By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government will have to increase its annual income by more than $550m to hit the Prime Minister’s target of achieving a 25 percent revenue-to-GDP ratio by the time his term in office ends.

Tribune Business calculations, using the $11.573bn gross domestic product (GDP) estimate for 2021-2022 provided in the supplemental Budget, showed that revenues equivalent to $2.893bn would be required to hit that goal this fiscal year.

That amounts to a $556.45m increase above the revised $2.337bn recurrent revenue figure for this fiscal year, illustrating the extent of the fiscal transformation envisioned by Mr Davis that will likely have to be generated by a combination of economic growth and new and/or increased taxes.

“We are announcing the objective of achieving a revenue-to-GDP target ratio of 25 percent by the end of our first five-year term in office,” Mr Davis said. “At the time of the mid-year Budget, we will present further details of our tax adjustment strategies, which will be implemented in upcoming fiscal cycles.”

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, described this as “a very telling statement” which would attract lenders/creditors but not necessarily be so popular with the Bahamian people given the measures that will be enacted in future years.

“To increase the tax rate to 25 percent is a bold statement to make,” he added. “It’s not very popular to make that statement, but indicates there’s an acceptance of reality to increase tax revenues.

“Economic growth will not do it alone. We need a greater level of extraction from GDP going into the Government’s coffers.” While the Government’s focus this fiscal year is on compliance and enforcement, Mr Bowe said revenue-enhancing measures can be expected in upcoming years.

Meanwhile, unveiling other targets, Mr Davis said: “The path to restoring our fiscal health begins today with the re-establishment of a fully resourced Revenue Enhancement Unit, whose purpose is to increase the tax base by minimising tax avoidance and fraud. Within 24 months, we expect that this unit will account for $200m in additional taxes.”

The Government is also seeking to beat the Minnis administration’s fiscal deficit targets, with the revised supplemental Budget targeting ‘red ink’ of $858.6m as opposed to the former government’s $951.8m. It is also forecasting lower deficits for 2022-2023 and 2023-2024 at $351m and $148.7m, respectively, as opposed to its predecessor’s $371.9m and $151.6m.

Mr Davis also promised to reform the Ministry of Finance’s revenue policy committee, which he said had ceased to function under the former administration, as well as create a debt advisory committee headed by former minister of state for finance, James Smith.

“As additional measures to strengthen fiscal credibility and enhance accountability, transparency and integrity, I wish to presage forthcoming amendments to the Public Financial Management Act, the Procurement Act and the Public Debt Management Act,” the Prime Minister added.

“This compendium of legislation, which was rushed through the legislative approval process without any or little debate, was also rushed through the internal approval process in the public sector. These are badly flawed pieces of legislation.

“There are no regulations for any of the legislation recently passed. There are no procedural manuals, and internal processes have ground to a halt and legal opinions have to be sought constantly for what used to be ordinary every-day transactions.

“For example, if one were to interpret the Public Procurement Act literally, the Royal Bahamas Police Force could now take a minimum of seven days to buy replacement tyres for their patrol vehicles.”