THERE is a feeling of caution in the air over the government’s plans to reduce VAT.
The concern is whether, quite frankly, we can afford as a nation for the government to bring in less income at a time when our finances are, to say the least, precarious.
In the wake of first Hurricane Dorian and then the ongoing pandemic, the nation has experienced vastly reduced revenues along with a significant increase in expenses, and the deficit and debt has grown as a result.
At a press conference this week, press secretary Clint Watson said the government plans to bring legislation before the end of this year that will see VAT drop from 12 percent to ten percent.
Prime Minister Philip “Brave” Davis has said that despite the financial situation, he plans to press on with his administration’s commitments.
He said the VAT reduction “will be one of the first items we put on the agenda.”
His predecessor, Dr Hubert Minnis, sounded doubtful when talking about the PLP’s VAT plans, saying: “They continue to talk about reducing VAT but remember when we spoke about removing VAT off breadbasket items they thought it was impossible and we did it. But I’m looking forward to them reducing VAT to ten percent, the Bahamian people are looking forward to that.”
The latest voice to express hesitancy is that of former Finance Minister James Smith, who served in the first Christie administration.
He cautioned that you “cannot just throw it out there and wish it to happen” when it comes to something as critical as the government’s main revenue source, which VAT has become.
He said: “Changing tax rates to achieve an objective demands at the very least some kind of analytical input to ensure you get the effect you intend. When you look at your tax system like this, you’re not only sending a signal to a local audience but to an international audience, and there are the ones that lend you the money as well as the rating agencies, you need to give them some comfort that this makes sense.”
In other words, if you’ve borrowed money from someone and you plan to reduce your income, you need to reassure your lenders that you can still pay them back.
We have a growing deficit, shrinking revenues and a principal industry in tourism that is still getting back on its feet. The hope seems to be that the cut will stimulate spending and that might help to cover the shortfall – but that’s a gamble.
As Mr Smith says, we cannot just snap our fingers and make a wish for this VAT cut to happen – so it would reassure markets here and overseas if the government laid out its plans for how it will live up to its promise and still manage to pay the bills.
It’s time to show us the money.
Well done, Alfred Sears
A word of praise for Works Minister Alfred Sears. He has recused himself from all matters relating to the dissolution of the previous board over at Bahamas Power and Light after previously representing former chairwoman Darnell Osborne and two colleagues who are suing the government and BPL. It is the right thing to do, and we applaud him for making the right decision.
Contrast that to the position of Wayne Munroe, Minister of National Security, who did not recuse himself from matters involving the removal of Prison Commissioner Charles Murphy despite his law firm having represented two deputy commissioners seeking to quash Mr Murphy’s appointment previously. Despite that matter being reported in the press previously, Prime Minister Philip “Brave” Davis said he did not know Mr Munroe’s firm’s involvement in the matter.
So why does Mr Sears step aside and Mr Munroe say “I do not see the conflict”?
To avoid even the appearance of impropriety, Mr Munroe ought to let others handle matters he has been involved in previously. And he should look to Mr Sears as the model to follow.