The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent financial analyst says Bahamians cannot expect to remain “a low tax jurisdiction” while expecting to enjoy the same social security benefits as developed nations.

Larry Gibson, chief operating officer of CG Atlantic Pensions, told Tribune Business that this country can no longer provide what many Bahamians demand without the tax system and rates necessary to support the safety net provided by the National Insurance Board (NIB).

“We cannot continue to be a low-tax jurisdiction if we want the same benefits and what have you that the developed countries have,” he explained. “Your tax rate just has to be higher to support that. You cannot have New York city on an island with a tax system that cannot support it.”

Mr Gibson spoke before the Prime Minister yesterday backed away from implementing an NIB contribution rate in the near-term despite projections that its $1.6bn reserve fund will be exhausted by 2028. While acknowledging that NIB’s sustainability had reached a tipping point, Philip Davis QC said in virtually the same breath that the Government will again “kick the can down the road” given the further strain it will impose on already-stressed businesses and workers.

“Let me say, I know what the Bahamian people are experiencing,” Mr Davis said in a video released yesterday. “These are difficult times and it would be a last resort for me to put any more burden on their backs. The actuaries over the last 10, 15 years have been predicting that the fund is jeopardised because of us not having raised the contributions to NIB.

“Recommendations were being made from 2003, 2004 to raise the contributions. Yes, we are at that watershed moment, but I am not going to at this time put any further burden on the Bahamian people. We’ll see how we could be innovative and creative to ensure that we do not do or embrace such an initiative until we have brought the relief that is necessary to allow that to happen.”

Mr Davis did not give any details on this innovation or creativity, but added: “The minister of state in my office was just speaking the facts as what was said in the actuary report. They are recommending, and they are urging, that we do so and as was his duty he is bringing that report to Cabinet for us to look at and discuss.

“We will consider it but as insofar as what my views are on it, it’s not going to happen, not now, not until we have brought the relief to the Bahamian people and we have put to bed some of the issues that can’t make them sleep when they go to bed.” 

Several private sector sources likened this to “kicking the can down the road”. One, speaking on condition of anonymity, said: “I’m really fearful that the Prime Minister doesn’t seem to want to take any political hits. Any issues that come up where people have to pay more, he punts the ball. He will not get away with that, even for 12 more months.

“The question is: What is the solution and when will it be implemented? If you are aware something has to be done, what are you going to do and when? The longer you take to implement the solution, the more expensive it becomes. What is the game plan?”

NIB’s present reality was predicted more than two decades by its seventh actuarial review, completed in 2001, which forecast that “reserves are projected to become exhausted” by 2029 if comprehensive reforms are not implemented to address the fundamental problem of benefit payouts exceeding contribution income. The recipient of that review, which was only one year out, on September 11, 2002, was then-NIB chairman and now-Prime Minister, Philip Davis QC.

Now, with just six years left to the NIB Fund’s total depletion, the magnitude of the correction will be that much more severe for businesses and workers already grappling with surging inflation, COVID recovery, rising gas prices and a potential minimum wage increase. Private sector executives described the prospect of NIB contribution hikes as a “double” or even “quadruple whammy” for a business community still fighting for “survival.

Yet there was also an acknowledgement that NIB cannot be allowed to fail, given that for thousands of Bahamians it represents a key source of retirement savings (pensions) while also ensuring that others remain above the poverty line through the provision of unemployment, sickness, industrial accident, maternity and death/funeral benefits.