The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Prime Minister Perry Christie yesterday pledged that his government would not “stand in the way” if the private sector could prove it had a “better idea” for fiscal reform than Value-Added Tax (VAT).

Unveiling the Mid-Year Budget, Mr Christie confirmed to the House of Assembly that he was effectively ‘wearing two hats’ over VAT and fiscal reform - that of Prime Minister, and also as the Minister of Finance.

His remark that, as Prime Minister, he was “not yet” listening to the Ministry of Finance brought howls of derision from the Opposition benches, who implied that Mr Christie was ‘flip flopping’ and delaying VAT’s implementation.

The Government side quickly replied, with Khaalis Rolle, minister of state for investments, shouting that the Prime Minister was merely “keeping an open mind” in advance of the dynamic economic modelling the private sector is preparing to conduct on various tax reform options.

Mr Christie himself, emphasising that as Prime Minister he had a duty to “listen to every voice in the country”, said he also wanted to make sure VAT’s impact was minimised for those likely to be affected most.

He also indicated that the VAT rate was not ‘set in stone’ either, adding that while the Government was focused on a 15 per cent levy, the Inter-American Development Bank (IDB) had suggested 10 per cent and James Smith, former minister of state for finance, 7.5 per cent.

Yet, on the other hand, Mr Christie said that as Minister of Finance he was “fully aware the country is floating towards some icebergs” that needed to be avoided, in the shape of further credit downgrades and an unsustainable debt burden.

He added that it would be “foolhardy” for anyone to believe himself, or his government, would seek to “retard” the economy through fiscal reform.

As a result, the Government was pursuing two parallel tracks - getting ready to implement VAT by July 1 through the Ministry of Finance, while also collaborating with the private sector on its research.

Referring to this week’s meeting between himself and the Coalition for Responsible Taxation, the Prime Minister said: “My government, more than you people, wants an economy that works for this country.

“And if you have a better idea than me, I’m not going to let the Ministry of Finance stand in your way. If you have a better idea, let me see it.”

Emphasising his ‘split personality’ on the issue of tax and fiscal reform, Mr Christies said that while the Ministry of Finance was forging ahead with implementing the necessary VAT infrastructure, “the Prime Minister is not listening to the Ministry of Finance. Not yet”.

Mr Christie said his government’s message to the Coalition and private sector was that it was “open but proceeding” on the issue of fiscal/tax reform.

He added “We [the Government and Coalition] need not have a fight over this, because you’ll not be fighting with me; you’ll be fighting the Public Treasury.

“Use your best efforts to work with me, and come up with something universally in the best interests of the country.”

While “amenable” to studying the Coalition’s research results, Mr Christie did not indicate that its study would prove decisive in influencing the Government on fiscal reform.

He confirmed: “I agreed that the Ministry of Finance will provide Coalition researchers with whatever data and research material that they might require in order to complete their work in a reasonable and timely fashion.

‘“I have also alerted the Coalition to the reality that it would be unacceptable to inordinately delay fundamental and necessary tax reform through this process...... At the end of the day, a decision will be made in the best interests of the Commonwealth of the Bahamas.”

Mr Christie, meanwhile, pointed out that tax/fiscal reform, and VAT, were not new concepts for the Bahamas, having been discussed for at least 15-20 years.

“It’s been in the books of the Ministry of Finance and the International Monetary Fund since [Sir] Bill Allen’s time,” the Prime Minister said, referring the former minister of finance in the 1997-2002 administration.

“VAT is not an option that has recently surfaced. It goes back many years, in one form or another, and across many administrations. It is now under active consideration.”

This touches on a little-mentioned aspect of the tax/fiscal reform debate, namely that both Government and private sector have known for years that such change was necessary - both because of the existing system’s inadequacies, and this nation electing to join rules-based trading regimes.

This, then, suggests that both sides have ill-prepared for the inevitable and ignored the need to plan in advance.

Mr Christie reiterated, though, that the Government had no intention of jeopardising growth, and throwing the economy into recession, via tax/fiscal reform.

Referring to upcoming foreign direct investment projects and job creation, Mr Christie said: “With all this economic momentum, it would be foolhardy for those in the country speaking about VAT and other vexatious issues.... it is foolhardy to believe the Government would jeopardise the economy.

“I said it to the IMF and the Ministry of Finance: Do you think, after what I have given in my public life, I would invest so much into a new generation of leaders coming into my party to write their epitaphs? No.

“We clearly want a dynamic economy, and the Government is committed to growing the economy and not retarding it.”