Talk Of Vat Started Under Plp During Buoyant Economy

THE mess to which Mr Bradley Roberts referred as the reason for the PLP’s introduction of VAT into The Bahamas began in earnest under the PLP’s watch between fiscal 2002/3 and 2006/7. During that period, while the Bahamian economy enjoyed the benefits of global economic buoyancy and government revenue growth, the PLP increased the level of Government debt by 46 per cent, from $1.676 billion to $2,441 billion – an increase of $765 million.

This was a period of continuous annual revenue growth, with cumulative growth for the period of $479, representing an increase of 55 per cent. In the face of this revenue growth and economic buoyancy, the Christie Administration nevertheless proceeded to grow government debt by 46 per cent. This growth of debt in good economic times is the most eloquent argument for the need of tax reform and the rationale for the introduction of VAT at this time. It reflects the fact of a fundamental fiscal imbalance that needs to be addressed. It demonstrates the PLP Chairman’s intellectual dishonesty or his ignorance of the issue that he failed to see this as the reason for VAT and chose to blame a period that suffered the full impact of the greatest economic recession since the Great Depression 80 years ago.

The intellectual dishonesty of comparing fiscal performance during the period devastated by the greatest global recession in eighty tears with that of any other period in recent times is hugely shameful, and that is precisely what the PLP apologists insist on doing in order to rationalise the miserable fiscal performance of the Christie Administration. The FNM have governed The Bahamas for three non-consecutive terms and two of those terms were in ordinary economic times much as the one completed term of Prime Minister Christie.

The PLP apologists are keen to avoid a comparison of the fiscal performance of the governance of these periods. They dread acknowledging that in ordinary economic times the Christie Administration in its one completed term in office added more to the government debt than the Ingraham Administration did in its first two terms of governance in ordinary economic times, when it was not facing the greatest global recession in 80 years.

In point of fact, during the period October, 1992, to June, 2002, under the first two terms of the Ingraham Administrations, the government debt increased by $724 million to $1.676 billion. Under the first Christie Administration, from July, 2002 to June, 2007, the government debt increased by $765 million to $2.441 billion. This is a comparison the PLP apologists never make.

An increase in debt during the period of a severe global recession is not proof of a reason for an increase in taxation unless that global recession is seen as a permanent condition. The level of government debt is not by itself a reason for an increase in taxation unless it may be concluded that in ordinary times that debt will continue to rise. The incontrovertible reason for fiscal reform and for an increase in taxation is the persistence of recurrent fiscal deficits – the gap between current expenditure and government revenue in ordinary times, not extraordinary times. And the example of persistent and excessive fiscal deficits in ordinary times in The Bahamas is best demonstrated by the experience of the PLP Government, especially during the period 2002/3 to 2006/7. And unfortunately that pattern is continuing apace presently.

The growth in government debt between fiscal 2007/8 and 2011/12 was firstly a consequence of the deterioration in government revenue brought on by an historic global recession. Whereas the PLP enjoyed cumulative revenue growth of 55 per cent during the five-year period 2002/3 and 2006/7, during the five-year period 2007/8 to 2011/12 cumulative revenue grew by 6 per cent, and in three of those years revenue actually fell.

To put this in more graphic perspective, when the Christie Administration was increasing government debt by 46 per cent government revenue was growing by an average annual increase of over 10 per cent. On the other hand, during the fiscal period 2007/8 to 2011/12 under the impact of the global recession the average annual revenue increase was 1 per cent. So to reference the period 2007/8 to 2011/12 as the reason why VAT needed to be introduced, while ignoring the more obvious and unjustified recklessness of the previous five years under the Christie Administration is either ignorance or dishonesty.

The second driver of government borrowing during the period 2007/8 to 2011/12 was the universally recognised obligation of governments to take fiscal action to ease the pain and suffering brought on by an unusually harsh global recession. It does not matter whether the PLP apologists recognise the reality of this global recession or whether they understand the consequent need to take action to help those who stood to suffer the most from the fall-out of the recession.

The FNM Government undertook a considered programme of essential capital investment in which it created major capital assets like airports and highway systems that would position The Bahamas to maximise the country’s benefits from the next cycle of economic expansion while at the same time sustaining employment levels to the greatest extent possible in face of the global recession.

The critical distinction between this programme of expenditure undertaken by the FNM and that of the Christie Administration is the unmistakable evidence of capital investment represented by that expenditure which is to be seen all around you, and the levels of employment the FNM sustained in the face of a global recession. It would seem the present administration is finding it impossible to maintain employment levels even in the absence of a global recession.

Today’s article was contributed

by a Tribune reader


bismark 6 years, 7 months ago

Bradley Roberts need to take his greedy backside and go retire.


ohdrap4 6 years, 7 months ago

The PLP will regret VAT. people are already angry with the increase in prices


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