The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Bahamians must get used to “paying for what we get” in terms of government services, a former Central Bank governor suggesting many had enjoyed a ‘free ride’ for too long.

Speaking on the Bahamas’ fiscal woes at a presentation organised by the Nassau Institute think-tank, Julian Francis said the country had reached the point where it needed to look closely at allowing the Government to increase the national debt whenever it wanted.

The former Central Bank governor said there needed to be a level of accountability and transparency in government that countries such as the Bahamas have “not yet grappled with”.

“By borrowing, the Government is deciding either it doesn’t want to tax, or I will tax later,” Mr Francis said. “Its borrowing is nothing more than delayed taxation, for the most part.

“There is, in fact, a certain level of borrowing that a government is entitled to do. When The Government borrows to pay off its recurrent deficit, in other words to pay public salaries and those kinds of things, that is nothing more than deferred taxation. I’m suggesting that in any country a Government should not be permitted to do that.”

Mr Francis added: “What they are doing is postponing the obligation to pay that debt to someone in the future; our children are going to have to pay that.

“What they should be required to do is come to us and say: ‘We would like to spend more money for these purposes; do you agree to pay more taxes?’

“If we say ‘no’, then perhaps those disbursements shouldn’t take place. There is an accountability and transparency issue which countries like the Bahamas have not yet grappled with very well.”

Explaining what he meant, Mr Francis continued: “Look at the United States over the past few years, for example. Every six months President Obama had to go to Congress, and fight and plead for an increase in the debt.

“Obviously it’s a more complicated picture than that, but we are at the point, in my view, where we need to begin to look closely at whether it is appropriate to allow the Government, whenever it wants by simply passing a resolution in Parliament, to increase the debt in ways which could be injurious to the economy in the short-term, and imposes fiscal obligations on future Bahamians on which they have no say. This transparency and accountability is certainly a very important one.”

Mr Francis said the Bahamas must tax itself properly, as for too long Bahamians have embraced the benefits of government services without “paying for what we get”.

While noting that he was not an “advocate” for taxation, Mr Francis credited the Christie administration for taking the “bull by the horns” and examining the country’s taxation system.

He said: “I don’t want to sound like an advocate of taxation, but we have to pay for what we get. This is the problem we have in the Bahamas; we have always actually wanted to have it and not pay for it, meaning the level of Government.

“We want the good roads, schools, hospitals, police and the like, and we forget that all of that costs money and someone has to pay for it.”

The Government is proposing to implement a Value Added Tax (VAT) on July 1, 2014, at a rate of 15 per cent, with the hotel industry subject to a lower 10 per cent rate.