0

Alicia Wallace: Why Vat Rise Hits Hardest For The People Who Can Least Afford It

By ALICIA WALLACE

Bahamians tuned in to the Budget Communication in Parliament last Wednesday with great interest. After laying out a number of supposed benefits to the Bahamian people, Minister of Finance Peter Turnquest showed the price tag. The FNM administration intends to increase Value Added Tax (VAT) by 60 percent, taking it up from 7.5 percent to 12 percent on July 1. It expects this tax hike to increase revenue by $400m in the next fiscal year.

In a press conference, Turnquest suggested this is the best way to pay off arrears left by the former administration of approximately $360m. He insisted the government is doing the right thing by being honest with the Bahamian people as opposed to presenting a misleading budget and delaying pay day.

Under-budget or increase taxes? These are clearly not the only options. This administration is depending on us to play into the stereotype of “lazy” and “D-average” so it can do as it sees fit with little to no pushback.

Even if VAT is the best option for The Bahamas, it would have been more transparent — a term the FNM enjoyed using before May 2017 — and shown a commitment to more participatory governance to share the details of its financial concerns with the people before this point. It would have been easier to understand this decision if we had been provided with this information before the Budget Communication and had the opportunity to offer ideas. The people sitting in Parliament are, after all, our representatives and not a collective dictatorship.

Flip-flop

Over the past few days, many people have quoted the 2016 version of Dr Hubert Minnis who said: “I don’t believe in increasing taxes, I believe in decreasing taxes and increasing opportunities. Increasing taxes is a lazy way out. When you don’t want to think, you just tax.”

In 2013, Dr Minnis said the PLP should share its economic studies and analyses as well as alternatives it considered with the Bahamian people. Today, the Bahamian people are making the same request. We want to know how this administration came to the conclusion that a 60 percent increase in VAT is best for the country. We also want to see the other options that were under consideration, why they failed, and how the administration arrived at this conclusion. Hearing from the Prime Minister on his change in position would be welcome as well.

VAT and Customs Duty

In the Budget Communication, it was announced Customs exemption would be increased from $300 to $500, twice per year. There is also a reduction in Customs duty on new small cars and excise duty on new electric and hybrid cars under $50,000 in value. Neither of these benefit the poor.

We learned VAT will not be applied to breadbasket items. These include rice, flour, grits, cheese, butter, cooking oil, milk, evaporated milk, soups and mustard. Concerns have been raised about the lack of healthy options on the breadbasket list, and Minister of Health Dr Duane Sands suggested more items, including fresh produce, will be added.

VAT is also being waived from electricity bills below $100 and water bills below $50 impacting 30,000 and 43,000 people respectively — close to the 40,000 reportedly living in poverty. This measure, clearly meant for the poor, still does not bring balance when we are looking at 12 percent VAT on everything else. The 2013 Household and Expenditure Survey showed 12.8 percent of the population in The Bahamas is living in poverty — on less than $5,000 per year.

What is poverty?

We need to understand what it means to be poor. Poverty is not the inability to purchase a particular brand of cellphone. It is not making the decision to attend a community college instead of a well-known university. It is not driving a 2010 Honda Civic. It is not being a college student and living with your parents. It is not a situation you can see your way out of at any given time. It is not a decision or series of decisions you consider prudent or responsible. It is having $5,000 per year and being unable to make decisions that do not fit that budget. Poverty is not a choice and it is not about choices. It is not the result of working less, or working less hard.

Poverty is a systemic issue and a monster we continue to feed with unilateral decisions like VAT increases and discriminatory practices. It is an issue we trivialise and makes jokes about when we hear about VAT going up and declare ourselves “poor” because we may not be able to go to crossfit any more.

Not being able to benefit from the elimination of duty on airplanes does not make you poor and jokes about it are lazy and D-average. Dine on the Line — an awareness campaign in which participants spend $4 on food every day — was last week, and maybe we should we have an exercise of doing everything else on the line for a month. Can you live on $11.64 per day? And no, 12 percent VAT is not likely to force many of us below the poverty line, but think about what it means for those already living in poverty. The reality of the over-burdened Bahamians living in poverty is not a punchline and we do not need that kind of comic relief.

Equal, but not fair

The general conversation about the increase in VAT has revealed what we do and do not understand. It has been made clear, repeatedly, that the privilege some of us enjoy helps us to ignore or be completely unaware of the challenges other people face.

VAT is paid by all, but our experiences are not the same. We are not all in the same situation. VAT is a regressive — as opposed to progressive — tax. It is not higher for people with higher income. VAT is flat, so everyone pays the same rate, but it is not equitable. Middle class and poor people pay a larger proportion of their income in taxes through VAT. Though everyone is paying the same tax on individual items, the effect is different.

There is a popular pair of images used to show the difference between equality and equity. There are three people of different heights trying to watch a game over a fence and there are three boxes they can stand on. In the first image, they each get one box. The shortest person still cannot see the game at all while the other two can. That is equality. In the second image, the tallest person does not get a box, and the shortest person gets two. In this image, they are all able to see and enjoy the game. That is equity.

What if taxation was equitable? What if the government found a way to alleviate the burden that has always been on the poor? What if we, as citizens, cared enough to look for alternatives to the quick fixes our representatives find and implement?

What we need

Fiscal responsibility is critical. We know the government needs money to provide services, from education and health care to road repairs and waste disposal. None of this is free and the government needs a source of revenue. It does not, however, need to disproportionately burden the poor to meet its needs. It does not need to keep financial records and decisions out of our reach.

This administration needs to recognise that while the people did not necessarily vote FNM as much as it voted anti-PLP, there were expectations. Expectations of accountability. Transparency. An understanding that the Bahamian people are not interested in being blissfully unaware of the government action and inaction. We expect to be involved and to have the opportunity to contribute, critique, co-create the systems and programmes we need and demand.

We need to have a conversation about wages. Over the past few days, many have talked about the need to increase the minimum wage, but that comes with its own effects. Even so, it is time to talk about a living wage so every working person can afford adequate food, shelter and other physiological needs.

VAT is in the spotlight. No one wants to hear about taxes, much less increased taxes. We can agree on taxes, bills and poverty. We do not want them, but they exist. Let’s be honest with ourselves and each other, let’s use our power as a people to call on our representatives to stand with us, regardless of class or colour.

Comments

Use the comment form below to begin a discussion about this content.

Sign in to comment