By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government will bridge the “gap” to its $1.3bn revenue increase with “additional measures” in the upcoming mid-year Budget as it faces criticism for “very extreme” fiscal forecasts.
Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that some “new tax measures” will be required to achieve the projected 55.7 percent increase in government revenues over the next four years - an objective critical to achieving a forecast $71.9m Budget surplus by the 2024-2025 fiscal year.
While confirming that the Davis administration has not fully declared its hand on all possible options in the just-released Fiscal Strategy Report, he held to the position that enhanced enforcement and greater compliance will be “the primary driver” behind the attainment of $3.643bn in total revenues in the 2025-2026 fiscal year.
Mr Wilson, while not providing any details on the new and/or increased taxes under consideration, said the Government’s senior tax officials were also confident that “a significant” sum remains uncollected annually across real property taxes, VAT, Customs duties and Excise Tax.
Asked by this newspaper how the Davis administration planned to meet the Fiscal Strategy Report’s targets, especially since it spoke to generating just an extra $300m annually via enforcement measures when a further $1.3bn will be required in just four years’ time, Mr Wilson replied: “There is a gap, but you have to look at this report in context.
“I think the minister of finance [Prime Minister Philip Davis] indicated that during the mid-year Budget, he’ll speak to additional revenue measures in some detail. It’s a process over a period of time; there are a number of things going on. You cannot be premature in any announcements.
“The minister, at the mid-year Budget, indicated he will speak to some revenue measures, and then you have the annual Budget in May. We’re doing different scenarios as to what it will be, and how it might look, and once internally we are comfortable with it, and the minister is comfortable with it, they will be published.”
Mr Wilson spoke out after the Government’s 2021 Fiscal Strategy Report, released at 11.20pm last Thursday night, revealed it is targeting a more than $1.3bn revenue increase over the next four fiscal years - increasing its total tax and fee income from the presently-projected $2.339bn to $3.643bn in 2025-2026.
Such a goal, together with the forecast $71.9m and $220.4m Budget surpluses for 2024-2025 and 2025-2026, have already provoked concerns that the report’s projections are too aggressive and overly-optimistic given the struggles of many households, businesses and the wider economy to recover from the twin devastating impacts of Hurricane Dorian and COVID-19.
Kwasi Thompson, ex-minister of state for finance in the Minnis administration, in giving the Free National Movement’s (FNM) response to the Fiscal Strategy Report said the forecasts “diverge materially” from the 2020 version produced under its watch.
“Yet, critically, it does not provide the evidence to justify the change in these projections, some of which are very extreme,” he blasted. “The Fiscal Strategy Report provides for an almost 60 percent increase in the amount of Government revenue in four years.
“What is the basis for such projections, considering that you have decreased the amount of VAT [from 12 percent to 10 percent] and have not mentioned any new taxes? How are we to rely on these numbers when the Fiscal Strategy Report 2021 states that they have not completed the studies or strategy that we were expecting to accompany and justify the projections?”
However, Mr Wilson argued that some of the revenue buoyancy will be produced by “the reflation of the economy” as tourism continues to rebound, and businesses re-open, following prior COVID-19 lockdowns and other restrictions.
“Some of it is going to be the reflation of the economy, some of it is going to be a focus on compliance and some of it is going to be new tax measures,” he told Tribune Business of how the Government plans to hit its revenue and Budget surplus targets. “Based on our analysis we believe compliance will be the primary driver.”
While the recent real property tax revaluation exercise, and massive increase in tax bills for some, had grabbed the headlines in recent days, Mr Wilson added: “There are other taxes where compliance is not up to acceptable levels.
“If you look at the various Budget pronouncements over the past years, there has been material disappointment with the performance of the Customs Department. There may be money there. We haven’t done an in-depth VAT performance analysis because of the pandemic and so forth, so there may be non-filers and money sitting there.
“There’s a strong feeling that the Business Licence can be improved, looked at and made fairer and more equitable, and those improvements may lead to an increase in revenues.”
Mr Wilson declined to give a figure for how much the Government believes it loses out on annually in uncollected taxes, but added: “Based on internal discussions and what we know, we feel - and that’s the persons involved in tax administration in the Government - very comfortable it’s a significant figure.”
The financial secretary has similar expectations about the potential revenue boost from reducing VAT to 10 percent, and eliminating most of the ‘zero ratings’ and exemptions. He added: “I really think it’s going to be significant, but we won’t know until the April filing. That will be the first quarterly filing under the new regime and will tell us what is happening, all things being equal.”
Yet Mr Thompson was not the only person yesterday to voice concerns about the Government’s revenue and deficit forecasts. Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business: “The projections seem a bit optimistic given directly where we are.
“If we are striking out for a Budget surplus in such a short period of time, which is what that speaks to, I’m not sure we’ve accounted for the challenges with inflation and the supply chain, and the impact that will have on consumer behaviour.
“Basing it on a balanced Budget in such a short time and the surplus they anticipate, it’s still hard to get your mind around that in terms of historically what we’ve seen, our ability to execute, the minimal growth in our economy and lack of compliance in many areas.”
Mr Aubry said achieving the Fiscal Strategy Report’s targets depends on “two things we have not been very good at in The Bahamas”. He added: “One is execution. It takes a long time to ramp up to things once you put plans in place, and that can affect performance against these goals.
“They’re also talking about increased compliance. It fundamentally comes down to public trust. There has to be accountability. You may build the engine, but you still need oil to keep it going, and that oil is public trust. To achieve this over five years, we’re going to have to invest significantly in making the public believe.”
Based on feedback to Tribune Business, the Government’s efforts to make all real property taxpayers pay their fair share are already running into scepticism as to whether those with the ‘right connections’ - political, religious and otherwise - will still be able to evade their obligations despite the rhetoric.
Comments
tribanon 2 years, 8 months ago
Simon Wilson wants to tax already heavily taxed low-income earning Bahamians to death so that Davis, Cooper and Mitchell can have more of their money to fritter away on themselves and their favoured cronies and friends as they did on their recent extremely wasteful Dubai extravaganza.
In the meantime Davis and Cooper have told Halkitis and Wilson to go easy on taxing the "HAVES" like Sebas Bastian, Craig Flowers, Franky Wilson aka Snake, etc. as much as possible, and to instead focus on socking the "HAVE NOTS" with the lion's share of tax increases and/or new taxes and fees.
KapunkleUp 2 years, 8 months ago
Just what I was thinking and instead of always wanting more in taxes, how about cutting back on spending.
Sickened 2 years, 8 months ago
Boy, if they think government had a low compliance level for property tax payments before they are in for a shock now that they've doubled the value of most properties. I for one will no longer be paying mine after it doubled in value and must now be the most expensive, and smallest place, in the neighborhood. We're gonna have to start doing what they do in europe and south america - don't finish plastering the front of the house or landscaping it so that when inspectors come around it look like crap. Put all that saved $$ into the interior and back yard.
tribanon 2 years, 8 months ago
And just wait until you see the whopping increases in your electricity bill this coming summer as the price of a barrel of oil nears the US$100 mark.
Dawes 2 years, 8 months ago
So you have no idea how much it could be but decide to make it just enough to cover your expense increase which is happening no matter what. Amazing that.
tribanon 2 years, 8 months ago
Have you ever heard Michael Halkitis, Simon Wilson or John Rolle advocating in any meaningful way for a much needed reduction in wasteful and unnecessary government expenditures? Hell will freeze over before any them calls for a stop to the ever increasing size of our mostly unproductive civil workforce.
moncurcool 2 years, 8 months ago
One day they release a story saying they will balance the budget with no new taxes. Now here they today with the financial secretary saying new taxes needed. So which is it? But we all know the only way governments since majority rule know how to get money is to tax the masses.
tribanon 2 years, 8 months ago
Davis and Cooper promised time and time again in the run-up to the last national general election that there would be no new taxes if the PLP won and that the VAT rate would be reduced from 12% to 10%. Now they want new taxes that will be much higher than the token savings on the VAT rate that they gave us. Talk about two-faced liars!!!!!
M0J0 2 years, 8 months ago
All gov. has to do is collect property tax and enforce payments and penalties. If the FNM did not give all those tax breaks the kitty would be filled.
tribanon 2 years, 8 months ago
That's utter BS when you consider the bulk of the uncollected property taxes is due from government owned enterprises, agencies and departments plus the very wealthy politically connected owners of property like Sebas Bastian and his enterprises, Franky Wilson aka Snake and his many enterprises, Craig Flowers and his enterprises, and so on, and so on.
realfreethinker 2 years, 8 months ago
Voodoo maths 101. Brave and his new day crew are just out right lied to the Bahamian people. More evidence of bait and switch. Give us 20% reduction but take it back by raising 10% on items Bahamians spend the most money on. It's obvious that the budget surplus has nothing to do with fiscal responsibility but by raising taxes. Fook brave and his band of miscreants.
Flowing 2 years, 8 months ago
Do you have a source to back this up?
Sickened 2 years, 8 months ago
MOJO you obviously don't own a piece of developed property worth over $250k.
Proguing 2 years, 8 months ago
Until they balance the budget without increasing taxes, there should be no more jet-setting around the world for government officials.
M0J0 2 years, 8 months ago
sickened you obviously aint in the know lol. poor getn taxed but million dollar properties aint paying a dime. run talk dat.
tribanon 2 years, 8 months ago
ZZZZZZzzzzzz......
John 2 years, 8 months ago
How many times do IDIOTS have to be told that, ‘YOU CANNOT TAX YOURSELF OUT OF A FINANCIAL CRISIS?’ Are Bahamians now being PUNISHED for the financial fallout of the Covid-19 pandemic? Haven’t most ( except the chosen few$ Bahamians and Bahamian businesses suffered just as much loss of income and revenue as has government? Aren’t they also in recovery and even survival mode? Doesn’t Angry Simon or Mad Halkitis realize that imposing additional taxes on Bahamians or increasing taxes too soon can WORSEN the government’s position, rather than improving it and quickly create a STAGNANT Economy? Consumers are already faced with what can soon become runaway inflation. Meaning the higher prices on food, gas buiIding materials and other consumer goods is eating away the purchasing power Of the average consumer. Increased taxes will reduce the purchasing power even more, so government revenue will DECLINE! Consumers confidence will decrease and so will consumption. But, if on the other hand, government were to REDUCE TAXES, at least amount equivalent to inflation, at least in the short term, consumers would be able to maintain their purchasing power and continue to shop at pre-inflation levels. In fact consumer confidence will increase and so will spending. The cost of living will go down slightly and government will realize ADDITIONAL REVENUE. And as inflation levels off government can then increase taxes. BUT if the country goes into a booming economy, increased taxes may not be necessary, That is basically what Trump did.
jus2cents 2 years, 8 months ago
People don't mind paying taxes if they are Fair, and they get some sort of Value from the tax payments.
The taxes here are not fair, the poor pay same percentage as the rich, more in many cases. Also the tax revenues go to pay for our mostly useless government workers, the whole system needs an overhaul. Covid showed us the services that are ineffective or stagnating, and the ones we Do Not Need at all.
Making people pay existing their property tax (ALL PEOPLE including Government workers) A government lottery, and getting rid of web shops would be a good start.
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