Friday, September 14, 2018
By NEIL HARTNELL
Tribune Business Editor
The Deputy Prime Minister yesterday pledged there will be no further VAT increase before the next general election, as he slammed "mischief" and "nonsense" spread by social media.
KP Turnquest told Tribune Business that a further VAT rate hike would not occur "in this administration's term", identifying ex-Cabinet minister and PLP chairman, Bradley Roberts, for being one of the main culprits behind what he called disinformation.
"There is no VAT increase contemplated in the near future or foreseeable future, contrary to the WhatsApp and Facebook mischief put out there," he told this newspaper. "It's Obie Roberts and Bradley Roberts running on with this nonsense. It will not happen in the near term, and not in this administration's term."
Mr Turnquest's comments appear to rule out any change in the present 12 percent VAT rate until 2022, which is when the Minnis administration's term in office expires if it runs its full course, and a general election must be called.
The Government indicated that the rate hike unveiled in the 2018-2019 budget will be sufficient to pay off its $360m in unfunded arrears, and meet the Fiscal Responsibility Bill's debt consolidation targets, but fulfilling Mr Turnquest's promise will largely depend on avoiding any major performance deterioration or sudden shock to the public finances.
The deputy prime minister described the fiscal performance for the first two-and-a-half months of 2018-2019 as "very encouraging", but declined to provide details before the release of the Government's first quarterly report that is expected soon after September's end.
"We want to be transparent, but given the VAT concerns we want to make sure we give it an opportunity to show real results," Mr Turnquest said. "We don't want to inundate the public with information either."
The 60 percent rate increase, from 7.5 percent to 12 percent, is projected to increase VAT revenues by a gross $400m and help narrow the 2018-2019 deficit to a sum equivalent to 1.8 percent of gross domestic product (GDP) - in line with the Fiscal Responsibility Bill's targets and "glide path" for getting the deficit to 0.5 percent by 2020-2021.
Mr Turnquest, meanwhile, said the Fiscal Responsibility Bill was just one element in a four-strong legislative package that is intended to achieve "a total overhaul" of the public sector's financial management processes, systems and governance.
Pointing to the Public Financial Management (PFM) Bill, as well as the Public Debt Management Bill and Public Procurement Bill, the Deputy Prime Minister said earlier implementation of this legislation may have prevented the fiscal "indiscipline" that threatens to cost Bahamian taxpayers dearly.
While the Fiscal Responsibility Bill is due to be laid in the House of Assembly next week when Parliament resumes sitting, and the Public Debt Management Bill and Public Procurement Bill both tabled before year-end, Mr Turnquest revealed that the Public Financial Management Bill may only be ready in time for the 2019-2020 "Budget cycle".
Emphasising the Government's determination to modernise its financial systems, and come into line with international best practices, Mr Turnquest told Tribune Business: "The Public Financial Management Bill will be a while. We hope we will have that for the next Budget cycle. The Public Debt Management Bill and Public Procurement Bill, hopefully we're able to lay those before the end of this year."
Describing the Public Financial Management Bill, he added: "It's a total overhaul of the Financial Administration and Audit Act, contemplating improved financial reporting and exercising some changes in the way reporting is done.
"The Bill has some specific parts with respect to improving the management of the fiscal accounts, and will hold accountable those responsible for managing these Budgets as well as reporting. Modernising, that is the objective."
The Public Financial Management Bill will set detail accountability expectations for government agencies, and include provisions for sanctions over financial misconduct and crimes. The disclosure requirements for annual Budgets will be enhanced, with the overall objective of improving accountability, oversight, management and control of public funds.
Mr Turnquest, meanwhile, said the Public Debt Management Bill was designed to "optimise" the Government's debt structure by ensuring the interest paid, and maturities (date at which principal must be repaid), were such that the burden on Bahamian taxpayers was kept as low as possible.
"It's about organising our debt structure, ensuring we have the most optimal terms and maturities; ensuring we're optimising various elements of the debt structure," he told Tribune Business.
"Hopefully this whole suite of legislation will modernise the governance within the fiscal administration. It will enable participation and direct feedback from the public; it will increase the flow of information to the public, so they will be aware of where we are and the rationale for some of the decisions we make.
"There will be more of an insight into the assumptions behind the Budget, so the public are aware of what the priorities and considerations of government are. At least they will understand the rationale."
Mr Turnquest said the Bahamas might have prevented the fiscal "indiscipline" that placed the Government in its present predicament, with an $8 billion national debt and $300m-plus annual deficits, had these Bills been designed and implemented earlier.
The last Christie administration increased the national debt by $2.2 billion over its five-year term, despite enjoying around $1 billion in net new revenues from VAT over its last two-and-a-half years. That came on top of the $1.5 billion worth of "red ink" added by the prior Ingraham administration.
"We've just come through a period of tremendous indisciplined management of the fiscal affairs of the country," Mr Turnquest told Tribune Business. "We need to get ourselves on a sound footing for responsible management and good governance.
"This legislation is an attempt to improve these standards, so this government and future governments can be guided accordingly. We certainly would have avoided some of these issues we've had to confront over the last couple of years and continue to address today."