The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

The government will “commit economic suicide” if it introduces new or increased taxes with next week’s budget, a governance reformer warning yesterday: “Everybody’s been taxed to death.”

Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that the Minnis administration has “no more headroom” when it comes to major taxation and revenue-raising initiatives given that last year’s VAT hike to 12 percent has already slowed the Bahamian economy.

However, he backed the strategy - as indicated by KP Turnquest, deputy prime minister - of targeting untapped revenue sources already on the government’s books which have largely been neglected by past administrations.

Besides yacht charter fees and Airbnb-style vacation rentals, Mr Myers urged the government to go further by levying real property taxes on “large blocs of land” owned by Bahamians in the Family Islands.

Bahamian-owned property outside New Providence is currently not subject to this levy, and he argued that in the absence of such carrying costs wealthy locals had been “disincentivised” from undertaking activities to boost GFP growth and were instead merely “land banking”.

Describing himself as “wary” over the upcoming budget given the number, and size, of tax increases and changes in prior years, Mr Myers also urged Bahamians to “stop talking” about income-type taxes and other structural reforms until research on their likely impact was completed.

Voicing hope that the 2019-2020 Budget will be “fairly benign” compared to the recent past, the ORG chief said: “Everything’s been all over the place so many times before, I’m not sure what to expect. I don’t expect VAT in the number we got the last go-around, but I’m a little wary of what they’re going to be doing.”

He added that another VAT increase, or raising rates for any of the Government’s other major revenue streams, would be akin to “committing economic suicide”. Mr Myers said: “People are taxed out. There’s no more headroom. 

“We’ve taxed everybody to death, and the economy is slowing because of it. There’s no more room to tax. They sure as hell can’t tax the consumer, the public and businesses any more. They’re taxed and tapped out. They have to clean up their own house and figure out how to get this money bleeding out of the state-owned enterprises (SOEs) and ministries.

“The Government has to tighten up its labour bill, payroll, and get the ministries and SOEs efficient. There’s no more headroom in the private sector and public sector to keep taking while money is wasted away. That is asinine.”

Mr Turnquest has repeatedly stated that there will be no further VAT increases, nor any income-type taxes, included in the 2019-2020 Budget that he will present to the House of Assembly next week.

Based on his remarks to-date, the Government’s revenue strategy will likely be to plug loopholes and go after existing taxes that are not being properly collected or enforced. The recently-announced door-to-door real property tax assessment on New Providence represents one element of this plan, while shifting all Customs processes to the digital world is another.

Mr Turnquest last week revealed that the 4 percent yacht charter fee is one revenue source being targeted, amid suggestions there could be as much as $50m out there with just 30 percent of what is due being collected. The imposition of VAT, or another levy, on Airbnb-style vacation rentals is another tax-raising mechanism that has been signalled by the Government.

Mr Myers yesterday backed such a strategy, which is likely to be combined with greater compliance, enforcement and administration to ensure the Public Treasury is collecting all revenues due to it.

Suggesting that revenue-sharing of the overflight fees for Bahamian airspace was another potential income source, he also called for the Government to eliminate real property tax discrepancies that have resulted in properties with the same value paying completely different tax bills.

“I still think they should be putting taxes on people that own large blocs of land that are not taxed,” the ORG chief argued. “People renting to Airbnb and not paying property tax on a second or third home, they should be contributing to the running of the country.

“If you own 400-500 acres in the Family Islands, you should be paying property tax on it as you have disposable income. To not tax those people cause them to land bank is not doing anything for GDP or the economy.

“If you cause them to develop it you get something for the economy. At no tax, you disincentivise people from getting off their backsides and putting that land to work. Those people that have large tracts of land or multiple sites all over The Bahamas, there should be some tax.”

Mr Myers also warned against any knee-jerk changes to the tax structure facing the Bahamian business community, or a move to income-type taxes, as these needed careful research and study of the likely economic impact first.

“These things need significant economic research before you start messing with them,” he told Tribune Business. “We keep hearing that now: What about an income tax? Stop saying that around town.

“Let’s not talk about that until someone does some research on what it looks like, and we have conversations with investors, the Bahamian private sector, citizens, permanent residents and second homeowners. We have to understand all these things and make sure we do not cut off our nose to spite our face.”

Mr Myers also expressed hope that the Budget will include measures to reduce the cost, and enhance the ease, of doing business in The Bahamas but said he was unsure about the Government’s “capacity” to achieve this.