Cooper says deficit will exceed $400m

By Natario McKenzie

Tribune Business Reporter

nmckenzie@tribunemedia.net

The opposition’s finance spokesman yesterday charged that the government’s 2018-2019 fiscal deficit will exceed $400m, adding that it has as much chance of hitting its $229m forecast as “pigs flying”. 

Chester Cooper, the Exuma and Ragged Island MP, argued that his deficit overshoot projection was based on the fact that the government’s revenue numbers “can’t be trusted”. 

Predictably describing the budget as “a failure”, he said: “It is painfully clear that there was heavy lobbying for and on behalf of special interests, and their negotiators won. So, I ask, who negotiated for the people? Because clearly the special interests got tax breaks, and the poor and middle class got shafted once again.

“We see the new car dealers at it again. On top of the $25m lost in excise tax last year because you allowed them to bring in the cars duty-free, and only pay taxes when they sell the car, they get even more tax breaks this time.” 

While no $25m excise tax reduction has been publicly attributed to the “bonded warehouse” facility afforded to auto dealers, Mr Cooper added: “In the real property tax amendments, the removal of the residency requirement for home owner’s exemption for real property tax. Instead of six months it is now just seasonal occupancy, which could be widely interpreted and abused by rich second home owners.  

“This is going to cost the government millions. So the rich get loopholes and the poor gets crayons. There is a new tax on currency conversion of 1.5 percent when you exchange currency. Not only does this potentially undermine dollar parity, but it unintentionally encourages hoarding and a black market.

“The exchange control regulation was amended last year to allow businesses to operate US dollar accounts. So this is going to hit the poor disproportionately. In the simplest terms, as I interpret it, if a straw vendor, jet ski operator or tour operator in Exuma deposits a US $100 bill into their Bahamian dollar account they would receive credit for only $98.50.”

Mr Cooper added: “The minister of finance, apparently in seeking to avoid breaching the limits in the Fiscal Responsibility Act, appears motivated to make the numbers work. Why should we believe any of these revenue projections when the projections for 2018-2019 were so far off target?

“The revenue numbers, in my opinion, can’t be trusted. As of March 2019, the average monthly revenue was $188m per month leading to a projected year-end figure of $2.252bn. The minister, without any explanation, has estimated the year-end figure to be $2.413bn.

“This difference of $161m has allowed the minister to project a year-end deficit of 1.8 percent rather than three percent. If he is wrong, as I contend, his budget deficit won’t be $229m but more than $400m on this point alone. There is no credible financial analyst who would accept these figures at face value.”

Mr Cooper also argued that the government may have over-estimated its business licence revenue by $40m because it had failed to account for the change to the tax regime for financial institutions, which is now a risk-based levy - paid directly to financial services regulators - that also eliminates the three percent business licence fee previously paid by commercial banks.