The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Value-Added Tax’s (VAT) success can only be measured by the extent to which it reduces the fiscal deficit, a Bahamian economist saying: “You can’t call VAT a success if you have not reduced your deficit.”    

Rupert Pinder, a former University of the Bahamas lecturer and economist at the Bahamas Telecommunications Company (BTC), while speaking at a Chartered Financial Analyst (CFA) Society forum on Monday night, stressed the need for fiscal reform.

“There has been a lot of emphasis on taxation, but the bigger issue is really fiscal reform, where you address expenditure measures in addition to revenues,” Mr Pinder said.

“We brag about the amount of money we collect in VAT, but you can’t call VAT a success if you have not reduced your deficit. The success comes to the extent that you reduce your deficit.

“VAT was really intended to slow down the rate at which debt was growing,”Mr Pinder added. “Another thing we need to be careful of are these social programmes. They sound good on the surface, but you have to look at how these factors can be a deterrent to growth. You have to focus on growth strategies. You cannot continue to talk about social safety nets.”

The Government is projecting that the GFS fiscal deficit will be eliminated by the 2018-2019 Budget year, but in the meantime, notwithstanding VAT’s implementation, which has brought in close to $1.5 billion in its first two years, the national debt has continued to grow past $7 billion - albeit at a slower pace in recent years.

The Government’s fiscal deficit for the six months to end-December 2016 had more than doubled year-over-year, increasing by 112 per cent to $314.2 million.

Attributing much of this to the fall-out from Hurricane Matthew, the Central Bank said: “The Government’s budgetary operations for the first six months of fiscal year 2016-2017 were dominated by hurricane rebuilding outlays and disruptions in revenue collection, which contributed to an expansion in the deficit to $314.2 million from an estimated $147.9 million in first half of the previous fiscal year.

“Total expenditure rose by $121.9 million (11.7 per cent) to $1.166 billion, while revenue contracted by $44.4 million (5 per cent) to $851.8 million.”