'Too early' to decide new/increased taxes

Deputy Prime Minister Peter Turnquest.

As of Wednesday, June 17, 2020

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister has reiterated that "it's too early" to determine if new and/or increased taxes will be needed for The Bahamas to escape the fiscal hole created by COVID-19 and Hurricane Dorian.

K Peter Turnquest, pictured, in a recent interview with Tribune Business, expressed his faith in the economy's ability to "bounce back relatively quickly" from the multi-billion dollar shocks created by two crisis that occurred just seven months apart.

He declined to respond when asked whether The Bahamas' debt burden, projected to bypass the $10bn mark in the 2021-2022 fiscal year, was reaching levels where it becomes an unsustainable burden on Bahamian taxpayers, saying: "I'm not going to even entertain that conversation because the basic assumption is that we will have a relatively quick recovery.

"We have to believe that the economy is going to come back relatively quickly. The previous experience with pandemics is a V-shaped recovery. In our circumstance, it may end up being a bit more of a 'U', but hopefully it will be a short 'U' and we will get back to the other side relatively quickly."

Many observers believe that The Bahamas will have to generate explosive economic growth if it is to avoid further austerity measures to right its fiscal course, something it has conspicuously failed to do over the past decade when the average annual gross domestic product (GDP) growth figure was below 1 percent.

"It's too early to talk about this kind of thing," Mr Turnquest replied, when asked whether new and/or increased taxes will be inevitable as a result of the projected $1.3bn fiscal deficit for the 2020-2021 budget year. "We anticipate there's going to be a strong recovery in the economy based upon pent-up demand for near shore vacations.

"We also believe the cruise industry will come back to some degree, and that will help to advance the growth to bring us back around. These industries are resilient and will bounce back relatively quickly, together with all the initiatives we have taken to shore-up small and medium-sized enterprises."

Mr Turnquest acknowledged that the government's unfunded civil service pension liabilities, estimated by some to stand at $2bn now, represent "a significant exposure" that is being assessed both within the administration and external consultants.

He added that the budget had focused on a 12-month timeframe because "there isn't a hell of a lot of data to rely upon" in projecting economic forecasts during health pandemics such as COVID-19. "Forecasting is not as certain as we've had in past experiences because of the large unknowns," Mr Turnquest said. "Nobody can really predict how consumer demand will react....."

The 2020-2021 budget projections confirmed that the scars and impact of COVD-19 will continue to impact both the economy and the government's fiscal position for many years to come.

For the government is currently forecast to run an $813.4m deficit, measuring by how much its spending exceeds its revenue, in the subsequent 2021-2022 budget year. If that comes true, it will be the second highest deficit in Bahamian history behind this year's $1.327bn, and even higher than the $773.7m worth of "red ink" that will be incurred in the present 2019-2020 period.

This "unprecedented" deficit and borrowing, combined with those two years, means The Bahamas will have added more than $2.9bn to its national debt within a three-year span. And, according to the budget projections, will take the government's direct debt beyond the $10bn mark by June 2022.

Predicted to hit hit $9.5bn, a sum equivalent to 82.6 percent of Bahamian gross domestic product (GDP) this fiscal year, the Budget forecasts project this will steadily rise to $10.32bn in 2021-2022 and $10.614bn in 2022-2023. The debt-to-GDP ratio is forecast to peak at 85.6 percent in 2021-2022 before dropping to 83.1 percent the following fiscal year as economic growth returns to a higher level than 2019-2020.

This is forecast to produce a 15.5 percent, or more than $58m, increase in The Bahamas' debt servicing (interest) costs over three years. The interest bill just to service the national debt is forecast to rise from $377.052m to $435.498m by the 2022-2023 fiscal year, further cementing its place as the largest and most costly line item in the government's annual budget.

However, the debt projections in the Budget forecast do not contain the guarantees the Government has given on behalf of the public corporations (usually around 6-7 percent of GDP) or the multi-billion dollar civil service unfunded pension liabilities. As a result, the total national debt is likely much higher.

tribanon 3 years, 10 months ago

The fiscal hole was not created by Hurricane Dorian and Covid-19 as Turnquest would have us believe. It was in fact created by successive corrupt PLP and FNM governments over the past four decades, including the current Minnis-led FNM government.

thps 3 years, 10 months ago

I have a hotel to sell him if he thinks we are not going to see increased taxes sooner or later.

ALL government taxes you see today started off small and just to pay something. They then balloon and become permanent.

The government in no way will cut spending that's required. Further, we need gang busting growth over and above anything we've seen to get the revenues in. The bills will come due!

Does anyone want to partner with me to sell him a bankrupt hotel?

Dawes 3 years, 10 months ago

Taxes won't go up until after the next election. Then whoever wins will have to put them up. If FNM they will say no choice. If PLP they will say to pay off bad decisions FNM made.

yeahyasee 3 years, 10 months ago

Spot on!

tetelestai 3 years, 10 months ago

And in both cases they would be correct.

birdiestrachan 3 years, 10 months ago

Turnquest and doc will increase taxes. they have to live big and high

Imagine their 9,000 and 12000 dollars rent and the 10.000 for their office of the spouse.

unfortunately for the masterful liars. they can never learn there is no blood in stones. they should have learned after the greedy ones increased VAT 60% per cent many lost their buying power.

The unemployment rate is high. They can not lie themselves out of this one.

moncurcool 3 years, 10 months ago

Plp rhetoric. when will it stop.

tetelestai 3 years, 10 months ago

Moncur, sadly, this is not rhetoric. Whoever wins in 2022 will have to raise taxes. Simple math.

joeblow 3 years, 10 months ago

@birdiestrachan... I just read about some medication online that can help you with your condition!

moncurcool 3 years, 10 months ago

We need a PM who only wants one term and is willing to make the hard decisions. Set the country on the right part and be willing to go after one term, as you know Bahamians will complain and want to vote you out. But at least the right path would be set. Unless they vote in an idiot who undoes everything.

The sad reality is that none of us are willing to have a leader make the hard decisions to change our country. We ok with the decisions they make once they do not affect our personal situation or cause us to have to lose anything.

tetelestai 3 years, 10 months ago

Disagree moncur, because: 1) The Bahamas is far from "one term" from being set on the right path; and more importantly, 2) if you find this wonderful on-term PM who fixes all of our problems, he - or she - will only be replaced by an incompetent buffon (see Obama/Trump), who erases all of the good gains.

birdiestrachan 3 years, 10 months ago

Turnquest knows that the FNM Government left a 100 million dollars over run on the road work. He wants those who are foolish already to believe that no government leaves bills to be paid.

Turnquest should talk about the bad BTC deal his FNM Papa made. his Hutchison deals in Grand Bahama has left Grand Bahama in ashes.

moncurcool 3 years, 10 months ago

Present facts. What deal did Turnquest do with Hutchinson? You really can't be serious.

Thank goodness for he BTC sale. We at least now have competitors to BTC to lower the prices. Maybe you should tell us where is the so called 2% Christie claims to have gotten back.

tribanon 3 years, 10 months ago

Who are they going to tax? Only the corrupt political elite, their family members and their cronies who have all participated in robbing our country's poor and middle classes for decades have any wealth to pay taxes. There's no significant middle class tax base anymore. Most Bahamians can barely pay for food these days and are having to go without so many things that they took for granted decades ago, like healthcare and medications.

DDK 3 years, 10 months ago

Quite right, Anonymous! (Sadly.)

Proguing 3 years, 10 months ago

The million dollar question is who will lend the the Bahamas another billion dollars to fund the government's budget deficit ?

sweptaway 3 years, 10 months ago

T ax all the jobless into oblivion !that's how you do it .Are you all that ……...crickets.

bahamianson 3 years, 10 months ago

This economy is in shambles. What are you going to tax? We are taxed out. I can't afford to go to a restaurant and pay 15% tip plus 12% VAT as is. I don't know and can't fathom how Bahamians are still eating out. I just don't understand. You can't eat the non-essentials , so why are you buying non-essentials at this time?

joeblow 3 years, 10 months ago

... its pretty simple, you go out to eat then buy some liquor then go home and beat your kids or spouse (if people still get married) or significant other because you are frustrated that you don't have no money!

tetelestai 3 years, 10 months ago

The first thing you do is stop this nonsense and eliminate VAT - or atl least reduce it to a negligible amount (3%). Then you tax the wealth - I don't care what income you select as "wealthy", tax them. And, no, they will not leave the country and no, companies like the Tribune will not reduce staff because of new tax.

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