Friday, June 15, 2018
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government is predicting non-VAT fee and tax increases will generate an extra $100 million in the new fiscal year, amid warnings that "the fiscal chickens have come home to roost".
K P Turnquest, Deputy Prime Minister, yesterday told the National Chambers of Commerce Conclave that Immigration and Port fee hikes; the increased 2 per cent real property tax rate on foreign-owned vacant land; and greater licensing fees for large commercial services were all part of a strategy to align charges with the true cost of government services.
"We considered all of the user fees and services that have not been adjusted for many years and reassessed those," he said. "We looked at Immigration and port fees, which barely cover the cost of operations at this point.
"We looked at real property tax, particularly the tax on foreign-owned vacant land, licensing fees on large commercial vehicles and an increase in other user fees. In total, we came up with about $100 million from non-VAT revenue sources."
Mr Turnquest added that the Government had looked at raising the VAT rate to just 10 per cent, but "ultimately fell on the 12 per cent number as it gives us the best chance of arresting the slide, fixing the imbalance and funding priority modernisation and infrastructure projects".
The 60 per cent VAT rate hike is projected to generate an additional $400 million in revenue, although many observers believe this is unlikely due to compliance issues and reduced consumer spending/economic activity as Bahamians adjust to higher living costs.
Mr Turnquest again sought to suggest that the VAT was short-term, and represented the key component in a three-year strategy designed to pay off $360 million in unfunded arrears and bring the Government's annual fiscal deficit on target with the 0.5 per cent of GDP required by the Fiscal Responsibility Bill for 2020-2021.
He again promised some $100 million worth of Customs and Excise Tax reductions at the end of the period, although the Bahamas will have to make such an adjust anyway as part of its accession to full World Trade Organisation (WTO) membership by late 2019.
"I appreciate that many of these revenue-generating measures are unpopular. In fact, that might be the understatement of the day," the Deputy Prime Minister admitted.
"But we are in this together, as we only have one Bahamas, and we must adapt to be successful together. While the business community has been resistant to these changes, we are calling on you all to embrace the notion of shared sacrifice so that we can restore the public finances to a healthy state on a durable and sustainable basis. A healthy public financial position will redound to the benefit of all Bahamians."
Pegging the central government's direct debt at $7.2 billion, Mr Turnquest said 14 per cent of government revenues were now being absorbed by $381 million in annual interest payments on these liabilities.
And, dissecting the $76 million in under-budgeting for known spending commitments, he added: "Previous governments have been artificially under-budgeting for contractual commitments, which means vital programmes were under funded and some vendors were simply not paid."
Citing three examples, he listed:
A $4 million government food programme that only had a budget of $2.5 million.
A $6 million commitment for Immigration-related software and hardware to support the passport office was never specifically budgeted for.
A $10 million commitment for software and hardware upgrades to modernise the Department of Inland Revenue was never specifically budgeted for.
"Our fiscal state of affairs has been building from years of fiscal hocus-pocus and hide the debt," Mr Turnquest said. "Simply put, the chickens have come home to roost and unless we were willing to risk another downgrade to total crap bonds, with our ability to borrow in crisis evaporating, we had to address the problem.
"I would love to pull the magic rabbit out of the hat or push the liabilities further down the road, but that is simply not possible or responsible. Further, with interest costs eclipsing $381 million we just cannot afford any more large borrowings."
He continued: "Debt levels have been continuously climbing for the past 10 years - increasing by 160 per cent between 2008 and 2017. At $1.09 billion, debt service today is 8.3 per cent of GDP. Just last year, interest on the debt increased by $89 million.
"The corrective actions we are undertaking with the 2018-2019 fiscal plan might be hard and painful, and require shared sacrifice, but they are necessary. And they are made on our terms, not by the dictates of external actors, whose mercy we must subject ourselves to."
Comments
John says...
Donald Trump says there are 2.5 million jobs available but only 2 million persons looking for jobs. As more companies increase their output and government goes forward with its plans to expand and improve infrastructure more jobs will be available. So the restrictions on immigration will be relaxed. Bahamians will be among those traveling to the US looking for a job and better way of life. These will be mostly qualified people or persons who already have friends and family in the US. Can the Bahamas afford the brain drain? This migration will also cause an erosion of the tax base. And in the main time The Bahamas also expects growth and revitalization of its economy. Will there be sufficient qualified workers? Or will the continued increases in taxes and obvious deterioration in the quality of living in the Bahamas, especially for the working class and middle class Bahamians force them away
Posted 16 June 2018, 5:37 a.m. Suggest removal
realitycheck242 says...
Tougher Immigration policies being implemented by the Trump administration is making it that much harder for Bahamians to qualify for migration to the United States. Legal migration applicants must show cause which may include political persecution. Economics reasons such as a bad domestic economy is not looked favourably upon from applicants. The brain drain is endemic for all countries and will increase because of the standard of living, salaries, ability to qualify for some citizens. However the vast majority of our citizens will have to suck up this Vat increase, try to discipline themselves like they have never done before and live by better principles and higher standards to make it in the coming years. We have to work along with this Government for a better Bahamas no matter how pain full it may seams,,.Demonstrations is a expression of freedom of speech which is a constitutional right given to every citizen but after leaving bay street we should ask our selves ...Is what this government doing going to benefit the country long term and be a saving grace for future generations. The answer is unquestionably yes. .
Posted 16 June 2018, 6:26 a.m. Suggest removal
BONEFISH says...
Bahamians have to work to make things better in this country.Canada in contrast to the US under Trump is more open to emigrants.I know of a family who is moving to Canada.Quite a number pf bahamians are interested in moving there.The US is not the only option.
Posted 16 June 2018, 7 a.m. Suggest removal
sheeprunner12 says...
OK, so stupid-ass Bahamians will go to Canada and pay 40-50% of their salaries to that Government as taxes, but have a problem with 12% VAT??
Posted 16 June 2018, 9:16 a.m. Suggest removal
Greentea says...
Value for money Sheeprunner12 and wait- accountability.
Posted 17 June 2018, 5:29 p.m. Suggest removal
DWW says...
you get a lot more for hte 40% than you do here. when you hit retirement in the Bahamas you get screw
Posted 18 June 2018, 8 a.m. Suggest removal
birdiestrachan says...
Turnquest [predications will not come to pass. There is a just God whose Justice will
prevail. He is hurting poor people while giving himself duty free planes and the wash
house man duty free washing machines. and the liquor business that doc, Brent and
the wash house man has shares in a pass. so that there dividends are safe.
Posted 16 June 2018, 6:25 p.m. Suggest removal
TheMadHatter says...
Birdie - why is there only one "wash house man"? Why can't generation Bahamians own big businesses?
Poor people are hurting poor people. They are hurting their 3rd, 4th, 5th, and 6th child from the moment they are born.
Bahamians don't really understand what $381M in interest fees means.
Govt should say that nobody can travel out of the country or clear any shipment or buy or sell any real estate until they have paid their share of that debt. Divided by about 400,000 people equals $953 per person. Cough it up folks, esp. all of you who don't want to tax the "poor" people.
Posted 16 June 2018, 7:09 p.m. Suggest removal
Bonefishpete says...
2% increase on vacant land. I see the bottom dropping out of
foreigners lot purchases. Vacant land I would think costs the
government very little to service.
Posted 16 June 2018, 10:04 p.m. Suggest removal
sheeprunner12 says...
Sooooooo, why should foreigners come here, buy up our land, sit on it for free (indefinitely) and then wait for a good price and flip it or build a second-home unit(s) and AirBnB them for no taxes???????? .......... Who do you work for???????
Posted 17 June 2018, 10:22 a.m. Suggest removal
Aegeaon says...
At this point, why should we inherit the wealth?
Look at what we've created. When we first broke free from Britain, Lynden condemned us to death by giving up Norman's Cay for the Medellin Drug Cartel and, enslaved us to the transnational criminal drug trade started the Bahamian Drug War that killed 3,000 Bahamians.
That deal alone has corrupted and plagued many Bahamians to think criminally, like a disease.
From the government creating several economical downfalls designed to create workers and slaughter cattle for the new narco-state, and for allowing the Drug War to manifest into reality.
Our society is diseased to aid gangsters to hide and grow in strength, we've allowed money launderers (Sebas and Flowers) to survive and decimate the banking industry and the Family Islands. Families had been devastated by the rush of cheap, fast money and honest living has been cut so cheaply by launderers or drug lords.
What's the point of inheriting our National Resources when the Bahamian society will squander it or hoard it to themselves for friends and lovers? Then the new "Ministry of National Resources" that Prescott Smith and Kendle Colebrook are talking about would be making deals with Mexican Drug Cartels and Islamic terrorists to have their shares and open up more problems than we already have. Making the billion dollar mining and manufacturing industry absolutely worthless.
People on Facebook tries to hail the webshops as heroes against non-existent racism, but if they were those types of heroes. They should had become politicians with that type of support they got and turned this country into Dubai. Opulent, not that much crime, and importantly, financially mature and caring for others. Nope, they're playing with race cards and utterly lying. They can do fundraisers and charities, but they're worse than all the others. They launder money to possibly Al-Qaeda and ISIS and do NOTHING for us.
We blame poor migrants for just trying to survive, we call them parasites instead.
We blame other white people for non-existent racism that they had nothing to do with it.
Face it, we will never escape being imprisoned in the drug trade. The wealth will be all for nothing unless we destroy the criminal mentality our people are infected with.
Posted 17 June 2018, 7:01 p.m. Suggest removal
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