My name is Tamara van Breugel and I am a citizen of The Commonwealth of The Bahamas. I am a young working mother, my family owns a small business in the city, and I strongly believe there are responsible alternatives to VAT.
First of all let me say that I am by no means an expert on economic theory or taxation, I am not a representative of any political persuasion, and I have no special interest ties other than a special interest in the growth and prosperity of the Bahamas and of every Bahamian man, woman and child.
The Nassau Institute has kindly granted me a few moments in tonight’s program to share with you my personal thoughts on VAT, and I am extremely grateful for their kindness.
Over the months since the announcement of the imposition of VAT I like many of you here tonight have been following the news media, scouring the internet and attending various speaking forums to better understand this new tax proposal.
In my research I have learned a few important things:
- Our nation, has over many decades and successive administrations become excessively burdened by debt. Our national debt is project to exceed the $5 billion dollar mark by the end of this fiscal year. This is the equivalent of 61.5% of our gross domestic product and nearing a danger zone of 70% debt to GDP ratio.
- Governments have not been effective in collecting existing taxes or in safeguarding public funds from waste and mismanagement.
The 2010 / 2011 auditor general report illustrates some of these collection gaps identifying;
*5,980 cargo manifests that had not been presented for 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 subsidize Bahamas air
* $20million in subsidies to Water and Sewerage
* $7million to the Bahamas Broadcasting Corporation
…Ok you get the point.
- The Bahamas is preparing for ascension to the Wold Trade Organization by the end of 2014. As a part of this process the Bahamas must commit to dramatically reduce import tariffs.The expectation could be for an average peak tariff of approximately 15 per cent. Down from the current average of 55%.
- To avoid the potential ill effects of a credit risk rating downgrade the government has determined that a Value Added Tax mechanism would be the best option to help our nation combat the double-edged sword of a swelling deficit and the need to reduce the revenue from tariffs. And on top of that the Government believes a swift implementation is required to steer us off the path of economic failure. The increased revenue goal with the implementation of Value Added Tax is $200 million.
And so this in a nutshell defines the events that lead to us all being in this room tonight.
Early on when the idea of VAT was being mentioned I did not know much about it but I did recognize that for better or worse, this tax was destined to be the most significant adaptation our modern economy has ever seen. I also started asking myself some basic questions like, what is this tax? how does it work? how will it work for us?
Like most, I waited and waited for the Government to provide full details and education on how this tax plan would work. But as the information was slow to come I started to reach out on my own to learn more.
Here is what I have found.
Firstly, VAT is a regressive form of taxation.
This means that the economic burden will be greater on households with lower incomes. And while our customs duty system was also regressive, the VAT system does not seem to rectify this imbalance. As an offset to the regressive nature of this tax our government has provided for some VAT exemptions including breadbasket items, medical services and educational services. Offering comfort to the most needy in our society through this bare-bones survival kit of exemptions implies to me that VAT planners do anticipate a raising tide of prices that would overwhelm our poorest citizens.
And then from there I start to wonder… when these struggling lower income households become burdened with higher prices on their non-exempt consumption what will they to do to get by? Take a second or third job? Forego access to modern amenities like electricity, running water and telecommunications? Lean more heavily on the social services network? Or perhaps fall prey to the lure of white collar and blue collar crime?
Next, VAT will increase our cost of living.
Though the exact amount of this increase seems to become more and more difficult to define as we get closer to implementation, the estimates I have heard range from 3% -30% and according to a Ministry of Finance Official:
"On the cost of living there will be some initial impact from the VAT but that initial impact will disappear in a very short timeframe, over six, eight years. That is not long,"
Can we as citizens really afford a cost of living increase now? And could we endure it for 6 to 8 years?
According to statistics released by The Central Bank of The Bahamas, 95 percent of Bahamian dollar personal savings accounts have a balance of less than $10,000 and the average balance is $704. Additionally a Ministry of Finance Official recently disclosed that around 70% of government payroll is dedicated to salary deductions which service consumer loans.
By the looks of it the People of the Bahamas may be just as cash strapped as the Government of the Bahamas.
On a personal level, as I sift through my household bills I am always left to wonder will there be enough money to get through the month? And the thought of any increase makes me scratch my head and wonder… Where do they think this money is going to come from? Will it come from a decision to cut back on my child’s education? Will it come from a decision to shop only in the breadbasket aisles at the supermarket? Or will I have to start making some even tougher decisions?
Additionally, VAT will increase the cost of doing business.
If you own a business that is just getting by today how will you handle it when your prices increase and your customer volume goes down? Will you make the shift to lower quality products and services? Will you make some tough decisions about which staff to let go? Or Will you start preparing your business exit strategy?
The other thing about doing business is that VAT will require businesses to divert a portion of their time and resources from usual business activities to take on the new and uncompensated role of tax collector.
Most VAT registrants will be required to install new systems and acquire the services of a professional accountant to implement and administer the tax. Additionally the filings will be required on a monthly basis and amounts will be payable at the time the invoice is issued and not when payment is received. How will businesses manage this new expense? Do you think they will they absorb it into their profits? Or Will they build it into the price? And beyond that, might some businesses even try to evade paying these taxes altogether?
These are just some of my findings from my research on VAT. It seems however, that the only sure thing that comes out of each new discovery is even more questions. Regardless of where you live, how much you earn or or who you voted for. Don’t you also have some questions?
I will admit I did learn one other thing through this process. And that is that the people of Turks and Caicos were able to successfully convince their government to stall their VAT plans and implement alternative measures to get a handle on their economy.
From what I can tell a few factors combined to make their effort a success. Firstly they are a UK overseas territory, which obviously does not apply to us. But what I also found out was that when ALL the people came together and spoke in a unified voice they were able to demand that their decision makers move toward alternative revenue generating and debt reducing strategies.
Based on this insight I believe that the VAT debate in the Bahamas has the potential to engage and unite our country like no other issue of our time.
In the Bahamian context, I believe that the roadmap towards alternative economic strategies could include:
- Enactment of The Freedom of Information Act so that we can understand how our tax dollars are being managed.
- Full enforcement and collection of outstanding taxes
- Implementation of further reductions in government expenditure
- Develop near-term plans to relinquish under-utilized or unprofitable government assets and corporations
- Legislate strict conditions and limits under which future government debt could be approved
And if following these initiatives, additional tax revenue is still deemed necessary. I believe that a comprehensive economic impact assessment should be conducted to determine the appropriate economic and tax reform strategies our nation should implement.
Fellow Citizens in a time when we are being asked to forego some aspect of our quality of life to sustain our government through this fiscal crisis I believe that it is every citizen’s obligation to ask serious questions about how the financial affairs of their country are being managed and I also believe it is a citizen’s right to receive full and serious answers from its government.
Additionally, I believe it is only through the unity of people power that we can move this conversation with our government forward.
I know that there are many concerned groups forming and strategizing on this issue as we speak. These groups will vary in their objectives, their access to professional advice, and financial resources.
However, What if we consider for a moment that the most powerful and important participant in this discourse could be THE PEOPLE.
At the moment, the people are in general disconnected, distracted by the daily grind and without adequate information on legislation that will impact their lives.
Right now The people need several things to be effective, they need to be focused, they need to be educated about VAT in plain language and they need to be given a forum to express their opinions to their decision makers.
To assist in this process of engaging the people on this issue, a group of young Bahamians called Citizens for a Better Bahamas aims to launch a broad based educational campaign on VAT throughout our community streets, through social media and on our webpage www.citizensforabetterbahamas.org.
Our core campaign objective is to launch a petition both on-line and on the street specific to each constituency and addressed directly to each member of parliament. The petition will request each representative to vote NO to a VAT implementation of July 1st and to consider Responsible Alternatives.
We understand that this is a tall order on a tight timeline but we believe it is through activities like these that we will be able to help our decision makers know that we are all here, we are all aware and we wish to be heard.
You are here tonight because you are aware and you want to know more. But is your neighbor aware? Or your coworkers? Or your extended family? It will only be through a reconnection of our entire community that we will have our voices heard.
Citizens for a Better Bahamas is poised to become that reconnection point for our nation. But we recognize that on this issue there is a need to move quickly and we recognize that we cannot do it alone. We need YOU, EACH AND EVERY ONE OF YOU, we need your time, we need your talent, and yes we need your financial support.
We each have a vested interest in the outcome of the VAT debate. If we put aside our differences of background and social status and denomination and political affiliation and bind together as Citizens of the Commonwealth of the Bahamas I believe our voice will be heard and acknowledged by our decision makers.
It was Margaret Meade who once told us "Never believe that a few caring people can’t change the world. For, indeed, that’s all who ever have."
Fellow Citizens, if you believe in this simple idea I ask that you join us. Together we are better and together we can build a Better Bahamas.
Thursday, November 14, 2013