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‘Ad Hoc’ Taxation Stifling Economy

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to stop the “ad hoc” imposition of new taxes, amid warnings that its National Health Insurance (NHI) financing plans will cause “a further contraction” of the private sector.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, told Tribune Business that the absence of a seamless tax policy, and the introduction of new and increased levies every year, was undermining business confidence and certainty.

And he warned that any new taxation in the 2016-2017 Budget to finance NHI’s second phase, as indicated by Prime Minister Perry Christie, was likely to be “met with a lot of caution” by businesses and Bahamians generally.

Disclosing just how fragile the economy and business community is, Mr Sumner told Tribune Business he had spoken to “at least two businesses” yesterday morning who were having to desperately negotiate overdraft facilities with the banks because they had “run out of cash flow”.

While the Government’s plans to eventually finance NHI via increased taxation came as “no surprise”, the Chamber chief executive said it had to consider such a move carefully given that many believed they were already “over-taxed”.

Warning that the Bahamas’ competitiveness could be further eroded by another tax so soon after Value-Added Tax (VAT) implementation, Mr Sumner said: “This consideration to levy any additional tax on the Bahamian people, and the business community of this country, any time soon, is going to be met with a lot of caution from businesses and citizens at large.”

He added that the Bahamas was still “slowly getting accustomed” to VAT, while employers in the hospitality and restaurant sectors were also having to absorb increased “payroll liabilities” via the recent minimum wage increase to $210 per week.

Mr Sumner added that the National Tripartite Council, featuring representatives from the private sector, trade unions and the Government, were now grappling with the latter’s proposals to increase the severance pay limits beyond what is contained in the Employment Act - adding another potential burden for employers.

“We’ve got to be careful how this is implemented,” Mr Sumner told Tribune Business of NHI.

“Given that we all see the country is headed to a state where it can become over-taxed, and considering that the business community, through the services it provides, are the ones generating the revenues for the Government and the private citizens of the country, the Government in considering any new tax structure has to consult fully with the private sector before it introduces NHI.”

Tribune Business sources in the medical community have previously disclosed that the Government’s NHI consultants, Sanigest Internacional, were proposing a 3 per cent payroll tax - split 50/50 between employer and employee - to finance the scheme’s second stage.

But the seeming lack of transparency regarding the Government’s NHI financing plans is raising concerns that the scheme has been designed as a ‘bait and switch’, with the initial stage funded entirely from the Consolidated Fund just to ensure it can be implemented. The ‘no tax’ initial phase thus becomes a way of softening up the private sector for the ‘sucker punch’ to come.

Kevin Seymour, the Grand Bahama Chamber of Commerce’s president, previously said his members wanted to know the Government’s medium and long-term NHI taxation and financing plans, given that their businesses planned and budgeted at least 12-18 months in advance.

Yet Mr Christie admitted on Wednesday that the Government still did not have a final figure for how much NHI is going to cost - a statement likely to be met with exasperation and amusement in equal measure.

Mr Sumner, meanwhile, said the frequent changes to Government tax policy were undermining business continuity and certainty.

“There must be fuller discussion of wider fiscal reform to our economy,” he told Tribune Business. “We cannot be seen to be ad-hoc adding on new taxes to businesses and persons without taking into account wider considerations.

“To keep on adding on costs is going to put us in more dire straits in the area of competitiveness.”

Mr Sumner pointed to the latest fall in the Bahamas’ ‘ease of doing business’ ranking, where it slipped out of the world’s top 100 nations, as further evidence of the challenges buffeting the Bahamian economy.

While all agreed that ‘Universal Health Coverage’ was a noble concept, Mr Sumner said the private sector lacked the necessary information on NHI and remained concerned about its financing mechanism.

The business community still did not know for sure “what it’s going to be taxed on, and how it’s going to work”.

And Mr Sumner expressed fears that many private health insurers would become “extinct quickly” or diminished because they were having to compete directly with the Government’s public insurer under NHI.

“If the private sector is going to fund this through a payroll tax or some form of corporate tax, we have to prepare ourselves to deal with it,” he told Tribune Business.

“From the seat I sit in at the Chamber, I can tell you many businesses in the country are not making the level of revenue, not making the level of profits, that they need.

“I spoke to at least two businesses today that are having to negotiate with the banks for overdraft facilities, as they’ve run out of cash flow,” he added.

“While we’d all like to see universal health coverage implemented, if this process further taxes the private sector we will see a further contraction of businesses in this country.”

Such an outcome would result in reduced tax revenues for the Government, and Mr Sumner called for greater dialogue over NHI moving forward.

This, he added, was needed to ensure that Mr Christie’s pledge that NHI will not become a burden on the economy comes to fruition.

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