The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The deputy prime minister yesterday challenged his opposition counterpart to explain how he would make-up “the tremendous revenue loss” if services were made VAT-free in the Dorian-hit islands.

Confirming that the government has no plans to remove VAT from services in Abaco and Grand Bahama’s Economic Recovery Zones, K Peter Turnquest said it was easy for Chester Cooper to call for this as he was not responsible for ensuring the government can pay its bills.

“Can he explain to me how to make up the tremendous loss in revenue for the government as a result of the storm, considering that services have to continue?” Mr Turnquest asked. “Then I would be more than happy to do it. Anybody can say anything, but when it gets to the point where you have to pay the bills then things change.”

Asked whether the government may make services in the zones VAT-free in future, he replied: “I can’t speak to that at the moment. But I can only say that at the moment we don’t have any such plans. But that does not mean that things can’t change in the future. But, at the moment, the order is clear and that’s what we follow.”

Mr Turnquest previously said eliminating VAT on services in the Dorian-hit islands would be difficult to police and too costly, while granting tax breaks to companies that do not need them.

Explaining the government’s rationale for maintaining VAT on services in its newly-established Economic Recovery Zones, he told Tribune Business last week that “we’d love to do more” but there is still a public sector with multi-billion funding needs.

Singling out construction labour, in particular, as an area where the government would have liked to provide concessions, Mr Turnquest said it needed to “be reasonable” because the Public Treasury stands to lose “significant” revenues through the tax breaks already granted.

Confirming that the Minnis administration is trying to achieve a delicate balance between facilitating post-Dorian recovery and The Bahamas’ fiscal health, he added that the government was hoping to beat its revised $677.5m deficit target and ensure public spending “doesn’t get out of control” such that it stores up even greater long-term problems for the country.

“One, because it is difficult to control,” Mr Turnquest told Tribune Business of the government’s thinking in declining to provide the Bahamian economy’s dominant services sector with a VAT break.

“Second, if we do that, we would be giving wide-ranging concessions to businesses that don’t really need it; hotels, Freeport’s industrial sector, and all those various entities that provide services. Remember, the concessions are intended to help with the reconstruction effort. We are giving concessions on items people have to replace.

“In addition, this is a significant cost to the government, and we still have a government to run which has to be funded,” the deputy prime minister continued. ‘We’ve done the best we can. We’d love to do more, particularly as it relates to construction labour.

“We’d love to do more, but we have to be reasonable. It is significant, that’s all I’m prepared to say at the moment. It’s very significant.”