By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister yesterday revealed his response to International Monetary Fund (IMF) recommendations that The Bahamas increase its VAT rate to 15 percent was: “Hell no.”

Philip Davis KC, unveiling the mid-year Budget in the House of Assembly, said the “record” $1.44bn revenues generated during the 2024-2025 fiscal year’s first half had occurred “despite the recommendation from the IMF to raise the VAT rate to 15 percent in line with what they call my regional colleagues. Hell no.

“Let me put it this way,” he added. “It was their recommendation. They recommended it. It was for me to decide whether to accept it. We decided against raising it to 15 percent as was being planned. Thank God for September 16, 2021. We brought it down.”

Mr Davis’s reference to the general election date implied that the Minnis administration was preparing to raise taxes had it been voted back into office, whereas his administration rejected the external pressure and cut the VAT rate from 12 percent to 10 percent - something the Government is likely to increasingly remind Bahamians of as the next general election draws near.

And the Prime Minister also suggested that the Government had gained more fiscal “headroom” by lowering The Bahamas’ debt-to-GDP ratio to 79.2 percent, again comparing it to the 100.4 percent that it struck in June 2021 just prior to the general election as the economy was emerging from the COVID pandemic.

Using comparisons with 2018-2019, which he described as the last “normal” year before “the twin disasters” of COVID and Hurricane Dorian, and a time when the Minnis administration was in office, Mr Davis said: “For the first six months, preliminary total revenue collections are estimated at $1.4bn, reflecting a $138.9m increase compared to the same period last year.

“So far, revenue collections have accounted for 40.7 percent of the annual Budget target. When compared to fiscal year 2018-2019, the last normal year before the twin disasters, total revenue for the first half of the year has grown by 42.4 percent or $429.3m. This was achieved without any appreciable increase in taxes since this administration came into office.

“The revenue intake for the first half of this fiscal year stands as the highest revenue level this country has ever experienced for this period. This achievement can be attributed to several key factors, including more rigorous enforcement measures and a significant improvement in compliance, particularly in respect of real property taxes.

“As well, we have seen an increase in revenue yields from new policy measures, notably in respect of Business Licence fees and departure taxes,” Mr Davis added. “The combination of these efforts has led to enhanced revenue collections, reflecting this administration’s push towards fiscal consolidation.

“The fiscal landscape of the nation is showing promising signs of sustainability, paving the way for further investments in public services and infrastructure as well as meeting our revenue and overall fiscal objectives.”

However, Michael Pintard, the Opposition’s leader, speaking after the mid-year Budget accused the Government of using “smoke and mirrors” to distract Bahamians from its “failure” to govern in a fiscally responsible manner.

“Unfortunately, we have come to expect from the Davis administration exactly what we got today, more smoke and mirrors as they attempt to spin the conversation away from the fact that they have actually failed,” said Mr Pintard.

“Failed to provide relief for the cost of living, failed to provide a pathway for sustainable economic growth and development, and failed to show how they have governed in a fiscally responsible manner and how they have been transparent with what they do with your money. The truth of the matter is they have failed to manage the debt property, despite retaining world-renowned firms to help them.”

Mr Pintard said the Government has spent substantially more than it budgeted during the first half of the 2024-2025 fiscal year, noting that it projected a $69m deficit for the 12 months year but currently is at $400m.

“Today, the Prime Minister was forced to come clean with the fact that despite his boast of record revenues and record tourism numbers, the fiscal situation continues to get worse in the Commonwealth of the Bahamas, with the Government recording a whopping $400m or thereabouts in terms of deficit just at the mid-term point,” said Mr Pintard.

“The truth is, he had projected that for the entire year, their target in terms of the deficit, would have been $69m. So, whether you want to pick a low number of $400m or a high number of $500m, they have gone substantially over what they have projected for the entire year at the mid-term point, despite the Prime Minister’s idle talk and reassurances.”

Mr Pintard said Mr Davis explained his administration “front-loaded” capital expenditure during the first half of the 2024-2025 fiscal year, leading to record expenditure early in the Budget cycle, but questioned why recurrent spending increased by $192m over the same period.

“The greater question for us is: What was the reason and justification for a $192 m increase in the recurrent expenses? he asked. “We are concerned, and there is no explanation for why they continue to carry out this practice without justifying why they are doing it.  If there’s a reasonable explanation, by all means they should share it.”

Mr Pintard also called for a strategy to increase stopover visitors, noting that spending from cruise passengers is substantially less.

“They continue to talk about record numbers in cruise passengers, and they don’t seem to fully appreciate that the increase in cruise passengers who spend substantially less than stopover visitors has not advanced the economic growth and development of Bahamians along the value chain,” said Mr Pintard.

“It hasn’t advanced to straw vendors in Grand Bahama or in New Providence. It hasn’t advanced the taxi drivers and others. They have not figured out something their own statistics have told them; that the increase in cruise passengers, particularly from the state of Florida, comes at a time when the stopover visitors from the same location have dropped off.

“So, it almost suggests that stopover visitors from parts of the eastern seaboard, but Florida in particular, have converted into being cruise passengers who spend substantially less, more than $1,800 less, and so again, it is important for us to develop a strategy on how to increase stopover visitors.”