By NEIL HARTNELL
Tribune Business Editor
A Tax Coalition co-chair wants the Bahamas to legislate a Fiscal Responsibilities Act “within the next 18 months” and before the next general election, suggesting that implementation difficulties were being exaggerated.
Gowon Bowe said the necessary institutional support for such an Act could be assembled rapidly if the Government was committed to transparent reform, adding that “the key” was to implement real-time financial reporting systems that accurately measured all its liabilities.
Shrugging off suggestions made to this newspaper by some observers that the Bahamas lacked the institutions and capacity to properly adhere to a Fiscal Responsibilities Act, Mr Bowe replied: “If we’re very candid, we’re not institutionally ready for VAT, either.”
“In my mind, I would like to see it within the next 18 months,” he told Tribune Business of a Fiscal Responsibilities Act. “I’d like to see it before the next general election is called.
“I’d like to see it become a national issue, not a political issue. If there are challenges to getting it up and running, lay it out before us, so businesses and the public can see them.
“If we don’t know the hurdles, we can’t clear them. It has to be very clear why you think it’s so difficult. A number of times it’s not so difficult, because people are willing and accommodating.”
A Fiscal Responsibilities Act, if enshrined in statute, would act as a break on excessive government spending by committing each administration to hitting a series of fiscal targets that could not be altered without first obtaining Parliamentary approval.
This would also boost transparency when it comes to management of the Bahamas’ public finances, and increase accountability by legally mandating that the Government act responsibly in its stewardship of the people’s money.
A Fiscal Responsibilities Act has been a key demand by the Coalition for Responsible Taxation, which has described this as “non-negotiable”.
The Government, though appears to take a different view, with Michael Halkitis, minister of state for finance, telling this newspaper it had no plans to introduce such legislation as part of its Value-Added Tax (VAT) and wider fiscal reforms.
And he pointed out that New Zealand only passed a Fiscal Responsibilities Act some eight years after it introduced its VAT. Mr Halkitis was non-committal as to whether the Bahamas, too, might put this on the statute books in the medium-long term.
But Mr Bowe told Tribune Business that it was merely a question of priorities, adding that “a lot of what is required” in terms of human resources is already in place within the Government “if we’re serious about a Fiscal Responsibilities Act”.
The major reform needed now, the Tax Coalition co-chair added, was for the Government to move from a cash-based to accrual accounting method, which would capture all its liabilities and help to comply with International Financial Reporting Standards (IFRS).
This, the PricewaterhouseCoopers (PwC) accountant and partner said, was vital to measuring the Government’s financial performance and whether it was hitting the targets set by the Fiscal Responsibilities Act.
The absence of IFRS-compliant financial reporting systems, and production of timely data, had made it difficult to “hold accountable” previous administrations, with their successors constantly blaming them for unexpected spending commitments.
“What’s important is a system to capture data to measure the targets being set,” Mr Bowe told Tribune Business.
“The institutional capacity to deal with a Fiscal Responsibilities Act can be put in place in a relatively quick timeframe. The key thing is the reporting system.”
Mr Bowe suggested the Government’s current accounting system “allows too much manipulation of how things are reported”, which prevented observers from “diagnosing failure in government performance”.
Prime Minister Perry Christie, in his 2014-2015 Budget address, said the Government would transition from a cash-based to accrual accounting method, prompting Mr Bowe to say: “I hope that’s not an idle promise.
“It’s critical the Government move itself to better reporting. How do you run a business if you do not have the financial information? You can’t. If the Government is running on feeling and sentiment, that’s a recipe for disaster.”
Robert Myers, Mr Bowe’s fellow Tax Coalition co-chair, said that based on Mr Halkitis’s comments, it appeared that the Government needed “more persuasion” over a Fiscal Responsibilities Act’s merits.
While acknowledging that the Minister had “not closed the door completely” to this, Mr Myers said that “it doesn’t show a high degree of responsibility” for the Government to still be employing cash-based accounting or nor committed to “fiscal responsibility”.
“If it takes a year, year-and-a-half to do it, that’s fine, but to not do it is completely irresponsible,” Mr Myers told Tribune Business. “Doing it over 18, 24 months would be a much better answer, and send a good message to the rating agencies and lenders who support the Government’s debt.”
He added that a Fiscal Responsibilities Act would make the Government commit to certain goals, “and that’s what’s lacking - a commitment”.
“We want to put that Act in place so successive governments don’t back track, and they have a rule to follow so we don’t get into these problems,” Mr Myers told Tribune Business.