The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Government must be realistic over how much money it will have to commit to social assistance programme designed to mitigate Value-Added Tax’s (VAT) impact on lower income Bahamians, a Tax Coalition co-chair describing this issue as a “huge balancing act”.

Gowon Bowe, who is also a PricewaterhouseCoopers (PwC) accountant and partner, said the Government had previously indicated it would boost social assistance programmes by almost $30 million when the VAT rate was proposed at 15 per cent.

He added that the recent Household Expenditure Survey should give a clear indication of the number of households likely to suffer greater hardships because of the VAT-induced increase in the cost of living.

As of last year, data collected from 2,123 randomly selected homes suggested that the number of Bahamians living in poverty had increased to 12.5 per cent, a rise attributed to the 2008 global financial crisis.

Officials said the survey was conducted to establish a new poverty line in the Bahamas, which is now set at $11.64 per day, per person, or about $4,247 per year. The poverty line represents the minimum amount of money required to afford a low-cost diet plus some essential non-food needs.

“It’s best to have empirical information to give you an appreciation of what the new poverty line is going to be, and how many persons are above and below the line,” Mr Bowe told Tribune Business.

“Is the $30 million realistic, or are we going to find that once VAT is introduced we are going to have to find a significant amount more?”

Mr Bowe acknowledged that the Government was getting set to introduce a programme that would ensure assistance was given to the right people.

“I would recommend that government have a clear indication as to the level of poverty facing the country, so they have a realistic understanding of how much is going to be required to mitigate against the impact of VAT and the cost of living,” he said.

“That is important. I would give them credit for doing that, but they have to make sure in earnest, as they already have made certain presumptions in this full year Budget for an increase of the social assistance budget. If we find that that is going to be inadequate then that will contribute to the deficit.”

Mr Bowe added: “It is a huge balancing act, but the reality is if we continue to have fiscal deficits at the level we do, then there will be greater impact on the margins because you are going to have the inability of government to provide the social programmes.

“It’s a bit of a catch-22. While one may say implementing VAT will increase the number of persons living below the poverty line, in the absence of raising additional revenue the Government will have an inability to help those that are on the margins.

“From that perspective, we will also have others joining it. Your main objective is to increase revenue with the least amount of impact to those on the margins. Your main action should not be to give a man a fish, but to teach him how to fish so that he can be on his own.”