Minister of Finance Peter Turnquest delivers the Budget Communication. Photo: Terrel W Carey/Tribune staff
By DENISE MAYCOCK
Tribune Freeport Reporter
dmaycock@tribunemedia.net
THE government has collected some $2.5bn in value added tax revenue since 2015, according to Finance Minister Peter Turnquest who accused the former Christie administration of mismanaging the money.
Mr Turnquest, who is also deputy prime minister, was in Grand Bahama on Saturday to meet with residents at a town hall about his recent budget communication and plans to increase the VAT rate from 7.5 percent to 12 percent.
Financial Secretary Marlon Johnson also attended the event at the Calvary Temple Church, where tempers of concerned residents sometimes flared.
Mr Turnquest told the crowd the Minnis administration looked at various fiscal options, but felt that increasing the VAT rate was the best route.
In response from questions from the crowd, Mr Turnquest said more than $2bn in VAT has come into the treasury, but added the country is “worse off” than before.
“That is the obscenity that has been allowed to happen in having all this additional revenue, even though we collected that revenue we are worse off than we were, and because the cost has gone up significantly in the same period,” he explained.
He pointed out that the salaries in the public service alone in the last five years went up $266m, in addition to the over $2bn in debt that was racked up in the previous five years.
He said that does not include the $1.4bn borrowed this year to cover last year, bringing debt to $3.4bn.
“You want to know where the VAT money gone? A lot of programmes, hiring, and also contracts given for questionable reasons, also wastage, and corruption,” Mr Turnquest said.
“And while we been in office for one year we accept responsibility for that debt and the burden of the past 45 years, because governments are continuous,” he said.
He also explained why the government has decided to increase the VAT rate instead of an alternative route.
“When we talked about VAT, we looked at customs duties, we looked at the harbour tax, but we still got this (huge deficit), so we had to look at VAT,” he explained.
He said a nine or even 10 percent VAT rate could not suffice because of a $480m hole the country was in, and continued borrowing and interest would have dug the nation deeper in debt to a point where it could not borrow any more money.
“That is reality; we looked at it and the 12 percent gives us the best chance to balance the budget and start addressing the big problem which is the debt, and get it down to manageable levels. It is a sound reason for it (12 percent VAT). No point in playing around with it,” he said.
Some have called on the government to introduce income tax instead.
On Saturday, Mr Turnquest dismissed this suggestion as being viable.
He said that those persons at the bottom end of pay scale would not pay income tax, leaving those with more financial means shouldering the brunt for those who could not support themselves.
“In the Bahamas, if you were to take a survey, you will find the overwhelming of majority of the workforce in under that threshold,” he explained.
He noted that persons who work and earn a living above those that are exempted would consist of a small pool of individuals, resulting in higher effective tax rate because the government still needs the same revenue.
“Now you have to pay for yourself as well as those who do not have a job, and those below or at minimum wage. And so you might think you are winning, but you are not going to win. “The house always got to win and bills got to be paid,” he said.
“There is no doubt that a flat tax as VAT is a much simpler way because it has built-in mechanisms that work,” he said.
Turnaround
Resident Andrea Thompson reminded Mr Turnquest of his remarks about VAT while in opposition. The FNM opposed the introduction of VAT in 2015 and frequently slammed the tax as regressive and a burden on the poor.
Mr Turnquest explained why his position on the issue has changed since assuming office.
“The whole idea about 2014 to 2015, the FNM at the time in opposition expressed opposition to imposing VAT; I was there. The position we took was very clear. It was in recognition of the fact that coming out of the global recession in 2008 and 2009, the then government engaged on spending money on infrastructures and hiring people because the economy was going in a negative direction and the private sector some businesses were shedding jobs. So government intervened to slow it down and so government expense grows.
“Going into 2010 and 2012, the economy started to recover, and by the time in 2014 our position then was, now that we have correction what you ought to be doing is scaling back expenditure to the normal rate, which would not require the introduction of VAT - that was our position,” he explained.
The MP for East Grand Bahama said that after the election in 2017 when the FNM came to office, they met bills and all of the significant costs that the previous PLP administration did not roll back, but added to it.
“So now we are faced with a situation where the cost of government has gone up. It is very difficult to roll back. We did not renew the contacts of the 52-week workers. You know what it takes to bring the public service back down to the normal rate to what it used to be in 2008?
“We need to bring rationalisation to the programmes and the public service, and that has to be a very slow process,” he said.
Mr Turnquest stated that comparing the country now to back then is not realistic.
“Even when the question was put to the leader of the opposition (Philip Brave Davis), he could not answer that question about reversing VAT, we can’t answer the question because circumstance changes and it dictates the posture you take – this is the way it is.”
As of August 1, breadbasket items will be exempt from VAT. However some have said the list does not include healthy items.
In response, Mr Turnquest agreed the list needs adjustment, but explained that it is a slow process that requires education and getting people to acquire a new taste.
“No point reducing the duty on asparagus; who is going to eat it? Wealthy people and we are concerned about the wealthy; we are trying to protect the bottom level,” he said.
Comments
vlmarshall 5 years, 10 months ago
Waiting on BirdieStrachan and TalRussell to comment on something totally irrelevant. Maybe how someone is a liar or incompetent or maybe even some drivel about redshirts, imperialism and comrades.
proudloudandfnm 5 years, 10 months ago
I honestly believe if we eliminate duty we'd see massive economic growth and as a result higher tax revenues.
All we need is a courageous leader to just take the gamble and do it!
VAT is not the problem. Duty is.
Bahamians need to stop being manipulated and start dealing with facts. Concentrate on duty! We can leave VAT in place!
Dawes 5 years, 10 months ago
Agreed. i also think that is the plan in the long term as they need to do reductions on duty with WTO, they are just going to use the next year or two to get the extra income from VAT and Duty before reducing duty. They are hoping by then to have reduced the Governments expenditure and have a surplus on the budget so things can move forward. As i said they Hope so we shall see.
licks2 5 years, 10 months ago
I do agree. . .that was the conclusion in out watering hole this week end. . .duty is the big dog eating plenty of the government and everyday man's pocket. . .and it makes the merchant class extremely rich. . .WTO will move duties. . .VAT at 15% will offset the lost in government revenue lost by removing duties. . .the merchant class will find their bottom line reduced drastically. . .high duties will no loner be their excuse for raping the people resources!!
DDK 5 years, 10 months ago
Concur. That AND cutting runaway spending and the size of the civil service. It goes without saying that the gambling houses should be closed yesterday. Although there has been a slight up-turn in the economy, it is likely mainly due to the import duty exemption extensions on building supplies, mainly taken advantage of by foreigners who can afford to build, but, none-the-less, keeping the construction sector moving along. This brings another question to the fore, these foreigners are building units to rent out to tourists. As this new practice eliminates much hotel room tax, has further thought been given to this lost revenue and the fact that non-Bahamians and the Bahamian elite seem to be the only ones scheduled to profit from The People's budget? While at the same time this Government wants to write down BOB mortgage theft to capital expenditure and allow the mismanaged and thoroughly in debt BEC to borrow more money while hiding behind the name BPL. Wonder how much we paid to create that company and all the trimmings?
Dawes 5 years, 10 months ago
I think they have now put VAT on Airbnb etc to try and level the playing field.
DDK 5 years, 10 months ago
Thank you, but is it not only on those who collect $100k or more per annum? None that I know pay anything. Not that there would be any oversight on the collection of same.
Dawes 5 years, 10 months ago
It is going to be done at the website level. So they will take and pay to Government, not the home owner itself. now those who do not advertise on airbnb and the other websites will not charge it, however they will also have issues trying to get people to stay without using those websites.
joeblow 5 years, 10 months ago
Fiscal irresponsibility is the problem no matter how you look at it!
sheeprunner12 5 years, 10 months ago
Better to take your VAT medicine now from KPT ......... than from the IMF in five years.
ThisIsOurs 5 years, 10 months ago
They're feeding you lies with that "VAT or doom" talking point.
Let's assume that they implement VAT and everything goes great, the economy grows, employment goes up and government is able to balance the budget. Let's assume that can happen because truly nobody knows the future.
The problem with that scenario is its EXTREMELLY risky and the probability of that outcome is low. Just look at all the examples of devastated countries you want to list, they all increased taxes then SUNK.
The risk of things going wrong with an unnecessarily narrow timeline and an astronomically high increase is simply too great.
Is the govt mixing the studies on WTO Ascension with this VAT hike? Could it be that WTO Ascension has nothing good in it for the small man and they are putting a heavy burden on the poor so the govt maintains its revenue level and rich businessmen have the ability to trade their goods in other countries? I honestly don't know why we're speeding down the road to WTO Ascension when we KNOW we're not ready to compete, we have no products to trade and the EU will ensure that offshore services die a slow death. Why not identify the strategies that would make us competitive and a timeline to implementation?
licks2 5 years, 10 months ago
So what do you suggest we do? Fail to adhere to international instructions and become a failed state like Barbados who "did her now thing" and is now governed by IMF who had to bail her out and keep them from going bankrupt. The countries that went junk were the one who did not listen and kept their VAT below the recommended scales. Remember Greece. . .she bit the bullet and is now doing ok. . .
Well_mudda_take_sic 5 years, 10 months ago
You sound like a PLP political operative tasked with the mission of egging the Minnis-led government in any direction but the right direction. You never show concern about the size of our grossly over-bloated and largely non-productive public services sector, and you clearly have great disdain for the implementation of desperately needed serious austerity measures. And as if that weren't enough, like the IMF, IDB, etc., you continue gooseying our government to sign on to WTO which would have disastrous economic consequences for us. Smaller less developed countries that join the WTO are effectively made to turn over control of their economic policies and destiny to the foreign corporate constituents and other foreign interest groups represented by the developed countries and their international agencies, like the IMF, IDB, etc. Is that what you want for us? If so, you're a certifiable treasonous dingbat!
Aegeaon 5 years, 10 months ago
Even if we avoid these international groups, then what? We'll bankrupt ourselves faster than before. For me, the Bahamian people reacting to WTO is just about some sort of economical immaturity that they refuse to understand. We still have control of everything we have in this country, yet we as a people sabotage the country and pin the blame on Haitians, Jamaicans, White Americans and Europeans.
Guess what? NONE of them are to blame but ourselves. We ruined the country by the drug trade, then accounts of money laundering mostly through Bahama/Panama Papers by some PLP MPs and the number houses decimated the banking industry. Criminal gangsters dominate our schools and neighborhoods. It's seriously better to blame ourselves and try to figure out a way to combat the criminal mentality of the Bahamian people.
bogart 5 years, 10 months ago
The Bahamian system of government needs to be reviewed because here we have a former Shadow Finance Minister in the very same Bahamian Parliamentary Chambers......accusing the former Government of mismanaging some whopping $2.5 Billion dollars in Vat tax revenue.
Someting is not right that the Bahamian people must wait .....until the Opposition side of Govt is elected before corrections can be made....same can be said for the present Opposition and after the ship has sunk or the patient is out of the wheelchair and in the morgue.
No Bahamian govt should be allowed to govern unchecked for years and years an years ...and in this case accused of mismanaging some $2.5 Billion dollars.....critical life saving blood.....and much worse noone is held accountable.....for excessive wastages in engineering projects,. Seawalls, clinics, repeated repairs to schools, roads, ....contracts,.....other areas etc...and shortgages of money to repay debts,...repair, purchase and invest what is vital.
And the final blow to correct this ...must find it necessary to now get blood out of a suffering people.
joeblow 5 years, 10 months ago
The truth is we already knew this, we just didn't know the dollar amount!
DDK 5 years, 10 months ago
....and maybe we still don't!
BahamaPundit 5 years, 10 months ago
So long as they don't use our increased VAT to begin a bunch of pork projects like sewer systems in the inner city and an airport on Rag Island, I can live with the increase. However, if they start expensive roadwork projects and building public schools, I will be completely irate, because then our increased VAT will. E going straight into the pockets of FNM cronies.
Well_mudda_take_sic 5 years, 10 months ago
Our current government is incapable of taxing the Bahamian people out of the hole that successive corrupt governments have dug for our country over the last 40+ years. Feeding the current government additional tax dollars at this time will only result in a deeper hole, one that we may never be able to crawl out of. Draconian austerity measures urgently needed now must not be left for the IMF, IDB, etc. to implement at a later time when they would have taken control of our economy for the benefit of their own foreign interests.
TheMadHatter 5 years, 10 months ago
K.P. is 100% correct on every point he made.
Bogart you are also right in saying "Someting is not right that the Bahamian people must wait .....until the Opposition side of Govt is elected before corrections can be made...."
The problem is NO GOVT has the guts to make a Law allowing the shadow ministers of finance and foreign affairs FULL ACCESS to the loans, contracts, and treaties that the ruling government signs on behalf of your grandchildren.
You have to win the government and then go on a Easter egg hunt to find out what dirt was swept under which rugs during the prior 5 years.
This is shameful and COWARDLY.
realfreethinker 5 years, 10 months ago
TheMadHatter, it is my understanding that a fiscal responsibility act will be brought to parliament to address this issue. I hope it does come to pass
realitycheck242 5 years, 10 months ago
Along with the 12% Vat rate will be a National Insurance contribution Increase recommended by the ILO and acturial studies. This government is following every advice given by the international agencies.
Well_mudda_take_sic 5 years, 10 months ago
These international agencies very deliberately advise governments like ours to take the easy road of more taxes and more borrowings until it is too late. They then swoop in to unleash the harshest of austerity measures possible to finish us off so that the foreign corporate vultures they represent can pick our carcass clean for pennies on the dollar while creating another very cheap source of labour for themselves, i.e. the Bahamian people that they made destitute. We need to do the serious belt tightening now, not later when Turnquest and Minnis will each have three unsightly large fat rolls on the lower back of their head!
Well_mudda_take_sic 5 years, 10 months ago
The current Minnis-led FNM government are just as spendthrift as the last corrupt Christie-led PLP government. This is evidenced by the simple fact that the proposed 2019/20 budget does set out any detailed plans for the implementation of desperately needed austerity measures to address the grossly over-bloated size of our public services sector. Turnquest and Minnis have elected to take what is for them the easy road of imposing new taxes, rather than take the hard and politically painful road of significantly reducing the size of our largely non-productive civil work force in the shortest time possible notwithstanding the resulting civil and political unrest that would surely (and must) follow. We would be crazy to feed the Minnis-led government additional tax dollars before they demonstrate to us a sustained meaningful effort on their part to reduce rather than grow the size of the public services sector. All of our 7.5% VAT dollars went towards bigger government in an effort to buy political support as opposed to reducing our annual deficits and national debt. And we are now at the end of the road and can ill-afford to make that same mistake again. Cabinet must start tightening the belt in a most serious way - there are no other sensible options, period!
DDK 5 years, 10 months ago
They simply cannot comprehend the word "austerity", unless it applies to the beneficiaries of their taxation. We are all to plant vegetable gardens, but with persons working six and seven days a week to put food on the table as it is, who has time to tend garden and who can afford the seeds?
sheeprunner12 5 years, 10 months ago
Economic studies show that where VAT is collected, national debt continues to rise ....... The money comes so easy that the slack governments continue to spend like drunken sailors ..... It will be up to KPT to manage the contracts, wage spending and the leakage of public funds.
Well_mudda_take_sic 5 years, 10 months ago
The 2019/20 budget in and of itself clearly demonstrates that Minnis, Turnquest and the other members of cabinet have no political appetite whatsoever for the kind of serious belt tightening that urgently needs to be done. Instead, the budget and the additional candy giveaways since it was first publicly announced clearly indicate that the additional 4.5% VAT will be squandered by the Minnis-led FNM government in the same way the original 7.5% VAT was squandered by the previous Christie-led PLP government, i.e. used to grow the size of the already grossly over-bloated public services sector in an effort to 'buy' political support. There is absolutely no political will to apply the additional 4.5% VAT and the initial 7.5% VAT to the marked reduction of our annual deficits and our dangerously high national debt. Our politicians will not be forced into doing the right thing if they can time and time again simply get away with increasing taxes on Bahamians and their private sector businesses. WE MUST OUTRIGHTLY REJECT THE OUTRAGEOUS VAT HIKE THEY PROPOSE TO RAM DOWN OUR THROATS AND INSIST THEY TAKE THE POLITICALLY UNACCEPTABLE, BUT SENSIBLE AND URGENTLY NECESSARY ROAD, OF SIGNIFICANT AND SUSTAINED AUSTERITY MEASURES.
PastorTroy 5 years, 10 months ago
It's time for a change. #JustLegalizeCannabis
realitycheck242 5 years, 10 months ago
Agreed .....but your name must be a fake ...what a recommendation from a Pastor.
bogart 5 years, 10 months ago
...a number of religions use cannabis. Then again who are we to judge.?
TalRussell 5 years, 10 months ago
While the red shirts MP shakeup information coming my way still requires further verification, if true then the four comrade PLP MP's might just be on verge lose its Official Opposition Party Status in House of Assembly.... there some really pissed off at PM red shirts MP's for his having appointed the growing brutally controversial comrade Marlon financial secretary..... storms are gathering around not so hushed meetings being called by eight leading red MP's. They want Marlon gone and gone NOW!.
birdiestrachan 5 years, 10 months ago
Turnquest is just telling lies. to bad for those who can not think for themsel?ves . so they believe his lies. They said VAT was bad, BAH MAR was bad the Chinese was bad. All lies Lest we forget the Spy Bill was bad. No one can believe anything that comes out of their mouths.
Masterful liars all of them. The devil is the father of lies and a true liar believes their own lies Like doc is going to save the Bahamas. When did he become a Savior?? . As much as he can lie. just telling lies again.l
birdiestrachan 5 years, 10 months ago
remember the OBAN fake signing even that was a lie. TV and press in tow just Waite until you all find out OBAN will pay no duty or VAT and the foreign staff will have the same exemptions. They have no heart for the poor. those poor black people from over the hill will suffer most.
sheeprunner12 5 years, 10 months ago
We will reduce our debt to sustainable levels. We will follow a plan that will bring the debt to GDP ratio down from close to 175% to below 115% at the end of 5 years and, if we have a continuing mandate, to below 85% by the end of 10 years.
This, my friends, is from the Barbados PM (Mia Mottley) 2018 Budget Speech ........ Do we want to get to this point in The Bahamas???????
John 5 years, 10 months ago
The rich little country that is O so broke and broken!
Well_mudda_take_sic 5 years, 10 months ago
We are not all rich criminal thugs like your two good friends, King Sebas and Sir Craig.
DaGoobs 5 years, 10 months ago
Since 1966, our currency has enjoyed parity or near parity with the US dollar unlike our friends and neighbours in the Caribbean except for Cayman Islands, Turks & Caicos Islands, US and British Virgin Islands and Puerto Rico. Jamaica is around $80 to $1; Barbados and the Eastern Caribbean at $2 to $1; and Trinidad & Tobago at $6 to $1. We don't ever want the Bahamas to follow Alice down any of those rabbit holes. The amazing part is that we owe single digit Billions of dollars unlike say the USA which owes Trillion of dollars if not Gazillions. Perry and those were borrowing to pay civil service salaries, loans, interest payments and that sort of thing and not using the VAT money to pay down debt which was the original stated purpose while borrowing more money. So we have Billions outstanding on pensions for civil servants without knowing how it is going to be paid but increasing each year. Got to make provision to pay the piper for years of questionable governmental financial strategy. I would put my house or land papers up as security for a bank loan to take a vacation. But that is effectively what successive governments have done for the past 40 plus years.
bogart 5 years, 10 months ago
Present government accusing previous government of 'mismanaging' $2.500,000,000.00 that is $2.5 BILLION DOLLARS.
ISN'T ANYONE GOING TO BE HELD RESPONSIBLE ACROSS DOZENS OF GOVT MINISTRIES, GOVT DEPARTMENTS, AGENCIES, BPL, BAHAMASAIR, BANK OF THE BAHAMAS, DEVELOPMENT BANK.......or are we to just accept incompetance, slackness, mismanagement ....to the tune of $2.5 Billion dollars ...and now accept more VAT TAXES...for the 'incompetance'...and play as though nothing happened......this does not make sense...
sheeprunner12 5 years, 10 months ago
Agreed ......... But what happens when you want to hold a Bahamian accountable?????? .......... Frank Smith brought in a Jamaican QC
We are our own worst enemies ........ We tolerate slackness.
We like talk about comparing ourselves with Singapore ...... But Anderson Cooper just described that country as the "best run government in the world" ......... and they were poorer than us at Majority Rule.
DDK 5 years, 10 months ago
It makes absolutely no sense but it is easier to increase taxes. Bamboozled is a good word!
bogart 5 years, 10 months ago
Strong measures were used by Lee Kwan Yew that eventually someday Bahamians will be so fed up thhat they will vote for such a strongman/stongwoman Natural evolution....
But last elections Bahamians saw the need for strong measures to do better its the peoples time and voted Historically to elect the then Opposition with Historic 35 to 4 to clean tings up for better lives and even the PM lost his seat.
Bahamians voted for many Candidates with STRONG BUSINESS ACCUMIN ...PERSONS WHO KNOW WHAT TO DO WITH EMPLOYYEES WHO MISMANAGE THE BUDINESS......ELIMINATE WASTAGE...FAIRNESS...
DDK 5 years, 10 months ago
Bamboozled I tell ya!
Damifiknow 5 years, 10 months ago
So sad 12% of your 200.00 a week gone ,just like that!The honorable H Minnis run on repeal ! Suck dat teet was dry ! Despair causes harm ,no money ,hi electric ,gas ,food and they don’t see ,then murder,robbery’s crime ,all in one need little bundle of stupid economics! The people are poor and all you hear is about the pensions! The people who have to pay are the 200 a week and never see a pension in their time! Got to keep those wool suits taken care of ! Pensions! Squeeze a rock and get sand man! You cannot tax the country into prosperity! Should have known it was all just a false statement,repeal the vat . 85 % duty on car 65% on car parts ,30 to forty thousand on a 12 thousand dollar car from in the states yeah the only one to get them work for you know ! Mortgages at 12 % for thirty years that’s 250 thousand interest on a 100,000 thousand dollar home All that’s left is the robbery and murder crime and despair The Poor peoples time again!
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