The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known businessman yesterday called for a ‘fiscal rule’ where the Government’s debt-to-GDP ratio cannot exceed 65 per cent, arguing that increased revenues had to be accompanied by spending discipline.

Dionisio D’Aguilar, Superwash’s president, told Tribune Business that the fiscal reform discussions had to broaden beyond Value-Added Tax (VAT) and just increasing government revenues.

“The discussion needs to focus on why the debt got so high, and raising taxes must go hand-in-hand with responsible spending,” he told Tribune Business. “There must be safeguards put in place to ensure politicians don’t spend us back into this problem again.”

Describing Bahamian politicians as “too scared” to implement such measures to restrain their spending, Mr D’Aguilar said: “They have 100 reasons why they can’t do that.

“It’s all baloney. Put them in. In my opinion, the debt-to-GDP should be limited to 65 per cent, and they can’t go over that. The Central Bank governor must be empowered not to raise debt if they go over that.”

Several observers have suggested such fiscal rules and spending limits would handicap the Government’s ability to respond to crises, such as the aftermath of a major hurricane, and should only be explored more fully when the present fiscal crisis has passed.

But Mr D’Aguilar, responding to the politicians, added: “We hear them that they can’t do that. Of course you can. They don’t want to do it.

“When an election comes along they want to spend like crazy, but they have to man up, swallow this pill and say we’ll do it.”

Pointing out that many US states have a ‘balanced Budget’ amendment in their constitutions, Mr D’Aguilar said of their Bahamian counterparts: “None of them want to do it, they don’t want to abide by it, so the people should make them.

“We’ve got to put in place a system of checks and balances. It’s more politically expedient to borrow than raise taxes. It’s a way of getting around coming to the people. That’s why we are where we are.”

On the VAT front, Mr D’Aguilar said the Coalition for Responsible Taxation and private sector were neither for nor against the Government’s main tax reform proposal - they simply did not know whether it was “the right tax that will not have a detrimental effect on this economy”.

“The Government have got drunk on VAT Kool Aid and are saying this is the tax for the Bahamas, because 153 out of 187 nations or whatever have done it,” he told Tribune Business.

“Our position is: That may be true, but let’s get some evidence to prove that. They’re pushing VAT, pushing VAT, pushing VAT and we’re like: Prove it.”

While acknowledging the concerns of former minister of state for finance, James Smith, over the risks the Bahamas ran in delaying fiscal reform, Mr D’Aguilar added: “That doesn’t mean rush and make a wrong decision.”

Pointing out that the Government would not be “where we are” if it had conducted studies conclusively proving VAT was the best option, he said: “This is such a major decision, and they don’t have the evidence to support all the effects this will have on the economy.

“It would be responsible to delay it for one, two, three months so we can get it right.”