EDITOR, The Tribune.
The reasons for the upcoming snap election (the first in Bahamian history) are as clear as daylight. The unprecedented fiscal challenges posed by a year of lost economic activity have the government facing a dilemma long in the making.
Any attempt to borrow money (the favored tactic of this administration), will be met with demands from would-be creditors to either dramatically cut spending or to reform taxes (either by increasing present ones, or shifting to new sources).
The former choice will outrage a population already abused by years of irresponsible austerity, while the latter will force the FNM to face up to the stark reality of an egregiously regressive tax system that spares the rich and squeezes the poor.
While the FNM knows it will face civil disorder if it follows its instincts and slams the poor with another VAT increase, it simply cannot bring itself to follow the entire civilized world and make wealthier residents contribute their fair share of taxes. That just isn’t in its DNA. Besides, its greedy and shortsighted paymasters would never tolerate it.
So instead they choose an election that they are certain to lose.
The Bahamian electorate has tossed out every incumbent since 2002. While most voters have probably never articulated the underlying reasons (fixating instead on short term media-driven narratives), they should be clear to any thoughtful observer.
Since the end of the Pindling era, the basic policy thrust of this country has been toward a neo-liberal model, favoring a trickle-down economic agenda and assuming (against all of the evidence and experience of the last 30 years) that simply concentrating wealth at the top and taxes at the bottom will magically bring growth.
Hence our taxes (always regressive) have become dramatically more so with the introduction and increase of VAT, while vast tax cuts are given even to controversial investors (like Disney) and ministers promise rich Bahamians and foreign home-owners respectively that there’ll be no progressive taxes on high incomes or luxury properties.
Meanwhile, average wages have been outstripped by a cost of living that increases with each new tax, fee, charge, (Bahamasair) fare-increase and parcel of Bahamian land that a wealthy realtor sells to a wealthy foreigner.
While the FNM is the proud champion of these insanely stupid policies, the PLP is guilty of following or at least not reversing them. For its part, the media either tacitly approves or is itself distracted from the real issues through genuine ignorance.
And it is these increasingly bipartisan policies that have created the conditions that give the electorate a well-founded sense of diminishing living standards and individual prospects, which in turn manifests as anger at incumbents every five years.
Mr Davis and company will only have one short-lived opportunity to break this cycle by reversing the underlying causes of a rightly disaffected population. To do this they must drastically restructure the tax system by rebalancing it in favour of taxes on wealth, property and income and eliminating or reducing consumption taxes. They must also raise minimum wage, bring spending in line with international norms and introduce real universal healthcare.
If they do these things, the boost to consumption will bring about the kind of economic growth not seen in generations and will permit the middle class to grow again.
If they do not, in five years they will lose an election and the cycle will begin all over again.
ANDREW ALLEN
Nassau,
February 17, 2021.
Comments
Proguing 3 years, 2 months ago
Well VAT was introduced by the PLP, and it was the FNM who followed the PLP on this tax and helped the poor by excluding breadbasket items from VAT. Why did the PLP not exempt breadbasket items from VAT if they care some much about the poor?
And we have not had years of irresponsible austerity, we have had years of irresponsible spending with enormous budget deficits which have left this country almost bankrupt.
Also, the PLP like the FNM know very well that the only reliable form of tax in the Bahamas is VAT, because it is collected by the private sector at the expense of the private sector. No government will be stupid enough to get rid of the only reliable source of revenue at its disposal. Whoever wins the next election will increase VAT, the only question is by how much?
momoyama 3 years, 2 months ago
VAT "breadbasket" exemptions are pure nonsense. You seem to share Minnis' total lack of understanding of how VAT works. If there is an "exemption", it is meaningless, since the tax is ubiquitous and will be paid elsewhere in the same ecosystem and affecting hardest the same people - those who consume the most. I.E. the poor.
As for your assertion that we have had "irresponsible spending", can you back that up with one iota of evidence, data, statistic etc? Of course you cannot, because it is pure fiction. We have not spent too much, we have collected too little. Both cause the same outcome (yes, bankruptcy) but in our case it is CLEARLY the case of insufficient revenues rather than overspending.
Here are the simple facts: -
The Bahamas collects about 17% of its GDP in revenues and spends about 18%. This is about the lowest level of spending/revenues relative to GDP on the planet. Are you aware of this? If you disagree, kindly cite me another country that spends less on its citizenry as a proportion of GDP.
The global average of revenues / spending to GDP is about 40%, with all of our regional counterparts being above 30% and the USA (that socialist paradise!) being between 38% and 43% every year since 1990. European countries are above 50%. Again, we are at 17%!!!!!
Our tax base is so low because we exempt wealthy locals from progressive (income) taxes that every other independent country apart from oil exporters levies. Our decision to do so makes no sense since it does NOTHING to benefit the economy, since the sacred 'foreign investors' that are always cited would not pay a local income tax anyway, since they are taxed on income in their home countries. (read my letter coming out on Monday for more on this).
The government that raises VAT will be gone and they deserve it. VAT is regressive and should be replaced with taxes on income and a MUCH stronger and higher rated Real Property Tax on properties owned by foreigners (which again, contrary to ignorant myth, does almost NOTHING for our economy).
It is amazing how much ignorance is out there about basic, easily verified facts. And this country is suffering for it.
Proguing 3 years, 2 months ago
Yes, sure everybody is ignorant except you! Like I said previously, you need to resurrect the Vanguard party so that you can get the 200 votes that you deserve.
“those who consume the most. I.E. the poor.” Since when do the poor consume more than the rich? What is your definition of poor?
Caymans, Singapore and Hong Kong collect less than the Bahamas in tax % to GDP and have a much better economy than the Bahamas or France with the highest ratio in the world.
BTW the US and Europe that you cited produce things that they export all over the world, have major domestic corporations that are internationally competitive, unlike our economy where we attract foreign businesses and individuals due to our tax advantage. Taxing them directly would be economical suicide.
You cannot compare the Bahamas to the Europe or the USA (the is no Google, Facebook, Microsoft or Amazon here)
Government spending has climbed much more than economic output since 2008. Much of this spending has been to employ an over-compensated bloated civil service. In other words, the economic problem is that there has been too much spending. The right solution to this problem is to reduce the burden of government spending back to the levels of the early 21st Century.
momoyama 3 years, 2 months ago
In 2020, Singapore's expenditure to GDP was 28.46 percent. Of course it is (like the Bahamas') one of the lowest in the world generally, but as the 2020 figure demonstrates, it is (UNLIKE THE BAHAMAS) sufficiently flexible to withstand slowdowns, largely because (UNLIKE THE BAHAMAS) it has a progressive tax regime, featuring income tax. Unlike the Bahamas, Singapore does not make its poor pay for its rich by exempting income tax and replacing it with taxes on consumption.
So your research has either been very superficial or intentionally ignored all the things that make my point for me. While you had to look far and wide to find a handful of countries with similarly low expenditure (and didn't you say earlier that we have HIGH expenditure??), your examples are glaringly different from us in that Singapore and Hong Kong DO HAVE progressive income taxes, while Cayman is a microstate where financial services make up 60 percent of revenue and jobs.
And you still did not explain your factually ignorant statement that government spending in the Bahamas is high, since you are now comparing it to the very lowest spenders on earth. Do you see no incongruity there? Since it is less than half the spending of the USA or even Barbados, does it make these places communist? Or rather, the global norm....
As for your reference to the Vanguard, I guess that makes some sense to you, but it does not explain the fact that my recommendations would bring the Bahamas in line with the virtually the whole world, us being drastically to the right of the USA on taxation. I guess Trump is a socialist too in your absurd and ignorant world.
momoyama 3 years, 2 months ago
And I am very familiar with the spending levels of the early 21st Century. My father was Minister of Finance then. He was firmly of the view that expenditure was (and still is) far too low for our development needs and that what made deficits chronic and inevitable in the Bahamian context was that the tax base was too narrow and inflexible. In other words, we need to grow up, stop making the poor pay for the rich and introduce progressive taxes on income and property!
Proguing 3 years, 2 months ago
You can't look at expenditure to GDP in 2020 because of the pandemic.
List of countries by tax revenue to GDP ratio:
Bahamas 17.9 Singapore 14.1
https://en.wikipedia.org/wiki/List_of...">https://en.wikipedia.org/wiki/List_of...
BTW the Bahamian economy looks much more like Caymans than Singapore. When the Bahamian economy looks more like Singapore or Hong Kong maybe we can talk about tax reform. But right now the only thing attracting individuals and corporations to this nation is the tax free regime. To start taxing them directly would be economical suicide.
As an attorney please stick to law and do not dabble into economics where you knowledge is obviously minimal.
momoyama 3 years, 2 months ago
"...the only thing attracting individuals and corporations to this nation is the free tax regime"...With that statement, I see it is a useless exercise to even attempt to reach you with reason or fact.
Of the major drivers of the Bahamian economy, can you name one that has ANYTHING TO DO with a "free tax regime"?
Firstly, the tax regime is only free when it comes to income tax etc. (it is anything but free on consumption taxes, which are high). Income tax has NOTHING TO DO with foreign investment in the tourist or any other industry, since we have had a policy since the 1960s that prevented those who come here (whether as investors or otherwise) from participating in the domestic economy in a manner that would involve them paying income tax.
Atlantis, Baha Mar, Sandals, Baker's Bay, Breezes, Hutchinson Whampoa et al ALL PAY CORPORATE INCOME TAXES IN THEIR HOME JURISDICTION. They have nothing to do with the income tax debate, nor would foreign second homeowners or residents (even if they did do much for the economy, which they don't).
It is people like me (higher earning Bahamians) that are the only beneficiaries of the fact we foolishly lack income tax. But the policy results in devastatingly high taxes on consumption that dampen economic growth since poor people are the consumers, while we high earners put our money in banks where it benefits the economy marginally.
How people like you manage to confuse the issue of INTERNAL taxation with foreign investment is laughable and it mirrors the ignorance of Dr. Minnis and other politicians who know zero about the economy of the Bahamas.
momoyama 3 years, 2 months ago
So Commonwealth Bank, Arawak Homes, Colina Insurance, Commonwealth Brewery, J S Johnson and Bahamas First would presumably pick up and leave if they had to pay tax on their corporate income???? Because these (and NOT foreign people who are "attracted" here) are the kind of corporations that should be paying tax on their incomes.
Proguing 3 years, 2 months ago
You are mixing up corporate tax and income tax
Proguing 3 years, 2 months ago
BTW the Bahamas is unable to collect property tax, which is the simplest form of tax in the world. How would the Bahamas collect the most complex and easy to avoid tax in the word? This is what needs to be answered, before going into any hypothetical debate about any tax reforms.
Why does the Bahamas not start by collecting all the due taxes? Anybody that does not address this matter when talking about new taxes, has no credibility.
momoyama 3 years, 2 months ago
The Bahamas is not unable to collect property tax. It does not want to collect property tax. It could easily do so, but has a government composed of people so ignorant that they think seizing and selling foreign luxury properties in the family islands (which are the vast majority of delinquent properties by value) would be "economic suicide". Just like you think income tax would be "economic suicide" although the latter has nothing to do with foreigners and involves, by definition, only high income BAHAMIANS. It is simply a matter of ignorance, my friend.
Proguing 3 years, 2 months ago
Andrew Allen, what are you doing in the Bahamas where everyone is so ignorant unlike you?
johnmcntsh 3 years, 2 months ago
BTW, with regards to Singapore they make up the low taxes by using other taxes. Example: 6% of government revenues come from "COE's" Do you want to buy a car? For a small economy car you will pay $31,000.00 dollars in TAX, on TOP of the price for the car. You have to pay for services. One way or another everyone MUST pay their fair share of taxes. Using simply income tax to compare does not tell the whole story
Proguing 3 years, 2 months ago
Well this would be a good solution to combat air pollution and traffic jams in the Bahamas. I am sure that Andrew Allen would agree, because only the rich would be paying this tax. But before this takes place an efficient public transport must be put in place, which won't be easy.
johnmcntsh 3 years, 2 months ago
Here is the link. and this is not the only tax that is incredibly high in Singapore.https://www.aas.com.sg/resources/coe/...">https://www.aas.com.sg/resources/coe/...
JohnQ 3 years, 2 months ago
In general and as a point of interest. When corporations are taxed it usually ends up as a direct "pass through" to the consumer.
bogart 3 years, 2 months ago
Taxes, taxes, taxes. Along with the taxes applied or charged to taxable persons or corporations, there must be Tax Credits. Tax Credits points can be given to encourage Corporations ie to make investments in govt desired Family Islands, Credits can be given for desirable industries, for amounts of persons employed etcetc. Persons can be offered Credits for ie Going green with solar use, electric vehiclles taking care of disabled family members, investment in certain products which govt wants to expand etcetc. Tax Credits can be used to have persons and corporations induced or encouraged to develop or expand in areas the govt desires.
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