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Avoiding devaluation reason for lack of cuts in duty

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Minister of state for finance, Michael Halkitis.

By RASHAD ROLLE

Tribune Staff Reporter

rrolle@tribunemedia.net

MINISTER of State for Finance Michael Halkitis said the government’s decision not introduce across the board Customs duty reduction with the looming implementation of value added tax (VAT) will prevent the government from “sinking further in debt” and avoid currency devaluation.

However, he suggested some duty reductions will come closer to VAT’s introduction.

Mr Halkitis said: “We will determine which (duties will) be reduced as we get closer to (VAT) implementation.”

However as he announced the government’s plans to introduce VAT, Prime Minister Perry Christie said the government will likely not deal with tariff and excise reductions until the 2015/2016 fiscal year.

When asked about concerns that paying both VAT along with barely reduced Customs duties may be burdensome Mr Halkitis said: “I definitely think it will prevent us from sinking further into debt and will cause us not to have our currency devalued.”

Meanwhile, James Smith, former state minister of finance, suggested that not radically reducing duties is a conservative gesture by the government to make sure its new VAT plan produces the desired benefits before proceeding with additional tax changes.  

“The original plan was tax re-balancing,” he said. “They would’ve reduced duties and increased VAT. That plan was rejected so they are not so sure anymore about what the impact will be.”

Asked about concerns that the tax system may place a burden on the middle and lower classes, Mr Smith said: “They’re trying to plug a deficit.

“The government needs so much money to carry out day to day activities and pay for things already sent. The government had to make hard choices because if you get it wrong the first time, it’ll be hugely significant. It’s better to be a little more conservative.”

Mr Smith added that Wednesday’s budget speech by Mr Christie erased a lot of uncertainty and fear over VAT and tax reform in the country.

“We know the rate and the date it will be implemented so the business community could now plan with more knowledge. That’s a major step forward.”

During his 2014/2015 budget communication, Mr Christie revealed that VAT will be introduced on January 1 at an across the board rate of 7.5 per cent with few exemptions. This is a reduction from the originally proposed 15 per cent rate.

“Being able to streamline exemptions and position the VAT rate much lower than in the white paper, the government is not announcing any wide-scale reduction in import duties and excise taxes at this time,” he added.

Mr Christie said his government will be in a better position to consider tariff and excise reductions at the time of the 2015/2016 budget.

The government had previously proposed reductions in import duties to the tune of around $300 million.

The Free National Movement has criticised the government for the move, saying that people will be “double taxed.”

Comments

Honestman 10 years ago

The mere suggestion of currency devaluation should cause all Bahamians to pause and reflect. Devaluation would be a disaster for The Bahamas. If persons think next year is going to be tough just imagine, as a nation that imports almost everything, how much more difficult life would be with a devalued currency? Government needs to reign in public spending NOW and enforce current taxes. VAT alone will not protect us. Talk of implementing a National Health programme in 2016 is more empty rhetoric. Anyone with a grain of intelligence knows that the country cannot afford a project like this at this time.

ThisIsOurs 10 years ago

Agreed, but only the blind and the current administration didn't see this coming the way they have been and still are spending money. They need to stop paying all these consultancy fees on roads to nowhere

Hogfish 10 years ago

"MINISTER of State for Finance Michael Halkitis said the government’s decision not introduce across the board Customs duty reduction with the looming implementation of value added tax (VAT) will prevent the government from “sinking further in debt” and avoid currency devaluation. "

YET ON THE OTHER HAND .....

"Spending To Increase For 30 Ministries And Departments "

THESE PEOPLE DISGUSTING!!

sheeprunner12 10 years ago

Agreed................... Where is the Public Accounts Committee and the Auditor General??????????? Whose holding Perry & Halkitis to account?

afficianado 10 years ago

lol I concur. Mr. Christie and his puppet administration are deplorable.

Well_mudda_take_sic 10 years ago

NOW WE HAVE THE MINISTRY OF FINANCE THREATENING DEVALUATION IF THE GOVERNMENT DOES NOT GET ITS WAY.....WHAT ARSE HOLES! CHRISTIE, HALKITIS ET AL NEED TO KEEP ONLY ONE THING IN THEIR LITTLE MINDS: The financial assets, real property, pensions, etc. connected to each and every MP who has served on the majority side of Government since 1992 will be fair game for the wrath of the Bahamian people if the Bahamian dollar ever gets devalued.....AND THESE MAJORITY SIDE MPs (both past and present) WON'T BE ABLE TO RUN OR HIDE ANYWHERE IN THE WORLD TO ESCAPE DEM DERE CONSEQUENCES.....IT'S REALLY AS SIMPLE AS THAT!

birdiestrachan 10 years ago

if the Bahamas fails we all fail. The FNM's in parliament should be smart enough to know that the Government needs the extra taxes. so why talk so much foolishness, The rich and the poor will suffer if something is not done. Persons in the business community seems to have accepted this; The gentleman at Atlantis said as much. I for one thank God for Mr. James Smith and Mr. Halkitis just look at the way they present themselves . They rank among the Bahamas finest.

thomas 10 years ago

At this rate its not "if the Bahamas fails"

B_I_D___ 10 years ago

The writing is on the wall...implosion is mere moments away.

Emac 10 years ago

Well I have alrady started planning my exit ever since this circus first got elected.

B_I_D___ 10 years ago

Yeap...my Bahamian currency is near zero...with the exception of physical property, ready to jump.

sheeprunner12 10 years ago

Yall dont follow up on Birdie ...................... she is on the UR2.0 and/or BAMSI payroll

Emac 10 years ago

Hmmm...I am beginning to see the light now. Somehow, someway I am convinced that birdie is gettin a piece a the pie from this government. He/She appears to be one of the PLP cronies living of the fat of the land. No one with an ounce of common sense could be this blind or complacent in the midst of all of this chaos, unless of course he is profiting from it.

ohdrap4 10 years ago

by not reducing customs duty, thry are trying to reduce the 'dead weight', which is the initial shortfall in revenue under increased taxes because people will buy less.

this makes the bahamas the only country in the world where vat has no semblance of being revenue neutral.

Guess what, people will buy even less.

i am stocking up non perishables and buy some extra clothing and shoes.

sheeprunner12 10 years ago

More power to the DoomsDay preppers.................... Bahamian style......... I suggest you go find the piece of generation land your great grandfather left you somewhere far from Nassau .............. it will be your saving grace

TheMadHatter 10 years ago

Hopefully it will cut down on the money so many churches seem to have to build new ones and expand existing ones.

Maybe then people will have time to worry about life's problems - instead of spending 90% of their energies worrying about the afterlife. Kids might have something to eat instead of Ramen Noodles then, after people start caring for them.

TheMadHatter

Emac 10 years ago

Let the church say,amen!

TheMadHatter 10 years ago

You keep saying "amen" Emac until you VAT gets to 75% See how that works out for ya.

Emac 10 years ago

Oh don't read me wrong Madhatter, I have lost all hope in this country. So hopefully I won't be around when that happens. Oh and I will not be wasting my energy thinking about the after life either. I already know what hell feels like. After all I live in the Bahamas don't I?

John 10 years ago

A number of years ago when the big hotels started coming to the Bahamas, I questioned why every single foreign investment in the Bahamas has to get dray loads of tax exemptions and so called 'government incentives'. Not saying that none was necessary but in the70's, 80's and 90's the government was practically giving away the country. I further said that the poor working Bahamian taxpayer was, in fact, subsidizing every single tourist who vacationed in the Bahamas at these properties that were getting these government exemptions. We were helping to pay for vacations that we could afford for ourselves or our families.

Then there was also the long lingering questions of overstaffing at all government corporations and agencies. ZNS, for example, has up to four times as many employees as most other radio stations. And even with extra staff, the service is still poor or wanting.

And there was always the question of why most government contracts seem to be padded So padded that but only certain people could even bid on them, much less get one. Not only was government being overcharged from the outset, but many of these projects were never finished on time, or had a lot of cost overruns, or not completed at all.. AT THE EXPENSE OF THE BAHAMIAN TAX PAYER!! Just look at the air port in Abaco, for example, or the LLoyd Smith building on JFK, or the customs warehouse building just across the street from it, or the big yellow building on Blake Road, that the government was advised not to buy, or the old City Markets building on Market Street that was gutted under the PLP government some 12 years ago, sat and deteroriated for FIVE years under the previous FNM government, all at the expense of the Bahamian taxpayer. Not to mention the Critical Care block at PMH, a building that seems to have met all the requirements of a successful project, except it still sits unutilized after being completed.

Then not to long ago, Bahamians were encouraged to abandon their farms on the family islands and come get a job in the hotels in Nassau or Freeport. There was plenty to go around and the work was easier. You were in a 'controlled' environment. But that bubble have since burst and now many Bahamians are without jobs and without food. The food imported from USA either makes you sick or it is too expensive to afford. Welcome to the Bahamas January 2015: MORE TAXES on the backs of the Bahamian people and even more uncertainty about the future of the economy. Cry for the poor working Bahamian, then cry some more for our country! . This know also, that in the last days perilous times shall come.

John 10 years ago

he last days perilous times are here:

2 For men shall be lovers of their own selves, covetous, boasters, proud, blasphemers, disobedient to parents, unthankful, unholy,

3 Without natural affection, trucebreakers, false accusers, incontinent, fierce, despisers of those that are good,

4 Traitors, heady, highminded, lovers of pleasures more than lovers of God;

5 Having a form of godliness, but denying the power thereof: from such turn away.

6 For of this sort are they which creep into houses, and lead captive silly women laden with sins, led away with divers lusts,

7 Ever learning, and never able to come to the knowledge of the truth.

Emac 10 years ago

These traits have been going on from the days of Moses. Isn't that the reason he broke the tablet???

John 10 years ago

In the times of Moses they were worshipping false gods Exodus 32:19
. When Moses approached the camp and saw the calf and the dancing, his anger burned and he threw the tablets out of his hands, breaking them to pieces at the foot of the mountain. .

SP 10 years ago

You guys have missed the big picture here!

Imposing a 7.5 per cent across the board VAT in January 2015 equates to cost of living increase of 7.5% overnight.

When added to the rapid skyrocketing rate of inflation and anticipated increases wholesalers will pass onto retailers and consumers to compensate for VAT derivatives we will be well above 15% in the end.

Obviously all of you PLP and FNM "DIEHARDS" are now ready to "DIEHARD".

John 10 years ago

Just imagine if the government is operating at an inefficiency rate of 30 percent. Meaning that for every dollar the government spends it only gets seventy cents in value. So imagine that this rate can be reduced to 10 percent. Meaning the government would have 20 percent more value on its revenue.. Meaning that there would be little or no need for VAT.

The_Oracle 10 years ago

You really think Govt is 70% efficient? I'd bet they're at 30% on collections, and less than 30% on function!

giacomo 10 years ago

Dear Sirs,

I would like to comment on the recent articles (The Nassau Guardian, 31st May) by former Minister of State for Finance James Smith and Minister of State for Finance Michael Halkitis. I fully understand Minister Smith 's concern over an IDB warning that the Bahamas could face a credit rating downgrade as a result of the delayed implementation of VAT and the comment by Standard and Poor's remark that the Agency will assess the "overall fiscal plan" when it makes a determination on how it will rate The Bahamas later this year. A downgrade by any of the rating agencies would result in a massive increase in the future cost of borrowing and would have impact even further the budget deficit of The Bahamas. The statement (Tribune, 30th May) by Minister Halkitis that the government's decision to not introduce across the board Customs duty reduction with the looming implementation of value added tax will prevent the government from "sinking further in debt" and avoid currency devaluation will just add further burden on the middle and lower classes. It will also increase cost of living. A large part of the Government's income comes from tourism and any increase in the cost of living would have a negative impact on tourism. Prices of hotels and restaurants in the Bahamas are already high compared with other Caribbean countries. A devaluation of the Bahamian dollar would have a similar impact as The Bahamas import most of its goods from abroad. As seen in other countries keeping increasing taxes will depress the economy and reduce the purchase power of the lower class. While a moderate increase in taxes may be inevitable the Government should focus on reducing public spending and collect outstanding current taxes. Also, on the longer end, the Government should make some effort to increase domestic productivity. If the Government wants to reduce a massive exodus of people from the family island into the capital, they should offer them some job opportunities.

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