Gov’t hit over VAT assistance delays

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government should “naturally expect the criticism” over its failure to introduce a key social support initiative in time to protect “persons on the margins” from a broad-based VAT, a banker argued yesterday.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business the delay in relaunching the RISE programme meant lower income Bahamians had been “penalised” through VAT’s reinstatement on “breadbasket” foods and medicines when the Davis administration cut the rate to 10 percent from January 1, 2022.

With inflationary pressures further fuelling the cost of living crisis, he argued: “More social spending commitments are likely to be required, and we’ve not yet introduced the RISE programme. When VAT was reintroduced on a broader base, really the persons most severely impacted that needed those benefits have effectively been penalised for the better part of nine months because the cost of items went up for them but the needed assistance has not been implemented.

“Maybe they could have been forgiven for a month, maybe a quarter, but now it’s three quarters.....You cannot dismiss the cries of people in need. The deficit is under-stated; there should have been benefits distributed to those in need by the RISE programme. They delayed the implementation, and should naturally expect the criticism.”

When The Bahamas first implemented the low-rate, broad-based VAT model at 7.5 percent in 2015, it was argued that increased social assistance should be provided to lower income Bahamians to cushion the tax’s impact rather than ‘exempt’ so-called breadbasket foods and other necessities because this would undermine compliance and administrative efficiency.

The Minnis administration overturned this position by introducing ‘zero ratings’ and ‘exemptions’ when it raised VAT to 12 percent, only for the Davis administration to eliminate them and revert to the 2015 model albeit with a 10 percent VAT.

While the Government has argued that the rate cut, from 12 percent to 10 percent, has reduced the overall tax burden for Bahamians since it is spread across a broad range of VAT-able goods, it has also increased the cost of previously zero rated and exempt items at a time when imported inflationary pressures are eroding spending power and disposable incomes, thus creating a cost of living crisis.

Mr Bowe has previously argued that the VAT now being collected on breadbasket foods such as rice and grits be redistributed to lower income Bahamians to help them cope with the higher cost of living. The RISE programme was designed to distribute this social assistance via debit cards, with recipients in return fulfilling conditions such as ensuring their children regularly attend school.

Obie Wilchcombe, minister of social services and urban development, said at the end of August 2022 that the RISE initiative was some two months away from launching. “The RISE programme was a programme that was intended to provide and monitor the growth and development of the clients we have,” he said at the time.

“If you are entered into the programme, what you want to do is break the vicious cycle of continuation to the programme where your children — you’re required to do certain things so that the programme can see a change in your behavioural patterns to move people away from the process.

“Of course we have to break the cycle, so the RISE programme is always intended to take you and lift you above being below the poverty line because you want to get more Bahamians out of dependence into independence.”

Turning to the Government’s fiscal performance, Mr Bowe said Bahamians should “not get too high or too low” on the 2021-2022 full-year outturn. “I think that I would describe it like we’re hoping we’re coming to the latter part of a roller coaster ride,” he told Tribune Business. “There’s been ups, and bumps and spins, because there are so many things coming at us.

“We’re still not completely done. We have to face the impacts of inflation. Inflation is going to cost government because its cost of goods and services goes up..... It’s a flat platform, and hopefully we’re coming to the end. We’re not quite rolling through, but hopefully on the last minor up and down with respect to inflation and, hopefully, the platform is stable.”

Mr Bowe also reiterated previous calls for more in-depth Budget analysis that identified areas of strength and weakness, and the government policies that are both succeeding and failing, so Bahamians and other observers can have greater understanding of why this is so as well as help to achieve the necessary adjustments.

“I’m not speaking to the woods,” he added. “This should not be one where we’re looking at the forest, but we definitely need to look at a few trees.” Otherwise, Mr Bowe warned, the fiscal figures are left “open to interpretation” and “noise in the market”.

“We’ve seen that in the last 12 months,” he said. “Both political parties throw mud at each other, and neither demonstrates empirically how it’s played out. This is not Monopoly money; it’s the taxpayers’ money. We make decisions not by the roll of the dice but by empirical analysis, and that goes for Opposition and the Government.”

Comments

tribanon says...

Bowe's odious position that we should keep our very unfair regressive tax structure, and simply use social welfare schemes of one kind or another to compensate for its unfairness to lower-income workers and low-profit businesses, speaks volumes about his self-interested reluctance to support the adoption of a much fairer progressive income tax structure.

And Bowe knows full well that the wealthier individuals and more profitable businesses in our country are not paying anywhere near their fair share of the annual taxes and fees being collected by government. Perhaps Bowe is enjoying his sweet new wealthier life style so much so that he too has now forsaken those not nearly as fortunate as him who remain very much abused and in need.

Posted 14 September 2022, 2:35 p.m. Suggest removal

LastManStanding says...

You should be well informed enough to know that businesses in this country pay license fees on GROSS revenue and not NET like literally every other part of the world does. Too bad if your business records a loss for that year, it is time to pay up; government needs money for their five star hotels and first class plane tickets abroad.

Regarding an income tax, are you really naive enough to believe that poor people are not going to pay that as well? This was the same exact argument used to bring income tax to America, that poor people would not have to pay anything. Fast forward a 100+ years and we clearly see that was a bunch of baloney. Are there even any wealthy Bahamians left that are not politically connected? Do you really think that the numbers boys will have to pay? The quality of your posts here suggest that you really cannot be naive enough to believe that there will not be any tomfoolery going on.

We need to starve this monster, not keep feeding it.

Posted 14 September 2022, 5:07 p.m. Suggest removal

tribanon says...

Not too worry, it's all moot anyway. There can be no significant tax reform without there first being a complete overhaul of our government. And we are well beyond too late for that to happen. The foreign lenders will soon enough be reforming our government and devaluing our Bahamian dollar in a way that will benefit them and be shockingly brutal for most Bahamians. The "monster" will indeed eventually be starved, but not by the Bahamian people. This will be done by external forces beyond our control, with all but a very few Bahamians being starved in the process.

Posted 15 September 2022, 5:55 p.m. Suggest removal

M0J0 says...

He always talks dog mess. I cant get why the paper keeps going to him to smear the paper with brown stains.

Posted 14 September 2022, 3:29 p.m. Suggest removal

birdiestrachan says...

Mr; Bowe a brilliant son of the Bahamian soil. continue to do what you can to help your country.

call the government officials and give them sound advice. they will listen to you.

Posted 14 September 2022, 3:37 p.m. Suggest removal

DonAnthony says...

PLP flying first class around the world, while failing to care for the poorest in our midst who go without food.

Posted 14 September 2022, 4:21 p.m. Suggest removal

birdiestrachan says...

it is a good FNM story to say PLP 's flying around the world while people are hungry is not really
exactly true but they say it anyhow it does something for them.

Posted 14 September 2022, 7:06 p.m. Suggest removal

tribanon says...

You don't have to worry about being hungry anytime soon. The many fat cells you have between your two ears could easily sustain you going without food for a very long period of time.

Posted 17 September 2022, 6:56 p.m. Suggest removal

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