By NEIL HARTNELL
Tribune Business Editor
A “sizeable proportion” of the $232.55m in foregone Dorian revenues relates to recovery zone tax breaks, the Ministry of Finance’s top official confirmed yesterday,
Marlon Johnson, the acting financial secretary, said the government had taken “a very conscious decision” to forego taxes to bring relief and speed up the recovery effort” on Grand Bahama and Abaco.
The government’s revised 2019-2020 budget estimates, released yesterday, reveal that it anticipates losing $126.9m in projected VAT revenues due to a combination of tax breaks and reduced economic activity in Dorian’s aftermath.
It is also projecting a $52.794m drop-off in taxes on international trade, and a $28.457m decline in Excise Tax, compared to initial Budget estimates made last May. Real property tax is forecast to be down by $17.4m, while taxes on the “use and permission to use goods” are projected to be down $7m.
However, K Peter Turnquest, deputy prime minister, yesterday told the House of Assembly that the Government had rejected new or increased taxes as an option to finance post-Dorian reconstruction and will instead totally rely on new borrowing/spending.
“The Government has determined that additional taxes would not be optimal at this time, given the substantial impact of Dorian to our economy and the need to maintain private consumption levels,” he said. “Accordingly, and very conscientiously, the Government has decided to fund the revenue loss and expenditure requirements through additional borrowings.”
Mr Turnquest added that the Government was relinquishing more than $200m in revenues as part of its Special Economic Recovery Zone initiative on both Grand Bahama and Abaco to ensure the two islands are able to rebuild more rapidly and cheaply.
“It is important to remind this House that given the magnitude of the impact of Dorian on the islands of Abaco and Grand Bahama, the Government unveiled an unprecedented package of tax incentives and concessions as a key part of the establishment of the Special Economic Recovery Zone (SERZ),” Mr Turnquest said.
“I know that members opposite agree - like all Bahamians - that this was, and is, the right thing to do. However, the impact of those much-needed tax concessions for those islands means that over $200m in tax revenues is being deliberately and consciously foregone. This is being done so that the Government is doing as much as it reasonably can to aid the speedy recovery and restoration of those impacted communities.”
He continued: ‘We anticipate that total revenue for fiscal year 2019-2020 will now be reduced by $232.6m due to revenue losses and revenue foregone from VAT, Business Licence fees, Customs, and a number of other taxes in the hurricane-affected islands.
“Thus, at year-end, we project a revised aggregate revenue of some $2.395.6bn in fiscal year 2019-2020 as opposed to the $2.628.2bn estimated at the time of the annual budget exercise.”
Mr Johnson yesterday said the Government had suffered a “substantial revenue fall-out because Grand Bahama and Abaco went off-line from an economic standpoint. The Government took a policy decision to help ensure their economies get back up and running as quickly as possible, and for residents whose livelihoods had gone to restore and rebuild”.