By CARA BETHEL
cbrennen@tribunemedia.net
POVERTY levels in the Bahamas could rise with Value Added Tax without safety net programmes in place, a new study by the Inter-American Development Bank has revealed.
The report, released yesterday, examines the economic and social impact of VAT on the Bahamas. It was released by the Ministry of Finance.
IDB officials concluded that the introduction of VAT translates into lower disposable income in most scenarios of their economic model for the Bahamas.
“As a result, poverty levels tend to be higher in the absence of social security net programmes,” the report stated.
“The expectation that the government would need to complement the introduction of the VAT with a social safety net programme is a clear massage that transpires from the simulation exercises.”
The IDB based its findings on 16 simulation exercises, some of which indicated that the transfer of resources represented a burden for the consumer, “especially poorer segments of the population.”
As a result, the IDB stressed that the government would need to ensure that the appropriate safety nets are in place to complement VAT.
In the long term, VAT could result in lower unemployment numbers due to higher growth rates in all economic sectors and a decrease in debt, the IDB said.
And lower public debt, in turn, could lead to lower interest payments and additional surpluses that contribute to lower the stock of debt even more.
Also, according to the IDB report, Bahamians could see beneficial effects on the cost of living as a result of the tax reform package, in particular after a few years cost of living is expected to be lower in the absence of fiscal reforms. This is because the government through its deficit spending is a significant contributor to price increases and such pressures are forecasted to subside.
However all these findings are based on the assumption that all additional revenue based on the introduction of VAT is assigned to reducing public debt, the IDB said.
The Ministry of Finance has interpreted the IDB report as predicting no significant short-term negative outcomes from the implementation of VAT.
”Domestic economic activity would remain essentially unchanged from its present uptrend. However, the pace of economic activity is forecasted to strengthen steadily thereafter in comparison to the status quo,” the Ministry said in a press release.
The IDB will host a one day technical seminar for economists and researchers from the Ministry of Finance, the Department of Statistics, the Central Bank, the Bahamas Chamber of Commerce and Employers Confederation. Afterwards there will be a handover of the model to a Bahamian technical group so that additional economic stimulations can be carried out if desired. More in depth training on the model is planned for January 2014.
A copy of the report is available on the government’s website: www.bahamas.gov.bs/VAT.
See Monday’s Tribune a more in-depth analysis of the IDB report.
Comments
watcher 10 years, 4 months ago
Quote...."However all these findings are based on the assumption that all additional revenue based on the introduction of VAT is assigned to reducing public debt, the IDB said"
But we all know this will not be the case. The government of the day will just use any increase in revenues to hire more cronies, hand out bigger bribes, and increase the lifetime pensions of parliamentarians, ex-Prime Ministers and their widows
The_Oracle 10 years, 4 months ago
Yep, and it can be avoided to a degree by cutting back on unnecessary expenditure, which will lower Govt Revenue, and will happen regardless. It is very very doubtful that Govt revenue will increase at all, which will create a greater pressure and gap. I've never seem a sinking boat stopped from sinking by charging passengers on board more for the ticket.
B_I_D___ 10 years, 4 months ago
The PM even came flat out and said that...'we have expenses and need money to build our future...'...or something very close to that...they have no intentions of using any money for debt...it's all future expenditures...
Honestman 10 years, 4 months ago
Disposable income is in short supply. Consumers are being cautious in their spending. Now add a 15% tax on spending. What does anyone with half a brain think will happen? Correct, consumers will spend even less. Tax revenue will not increase and the economy will plunge into recession. Every sensible Bahamian knows that the solution is for government to cut back on expenditure, eliminate the over employment in the public sector, clamp down on non payment of Property tax. Another area to consider would be a low level income tax.
The public is rightly concerned about corruption within government (past and present) and there is a real worry that any extra tax revenue will not be used for the intended purpose of bringing down the national debt. There has been little or no accounting for the $1b of public borrowing that has taken place since this administration came to office. That ought to outrage all right thinking Bahamians. A freedom of information act is long overdue but I doubt it will happen on the PLP's watch.
TalRussell 10 years, 4 months ago
Let's talk more about the Queen of Social and Welfare Programs. Both the Gold and Red Shirts Governments have spent more on "Corporate Welfare" than on all people Social and Welfare programs combined. When you take land from Bahamalander's for the ownership of foreigners that is Corporate Welfare. When you use $11 million from National Insurance Premiums to write a check to some foreigner controlled Beer Making Corporation that is Corporate Welfare. When you designate an entire Island with the Exclusive Collection of Customs Taxes over to a Corporation(s) that smirks of Corporate Welfare. When you allow corporations to owe BEC millions of dollars for electricity that is definitely Corporate Welfare. When you sign over Crown Lands and it ends up being used as Shanty Towns that is Corporate Welfare. When you turnover 51% ownership and services exclusivity of BEC to foreigners that is the Majesty of all Corporate Welfare Programs.
concernedcitizen 10 years, 4 months ago
WHEN YOU GROSSELY OVERSTAFF THE PUBLIC CORPORATIONS FOR VOTES AND HAVE TO KEEP BORROWING AND TAXING TO KEEP THE COUNTRY RUNNING THAT IS BASICALLY STEALING THE FUTURE FROM EVERY MAN WOMEN AND CHILD IN THE COUNTRY ,,COME ON BAHAMASAIR HAS A 100 EMPLOYEES PER PLANE ,THE INDUSTRY AVERAGE IS 23 .NOW THE MINISTRY OF TOURISM HAS CANCELLED CONTRACTS B/C OF NO MONEY W/ THE PROFESSINAL AD AGENGIES SO WE CAN LET POLITICAL CRONIES DOT IT .ON THE FAMILY ISLAND I LIVE THERE ARE 20 EMPLYEES IN THE MOT THAT DON,T DO SH##T ,THERES ABOUT 8 CUSTOMS OFFICERS AND I NEVER SEEN MORE TEN 2 CUSTOMERS IN THERE AT A TIME ..WE HAVE BEEN BORROWING SINCE THE LATE SEVENTIES TO FEED THE PUBLIC SERVICE BEAST ..i,m FIFTY AND IN MY LIFE OUR DOLLAR WILL BE DEVALUED //1 IN 4 OF THE WORK FORCE CAN NOT BE ON THE PUBLIC TIT AND A COUNTRY SURVIVE ,,ITS NOT POLITICS ,ITS MATH
John 10 years, 4 months ago
and of course do not forget the birth rate and the illegitimate children (lmao)
concernedcitizen 10 years, 4 months ago
Poor john can,t make a buck selling phone cards since the yolk of the most expensive minute rate in the free world was taking off the publics back ,,,75T% illegitimacy rate ,,i perfer the term absentee father as no child is illegitimate
bismark 10 years, 4 months ago
Concernedcitizen you are absolutely correct,Bahamasair was full of political cronies from inception,as well as B.T.C ,they were filled to the capacity with a bunch of dummies just collecting a salary,yes that's what we are paying for,i personally know what you are talking about,i am privileged to work with some of those same lousy good for nothing suckers who came in the door with an M.P letter and nothing else,this has been prevalent in our society for too long and when you talk about the dollar being devalued,i don't know how long we could keep that parity with the U.S dollar,we are barely surviving now,when you have a defecit of 500 million dollars what happens next year?our idiotic politicians have to be the laziest in the region,all they do sit on their asses,invest in this tourism product,we have been failing at that for years,we cant fill the hotels we have now,the jackasses sign to build another,i hope they aren't betting on the Chinese to spend they are some of the cheapest people in the world they love money,they don't spend it,we are in big trouble.
John 10 years, 4 months ago
We produce Kalik in the Bahamas but you can buy it cheaper in Florida or even the UK than in the Bahamas. Some people dream about having A/C if only in their bedrooms. Only to find that when they get it they cannot afford to pay for electricity to run it.Who is benefitting from the doubling of taxes on cigarette and tobbacco products? Who owns the new cigarette factory that is being opened in the Bahamas? Do you know the raw salt from Inagua is better for cooking than the refined one? Why are things so more grossly expensive in the Bahamas? Simple excessive borrowing and gross inefficiencies in government. Imagine what could happen if the electricity rate could be cut down by fifty percent. No don't imagine that no more. Have you noticed how crowded the streets are since gaseoline prices dropped? East Bay by the bridge and in Palmdale are like pre-Ingraham/FNM/road rennovations and don't even mention Carmichael which definitely needs to be expanded to two lanes going in each direction...
john33xyz 10 years, 4 months ago
I just hope that the VAT has very few exemptions. AND it especially NEEDS to apply to ALL bread-basket items - and allow for their price to rise that much above price-control levels.
There are WAY too many breaks for the poor - and that is why we have more of them. A new food distribution group has formed in Nassau which will provide soup kitchens for the poor - so they do not starve. I agree with that. We are civilized and so we should not have people starving on the streets.
But the price of baby food, diapers, bread, rice, grits etc. NEEDS TO GO UP. Too many "poor people" are sending their money out of the country by way of the dozens of little money-shops that have cropped up all over the place. That money needs to stay in the Bahamas. If they have to pay VAT - then at leave 15% will stay. If they are allowed to not pay because "they are poor" then they will keep sending the money away and the country will suffer.
The so-called "poor Bahamian" seems to find money every few months to hop on a plane to Miami and spend spend spend. Again, money going out of the country.
Straight_Talk_Bahamas 10 years, 4 months ago
you kid...
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