By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Democratic National Alliance’s (DNA) leader yesterday asserted that “there is no success in Value-Added Tax”, arguing that Bahamians were now “paying” for successive governments’ fiscal mismanagement.
Branville McCartney told Tribune Business that such a “regressive” tax should never have been imposed on Bahamians, who were now suffering for the persistent deficit spending by PLP and FNM administrations that has built-up a $6.2 billion national debt.
While the DNA leader credited the Christie administration for beating its 2014-2015 deficit targets, he said this achievement had to be set against the background of anemic economic growth and high unemployment.
While the Government has allocated $20 million in the 2015-2016 Budget to tackle the 31 per cent youth unemployment rate, Mr McCartney said he could “almost guarantee” that the public will not know how that money is spent.
He then suggested the Government’s plan, which involves encouraging employers to take on young workers via a “wage subsidy”, was merely a strategy to mask the real extent of youth unemployment by ensuring these persons could be included in the employed labour force when the next Department of Statistics survey occurred.
And Mr McCartney backed the concerns expressed by Moody’s, the international credit rating agency, over the Bahamas’ muted economic growth rate, arguing that the Christie administration had missed every growth forecast since it took office.
The 2015-2016 Budget emphasised the relatively successful VAT implementation, which yielded $110 million in gross revenues during its first three months, and is likely to exceed the $150 million net target (stripping out the $60 million in foregone Customs duties and hotel occupancy taxes) for the six months to-end June.
But Mr McCartney yesterday indicated he was among those distinctly unimpressed by such an ‘achievement’, given that the $110 million represents monies extracted from the private sector - consumers and businesses - and the wider economy.
“There is no success in VAT,” he told Tribune Business bluntly. “VAT came about because of the poor fiscal policies of the PLP and the FNM.
“We’re paying for their fiscal mistakes. This regressive tax should not be put on the backs of Bahamians. We’re paying for their fiscal mistakes and mismanagement.”
VAT is viewed as regressive because it imposes a disproportionate burden on lower and middle income Bahamians, who pay a higher proportion of their earnings in taxes than their wealthier counterparts.
The Government has moved to counter the burden on poorer Bahamians via allocating more monies to social security programmes, and it would likely argue that its revenues - as a percentage of GDP - were too low, especially given the services demanded by the public.
Still, Mr McCartney yesterday reiterated his and the DNA’s call for the enactment of Fiscal Rules and Fiscal Responsibility-type legislation, plus a Freedom of Information Act, to restrain government spending and provide greater transparency/accountability in this nation’s fiscal affairs.
“You don’t know where the money is going that you pay in VAT,” the DNA leader said. “Where else is that money going?”
He suggested that Bahamians will not see a Freedom of Information Act “come to fruition under this government”, adding: “This government is not known for its transparency and accountability.”
Mr McCartney, though, did give the Christie administration grudging praise for beating its projected 2014-2015 GFS deficit which, stripping out debt principal repayments, is now likely to come in at $198 million or 2.3 per cent of GDP, as opposed to the forecast $286 million or 3.2 per cent of GDP.
“That is good and I give that to them,” Mr McCartney told Tribune Business. “You cannot argue with that.”
However, he quickly returned to the attack, saying the better-than-expected fiscal performance had to be put in the context of high unemployment and low economic growth.
With the unemployment rate for 16 to 25 year-olds among the highest in the Caribbean, Mr McCartney said the Budget initiatives designed to tackle the problems “haven’t worked before”.
That is likely a reference to the programmes employed by the previous Ingraham administration, one of which bears a striking resemblance to the ‘wage subsidy’ plan now proposed by its successor.
Mr Christie said during his Budget address: “We will also initiate an apprenticeship programme in partnership with the private sector under which employers will be incentivised, through a wage subsidy, to employ young persons in positions that will afford them the opportunity to acquire vital, basic job skills.
“The programme will strive to enhance the employability of participating youth through practical on-the-job training and learning by doing.”
“I can almost guarantee you, with the lack of accountability and transparency, that that $20 million will be spent without us knowing where that money is going,” Mr McCartney said of the funds allocated to the youth unemployment initiative.
“The Government is allocating $20 million for job creation, but you are not building industries. How are you going to build jobs?
“Show me the industries, show me how the economy is growing in order for there to be jobs for me to give. It’s nothing new in the sun in terms of this being done. This will be used to give people jobs whether they have a job or not.”
Tribune Business revealed on Monday how Moody’s has cut the Bahamas’ projected economic growth for 2015 from 2 per cent to 1.7 per cent, due to the delayed Baha Mar opening.
Mr McCartney said that since taking office in May 2012, none of the Christie administration’s growth projections for the Bahamian economy had materialised.
“They told the Bahamian people everything they wanted to hear,” he added, “and have not lived up to their promises on one issue.”
Comments
TheMadHatter 8 years, 10 months ago
Don't worry - the Bahamian people will put the FNM back in power next election because they LOVED them so much last time. There are only two choices (fnm and plp) in the mind of a Bahamian which is a mind that has built-in limitations planted there by the school system.
TheMadHatter
BahamaPundit 8 years, 10 months ago
@TheMadHatter I hate the PLP, but I hate the FNM more. At least the PLP never pretended to be righteous and a sunlight party. I'd like the DNA to win next round, but if it seems FNM have a chance in hell of winning, I'll vote PLP. On Christie's worst day he cannot infuriate me as much as Ingraham. The PLP gave us carnival! In my books, that alone is enough to merit re-ellection.
B_I_D___ 8 years, 10 months ago
And there in lies the problem..."The PLP gave us carnival! In my books, that alone is enough to merit re-ellection."
Bahamians are damn fools and clueless...
ohdrap4 8 years, 10 months ago
They did not give it to you. they sold it to you. they gave it to a few committee memebers and political allies.
newcitizen 8 years, 10 months ago
This is why we can't have nice things
John 8 years, 10 months ago
Many people do not realize that VAT is supposed tio replace customs duties as the governments major source of revenue. The VAT and customs are only supposed to run concurrently during the transitional phase and once government decides that the VAT tax is workable, then determines the rate it needs to charge then customs diuties and stamp tax is supposed to be eliminated completely. Business licence fees are supposed to be eliminated or reduced. The advantage of vat is unlike customs duties that are collected at the ports of entry, VAT attaches itself to all economic activity in a country. As economic activity increases, so does revenue from VAT, and when an economy becomes too depressed, government has the option of increasing the VAT rate to get its revenue. Apparently the government seems to want to fall in love with this dual system of taxation and the additional revenue it is producing. This will not be a good thing in the long term as it will cause a lot of economic activity to dry up, especially if there is no real growth in the economy. Then the cost of carrying the dual tax system will weigh heavily on the revenues collected.
Emac 8 years, 10 months ago
@BahamaPundit-Are you kidding me??????
asiseeit 8 years, 10 months ago
The PLP facilitated carnival, EVERY Bahamian went farther in DEBT to pay for carnival. Your grandchildren will be paying for that party. It is astounding how shallow Bahamians are and how little they understand the implications of debt. Carnival is like the guy that has an 1990 Honda and goes and spends 4 grand on rims for the car. Rims look great but the car is still a piece of crap!
asiseeit 8 years, 10 months ago
This country spending can be equated like the guy in the ghetto who lives in a shack that is about to fall down. His wife is sick and the kids need clothes. He goes to the Bank and say "i need a lone" The banker says OK will X amount do. The guy is very happy he has money. First he goes to his sweet heart and gives her some, then his boys get some, he buys a big car, and a satilite dish. Once he get's home he shows his sick wife what he has and she asks is there is any money to go to the grocery store or the doctor. The man scratches his head and thinks about it knowing there is no money left. "I will be right back" he says, jumping in his car. " gone to the bank, off he goes but never makes it to the bank because he runs out of gas. MORAL OF THE STORY, DO NOT SQUANDER YOUR MONEY STUPID!
johnq 8 years, 10 months ago
Bran is spot on with his criticisms here. We are all negatively affected by VAT. Whether by the growing crime rate, disintegrating social fabric, low economic growth or high unemployment we are all affected. I am in doubt that the current government can even connect the dots to see what is going on in the country is a result of their policies. But criticizing them alone is not enough. Like the PLP government that implemented all of this, Bran/FNM are not providing any real alternatives. Transparency and responsibility measures should be the basic mode of operating any successful government, but we don't even have that! Transparency and responsibility, while being ultra important do not ensure progress. As far as I have seen, not one of our politicians have offered any legitimate measures to heal, stabilize and grow this nation. If y'all believe in prayer, I hope ya prayin'.
birdiestrachan 8 years, 10 months ago
Bran should tell the Bahamian people that if God forbids and he becomes the Government . there will be no more VAT. it will never happen. Never mind what Bran says it is all fluff.
duppyVAT 8 years, 10 months ago
VAT is not a panacea .............. if the government gets rid of the 30% pork in the budget and collect the present regime of non-VAT taxes OR scrap our tax system and introduce a 3 tier income tax system on all Bahamians earning more than $25,000 per annum, we will be fine.
But with the present inefficiency/political cronyism that we experience now, VAT is a burden to the country.
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