By TANYA SMITH-CARTWRIGHT
A TOP banker believes the government should put politics aside and make some unpopular decisions in the upcoming budget, saying the country is in a “precarious” position.
Gowon Bowe, Group CEO for Fidelity Bank & Trust, said a candid conversation on taxation needs to be had—with a view to increasing existing taxes or introducing new ones – but only on those citizens who can afford it.
“We are in a very precarious situation,” Mr Bowe told The Tribune. “We have to be in a position where we are making very difficult decisions that are going to be unpopular. The challenge is going into an election year, whether it is early or the regularly scheduled, whether or not the current administration will take the view that it will do as a fiduciary agent the best thing or it will be swayed by its political desires to continue in its current administration.
“When we move forward one year and we look at this time, the government’s precarious position I refer to is saying that ‘we do not want to push the debt levels to that point where we are only working to pay debt.’ In Bahamian vernacular it means my pay cheque is all going to pay previously spent money. That’s what debt represents, money that we have already spent.
“This year around, my position would be that the government has to be very deliberate that it is not spending on things that do not have long-term utility. What I mean by that is we need economic expansion and the most advanced territories like the US, Europe, Germany and the UK their government expenditure now is with the objective of stimulus. ‘How do I get economic activity to increase?’”
Earlier this month, the Ministry of Finance reported that spending to support social assistance programmes caused the fiscal deficit to rise to $878.2 million in the first nine months of the current fiscal year. This is up from $251.3 million during the same period in the previous year.
Since July 2020, the Minnis administration has borrowed $2.3 billion, a fiscal snapshot released by the ministry noted.
On the issue of social benefits doled out during the COVID-19 pandemic, Mr Bowe said Bahamians have already paid for the funding of these schemes through taxation.
“When I say that it comes down to in reality the government does not give back to the citizens what it does not take from the citizens,” Mr Bowe said. “In the last year there has been a lot of touting about the benefits that are being provided by the government. If we really take away all of the pomp and pageantry the government has only really given money back to citizens that it would have taxed before.
“Secondly, it has actually borrowed money in order to give benefits so it has left a debt for the same citizens. I think they need to do away with political rhetoric of what the government has done. In reality what the government has simply done is make a choice on behalf of the Bahamian people to redistribute its revenues that it collected from them, back to them directly as opposed to through government services economic expansion.
“It is almost an ‘Indian give’ in reality as they are giving certain incentives by way of tax breaks and other government subvention, but with the expectation that there is a return. I think that is going to be most important in this budget. That when we look at our expenditure, everything can be seen as investment in the future.”
On the issue of taxation, he said: “On the revenue front I think we have to (be) candid, in that we are already suffering from significant reductions in revenue and we are either going to have to look at increasing existing taxation or introducing new taxation that is not meant to strangle, but is meant to target those who can afford it.
“We’ve had a regressive tax system and we continue to have it based on consumption where you are not paying based on your ability to pay, but instead by just existing.
“The government is now going to have to look at its tax initiatives being directed in areas where it is most going to be impactful to those who have the capacity to pay. This is going to get political lobbying. They are going to have to shun that because they can’t increase it on those who are already in a depressed state. Trying to tax yourself out of a recession is like standing in a bucket and trying to lift yourself out.”
Mr Bowe also chided Bahamian governments for not looking beyond politics, saying that they should look at long-term planning. He said a national plan is what is sorely needed for successful outcomes.
“There is too much focus on social benefits being provided and we need to now have a mindset on how to teach a man to fish as opposed to giving him a fish,” he said. “We need to start looking beyond election cycles and we need the National Development Plan (implemented). That’s always my cry because that was looking out 25 years and beyond.
“In reality when you start planning that far in the future what you start doing is incremental steps and then you build. When you usually have a short horizon of what to do, you usually get thrown off course because you are not building towards something bigger.”