down the list is the Bahamas?

Posted 18 November 2016, 3:19 p.m. Suggest removal

The_Oracle says...

And where will one find the long lost "backbone" in the business community to take such action?
Their habit is to roll over, beg forgiveness and suffer forward.
John, you are right, but this stuff only matters to those who can se the big picture,
those who might care. Those who run their own lives on budget, paying taxes and bill on time.Government does none of these, as ministers and civil servants personally nor collectively as government.

Posted 18 November 2016, 3:34 p.m. Suggest removal

Honestman says...

Bahamas can't afford another 5 years of this corrupt Chinese and Web Shop sponsored PLP administration. Anyone who attaches themselves to this party of thieves and robbers immediately loses credibility. In this past four and a half years they have probably done more damage to the country than all previous administrations combined. The sobering thought is that whoever replaces this criminal enterprise is going to have one huge challenge to "right the ship". Many painful decisions are going to have to be taken. The worst is yet to come Bahamas.

Posted 18 November 2016, 3:52 p.m. Suggest removal

Just look what is happening with BTC as the reality of competition reveals itself. Rather than cut back on spending and make an attempt to protect its revenue streams, BTC is doing the complete opposite. They continue to spend like drunken sailors (yes plural) and they are unraveling their own sources of income. Rather than maintaining them and waiting to see what the competition does with their products BTC has adopted a spirit og giving everything away.. In a few short weeks, they have made calling a cell phone from a land line toll free, cell -to- cell between their customers free, reduced texting to one cent per text on their most busy day (Fridays) and are practically giving away data. Obviously the company is in a state of panic. So much so they have engaged in what only could be false advertising. They are advertising the I Phone 7 for $479.00, less 10 percent today. But when you go in they tell you you can only get the $479.00 price if you upgrade your package to their most expensive package ($139.99 ) Even if you already have this package you will have to pay $879.00 for an I Phone 7. So why would you want to upgrade your package to one that includes mostly texts and call time when these are virtually free for the most part? every one uses Wats App instead of texting. So BTC will be making an extra $80-$100 a month of you. Meaning you may as well pay the $800 price for the phone and not upgrade. Then NewCo is also advertising that they will have Iphones for $400.00 come Monday November 21, 2016...You think they gonna pull the same game?

Posted 18 November 2016, 7:22 p.m. Suggest removal

BahamaPundit says...

I've been thinking about this a great deal. I like to think of myself as quite neutral with no party affiliation. The corruption we have in the Bahamas is intollerable for many reasons. It feels like a betrayal and is gut wrenching, because the island is so small. How could people so close to us be so wretched, undisciplened and outrageously evil. This PLP is vomit inducing in the amount and boldness of their coruption. They have even admitted to being corrupt in public forum, by stating they play favorites in granting contracts. What I have noted is that both Ingram and Perry appeared to be somewhat respectable in their first term of office, but in their second run, both of them unleashed the krachan by being abysmally corrupt. This tells me that term limits must be required, if we wish to stamp out corruption. After losing office once and regaining it, the hurt of the previous defeat manifests itself in all out greed and stuffing of pockets. We can no longer afford to allow hurt persons to govern us. Both Hubert and Perry were hurt when they lost; when they got back in they sought their revenge and wrecked havoc on the electorate, who they considered to have betrayed them previously.

Posted 19 November 2016, 6:24 p.m. Suggest removal

MonkeeDoo says...

BLACK FRIDAY IS THE BEGINNING OF THEIR END !

Posted 20 November 2016, 10:22 p.m. Suggest removal

Greentea says...

Governance without the input of civil society is autocratic, essentially a dictatorship and hopelessly corrupt. This government and all recent governments in the Bahamas have demonstrated this tendency time and time again- making piss ass decisions without any input from civil society. We never learn of decisions until after they have been made, as if everyone is dumb and they are the only ones with the answers or know what is best for the country. Well look where we are. In a fast boat to hell in every arena. If you don't like people or what they have to say, don't seek to lead em. Enough of your limited vision, thinking and skill. I want someone to tell me why ANY sitting MP should be given another shot at political leadership. And being 'nice' don't count.

Posted 20 November 2016, 11:32 p.m. Suggest removal

If some of these politicians don't resign immediately after Black Friday then this country is in for some serious turmoil.
**Perry** you had better sacrifice *at least 5* of your criminal gang just to appease the Black Friday masses until election. Not doing so will bring an end to the whole PLP mafia after the next general election. And Gray, Fitzgerald, Nottage and Shame had better be on that list!!!

Posted 21 November 2016, 9:46 a.m. Suggest removal