If The Bahamas government cannot collect what is now owing ...how will it supervise and collect the taxes from Value Added Tax (VAT)?

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

Tribune 242 

Bahamas Blog International

Yes, The Bahamas is in a serious debt position ...but the present government has a nerve to ask the Bahamian people for more tax money ...to support the continuation of the manner in which our past taxes have been wasted

Government Must Be Held Accountable For Public Spending

Tribune 242 Editorial
Nassau, The Bahamas:



SINCE THIS government has come on the scene, it has stumbled from one sink hole into another. Nothing seems to be going right, because there is no planning, no co-ordination, and, as we have said before, each cabinet minister seems to have his own agenda and his own game plan.

Several months ago, when it was suggested that Prime Minister Perry Christie should reshuffle his cabinet, he is quoted as having said words to the effect that the timing was not right as there were cabinet members who had agendas that they wanted to complete. If there were cohesion in the Christie government, the only agenda to be completed would be government’s agenda, and anyone not at one with that agenda would be shuffled out. This goes to the very core of what is wrong with this administration. There is no strong leader who can keep his colleagues following the same road map.

They don’t even seem to speak the same language. For example, with all the negative feedback, Mr Christie seems open to the idea of exploring new avenues to raise taxes, provided businessmen can suggest alternatives to VAT. Despite this, State Minister of Finance Michael Halkitis has said that there are no plans to postpone the July 1, 2014, date for the implementation of VAT. If there are no plans, then why should the Prime Minister ask for suggestions to find a new, less complicated way to raise taxes and drop VAT?

About the only subject on everyone’s lips today is VAT. And the more government spokesmen try to explain it the muddier the waters become. As a matter of fact, these spokespersons don’t seem to fully understand it themselves, leaving Bahamians at the end of their question-and-answer sessions more perplexed and less confident than before. As a result, public anger and confusion has grown. Grown to the point that at the end of the day the country might see a vocal group of young people ban together to hold government’s toes to the fire.

The Insight feature in today’s Tribune is a speech given by a young mother, who is also a branch manager of a local bank.

Tamara van Breugel, because of the lack of information coming from government, went on her own journey of education and was alarmed by what she discovered. Along the way, she also found many intelligent, like-minded young Bahamians who want to turn a new leaf in our history books and build a new Bahamas. They are fed up with the underhanded shenanigans that have been going on for far too long among what old Bahamians used to call their “representers”. So our readers should be on the watch for Citizens for a Better Bahamas. We predict that Mrs van Breugel’s speech is the launch of a vocal, enthusiastic and, we hope, more responsible Bahamian.

As we have said in this column before, for a government promising 10,000 jobs almost as soon as it became the government, the suggestion of VAT was suicidal. True, government has to get itself out of debt not only to prevent its credit rating from being downgraded, but to become a member of the World Trade Organisation (WHO). Among the many rules and regulations that have to be followed is that government will have to drop its tariffs on imported goods so that the goods of WHO members can enter the country more easily. This means that government will have to find a substitute to the present Customs duties. However, it does not mean that VAT is the answer. If government can’t police the collection of Customs duties now, it will never be able to afford enough inspectors to supervise VAT. A simple sales tax would seem the more sensible route.

Today, we publish a letter from a concerned Bahamian who vowed he would refuse to open his books to any government inspector, until government opened “their” books for public inspection. He was on the right path, but he made one mistake. Government’s books are not “their” books. These books belong to every taxpaying Bahamian. We have a right to know how our money is being spent. We have a right to demand that those books be opened for inspection.

This government started immediately on its grand shuffle among government employees, moving competent persons from their jobs, and replacing them with less competent party supporters. Not only does that create a state of inefficiency in a department, but it is a costly exercise. The clearing of land in the so-called Urban Renewal project was a scandalous waste of public funds. The money used was public money — our money — and we, the people have a right to know. Not only did workers trespass on private property, but the money handed out, regardless of the work to be done, warrants a public inquiry. A government representative is duty bound to prudently administer public funds — administer it as if it were his own. None of that prudence was shown in the Urban Renewal land clearance plan, for example — it was just pay-back election time. The public should demand an accounting of this scandal.

During this belt-tightening time, all of these overseas trips should he scaled down. Certainly, the public has a right to know the cost of every one of them, right down to the last glass of champagne. Remember, this is the public’s money that is being so liberally spent – while the public debt steadily rises.

Mrs van Breugel points out that in the auditor general’s 2010/2011 report, he discovered that:

• 5,980 cargo manifests had not been presented to Bahamas Customs for clearance;

• $95 million in real property taxes went uncollected, taking the total sum outstanding to $541.886 million;

• $302,866 of unpaid fuel from The Ministry of Works.

In the 2014/2015 fiscal budget, subsidies have been allocated as follows:

• $20 million to subsidise Bahamasair;

• $20 million in subsidies to Water and Sewerage;

• $7 million to the Bahamas Broadcasting Corporation.

And so the horror story of how the people’s money is being misspent continues.

Our finances would not be in such a sorry state if we had better managers in charge, and a government that did not believe that it can play Santa Claus with other people’s money.

Yes, the Bahamas is in a serious debt position, but this government has a nerve to ask the Bahamian people for more tax money to support the continuation of the manner in which our past taxes have been wasted.

November 18, 2013

Tribune 242 

Bahamas Blog International