Warning On Vat From Barbados
Tribune242 Editorial
Nassau, The Bahamas
OVER the weekend, Elcott Coleby, deputy director of Bahamas Information Services, sent a release to the press to announce the downgrade by Standard & Poor of Barbados’ financial rating – the second in four months. Barbados is listed in tenth place as one of the world’s most heavily indebted countries. From a rating of BB+ it has been dropped to BB-.
“The
downgrade reflects the mounting external pressures associated with a
persistent current account deficit and external financing challenges, as
well as the ongoing high fiscal deficit largely because of a
substantial fall in government revenues as a result of the weak
economy,” the agency said.
“In
reacting to the news,” according to the Barbados press release, the
“former president of the Economic Society, Ryan Straughn, said the
latest rating has not come as a surprise and suggested that the writing
had been on the wall for some time since Government did not go ahead
with the expenditure cuts announced by the Minister of Finance in the
August 2013 Budget.”
But
what interested us even more was Mr Coleby’s warning at the top of the
Barbados release. “This,” wrote Mr Coleby, “is where the Bahamas could
be headed if it fails to act — sooner than later. So far, the Bahamas
government has successfully staved off another downgrade in 12 months —
thanks to its fiscal consolidation plan. Barbados was not so lucky.”
Nor will the Bahamas be, if it does not get its reckless spending under control.
However,
if this hint from NIB is a message from government to hasten the pace
for the introduction of VAT, it should slow down and give the matter
more thought. It’s a warning for caution. VAT was introduced in Barbados
on January 1, 1997, at the standard rate of 15 per cent. However,
Barbados took its time investigating and testing before it took the
plunge. Nevertheless, after 16 years, VAT has obviously not been the
perfect solution. Barbados still does not have its spending under
control and the very event that VAT was meant to avoid has happened —
another S&P downgrade. Although several Caribbean countries have
VAT, it is interesting to note that Grenada experimented with it in
1980, but quickly abolished it. It would be interesting to know why.
On
October 1st, the Barbados government – to bolster its failing domestic
tourism – reduced the VAT rate on “hotel accommodation” to 7.5 per cent,
extending it to the Direct Tourism Service, which had been 17.5 per
cent.
It
was noted in an article posted by “David” on August 25 that July 2013
recorded Barbados’ “lowest number of long stay visitor arrivals across
the last 11 years in any same month.” The land-based arrivals for the
same year in October and November was examined and it was discovered
that “both again, alarmingly recorded their lowest comparable monthly
figures for the past decade”.
In
another article, which noted that Barbados, although it had “enjoyed
good credit ratings in days of old because of bullish tourism and
international business products,” no longer did so because of the
general world picture.
It
highlighted several problems that needed urgent attention in view of
the international down grading. Bahamians should take note of at least
one of them, because, with a few amendments here and there, it is a
serious problem in the Bahamas.
“It
is apparent,” said the Barbadian writer, “that a few of the statutory
bodies have grown to be financial albatrosses around the necks of
taxpayers. Barbadians know too well those statutory bodies which
political parties ‘pad’ to guard party support. Now that money has dried
up this strategy of protecting the party faithful has been exposed for
what it is, an unsustainable practice. Deal with it!”
Here
in the Bahamas after last year’s election Bahamians saw this in high
gear as large sums were spent on clearing land in the name of Urban
Renewal. It was claimed that it was part of a plan to clear bushy areas
that attracted crime. There was a hue and cry when these “landscapers”
went on the land turning areas into arid waste and even trespassing on
private property. At the end of this unconscionable waste of public
money, nature laughed in the face of the politicians and in a few months
the bush, in which the criminals allegedly hid, returned — but the
money had already been wasted.
Then
there was the flushing out of certain areas of the civil service to
make room for party faithful. It was claimed that the price paid for
this was a return to inefficiency.
Of
course, there is also the non-collection of taxes. The question being
asked is if this government cannot collect what is now owing, how will
it supervise and collect the taxes from VAT.
Of
course, an item that is now of paramount concern to the public –
especially in these tight economic times — is the cost of official
travel by government ministers at public expense. Former National
Security Minister Tommy Turnquest in a page 1 article today has urged
Prime Minister Christie to give a financial accounting of his
delegation’s trip to CHOGM in Sri Lanka, and the side trips to Rome and
London. We shall comment on this in this column tomorrow.
However,
the point that rankles Bahamians is government’s apparent reluctance to
cut unnecessary spending. Bahamians resent having to be taxed to
support the status quo. Unless government sets an example, Bahamians
will grumble. This is the frequent complaint that we hear within the
ranks of the unions.
November 25, 2013
