Published in The Tribune November 18, 2013 and posted here with the kind permission of the author.
The Nassau Institute has long enjoyed its role as the libertarian, free-enterprise thorn in the side of Governments, whether FNM or PLP, battling every statist attempt to seize more power and reduce individual liberty.
Usually Government has ignored this gad-fly as beneath disdain, but recently it swatted back. When last August the Institute published its comprehensive study on the negative consequences of Value-Added Tax (VAT) for The Bahamas, The Ministry of Finance unlimbered heavy guns to denigrate the author as amateurish, unprofessional and ill-informed.
Last Thursday night the Institute took another major step in the anti-VAT campaign when nearly 100 of its followers heard a stem-winding speech from accountant of 50 years Ronald Atkinson, followed by a rational but passionate call from young Bahamian business owner Tamara van Breugel to launch “Citizens for a Better Bahamas” action group.
While displaying all the financial acumen of his accountancy career, Atkinson, a committed Christian, spoke more in the style of an Old Testament preacher exhorting his flock.
He mentioned all the well-known statistics about our steadily expanding $5.3 billion dollar debt (that growing $800 million in the last fiscal year alone), its increasing percentage of our GDP, and the continuing annual excess of government expenditures over revenues, making no bones about the “national calamity” this will lead to in the next ten years unless checked. He accepted that some form of revenue enhancement is required, pointing out the pluses and minuses of the three main choices: sales tax, income tax, and VAT. He was adamant that the proposed 15% VAT would be a killer of our economy over the next few years, as it would raise the cost of living and consumer prices for both Bahamians and tourists and drive down demand, while imposing new collection costs on both public and private sectors.
Without giving it as the final answer, he made his own specific proposal of a 4% sales tax, but combined with a 3% annual reduction in Government expenditures. He underlined that the IMF and the vigilant rating agencies are not demanding precisely VAT, but rather general prudence in budgetary management.
But Atkinson’s deeper message went far beyond fiscal matters. He evoked Winston Churchill’s famous lines as England had its back to the wall in 1941, offering nothing but “blood, toil, tears and sweat”. Not from military but economic threats resulting from 40 years of irresponsible government, Atkinson views The Bahamas as facing a similar crisis, an end to the “good life” when every Bahamian must now accept making sacrifices.
What better evidence of private sector profligacy, encouraged by Government, is the recent revelation that 70%-80% of public servants’ wages is immediately committed to repayment of personal loans, collected by direct assignment of salaries? Is it any wonder that a large segment of the population has become a consumer society, with no thought of savings or investment, just buying “to keep up with the Jones”? What more obvious sacrifice can there be than giving up a new dining-room suite offered by Furniture Plus on its usual “secured by salary” terms?
The public sector assuredly contains many wasteful expenditures that can be pared, such limiting government employees’ use of free gasoline, as well as the prevalent double-dipping on sick pay, before we approach the no-no of actual employee layoffs by Government . PLP point-man Ishmael Lightbourne assures us this would be “un-Bahamian”, while fully accepted in the private sector; apparently state employment of the party faithful is sacrosanct.
This observer predicts that VAT will not come into force in its present format, either in June 2014 or later. The Prime Minister has already been sniffing the political wind, and in an off-hand statement taken up by the press a couple of weeks ago made clear that while a target date has been set, any final decision remains firmly in his hands. He has already seen the opposition of the business community, from heavy hitters like Rupert Roberts, Dionisio D’Aguilar, and various Bay Street merchants. He has noted that here in mid-November his Cabinet still has been unable to produce the final package of legislation, regulation, tax schedules and financial projections that are essential to any understanding of the project, leaving Robert Myers’ Coalition for Responsible Taxation dangling in the wind, frustrated and unable to begin any constructive dialogue. Hard-working civil servants like John Rolle from the Ministry of Finance are dispatched to hold inconclusive public education meetings where, through no fault of his own, he cannot give full answers.
Neither he nor Minister Halkitis nor The Prime Minister has ever addressed the question foremost for every thinking citizen: why does not Government try harder to collect $542 million of due but unpaid taxes (rising by $80 million annually), before creating a brand-new tax collection bureaucracy to be run by a special agency and an appointed Commissioner?
All these objections to VAT, we believe, will become stronger in coming months, as a grass-roots organizations like Tamara van Breugel’s Citizens group gets organized and spreads wider roots. One of its objectives will be to create a dialog with other anti-VAT bodies, and with Government itself, and one can imagine that a new White Paper may emerge, quite different from last Febuary’s publication solidly committed to VAT. This dialog will not, as feared in Ishmael Lightbourne’s fulminations, be governed by hysteria and politics but by a spirit of education and cooperation. Mr. Christie, a consummate politician, will be open to any rational proposals made with wide popular backing.
But taxation is only one of the many drivers of our economy, and our Prime Minister will be struggling with far more than simply VAT in the coming years. There is no more patriotic, affable, articulate man in politics than Perry Christie. He is a genius at pomp-and-circumstance events massaging the Bahamian ego like turning Discovery Day into National Heroes Day and creating a new Black Independence day in early January – an essential and admirable role for any national leader.
But, on the record, is he the man to deal with the tough nitti-gritti issues of social and economic policy that cannot be escaped, such as:
– How to extricate himself from the self-created dilemma of promising the public that he would recapture 51% of BTC, in the face of implacable opposition from Cable & Wireless?
– Creating a lower-cost electric energy system, requiring complex negotiations with companies (still un-named) bidding to acquire BEC’s split distribution and generation functions, to be followed in 2014 by opening the market, at long last, to “renewable energy” options.
– Resolving what appears to be a profound dispute within his Cabinet about the proposed gambling legislation for our casinos, needed for them to compete with aggressive foreign competitors. Not to mention the continuing legal uncertainty, created by the half-baked referendum, whether web-shops can actually be prosecuted as law-breakers.
– What to do about the continuing deficit-creating subsidies for BahamasAir, Bahamas Broadcasting, and Water & Sewerage?
– Clear determination of policy toward oil exploitation in Bahamian waters Is there real progress towards creating an effective and fiscal and regulatory regime? If preliminary oil is discovered by Bahamas Petroleum Corp., will a referendum still be required to approve development drilling?
– How to explain the recent award of management of our solid waste land-fill facility to an unidentified foreign company, when a consortium of four experienced local companies were ready and able to do the job? This kind of secretive deal shouts for passage of a Freedom of Information Act; the Prime Minister must eventually stop dragging his feet on introducing legislation.
– By 2015, Baha Mar will become the nation’s first or second largest employer. Planning will be needed to handle extensive demographic changes in New Providence.
– Next year the giant American concern Sysco is authorized to acquire perhaps our largest local commercial enterprise, Bahamas Food Services, foreign-owned but key to our food distribution business. Apparently Sysco will be required to offer some portion in an IPO to Bahamian investors, but Government not released the slightest news about this major capital markets transaction.
– What will be the hard results of the much touted new Economic Development Plan, with its emphasis on increasing initiative and productivity?
Under our system of public administration, ultimate responsibility for all these issues percolates upward to the Prime Minister. Even the most loyal PLP acolyte must be quietly wondering whether Perry Christie has the aptitude, youthful energy and strong health needed to carry these burdens for the three and a half years to our next election. The Party has within the Cabinet a cadre of potential leaders. Brave Davis himself may have the needed decision-making qualities. Younger Ministers should not be ruled out, such as Jerome Fizgerald of Education, the only one who has ever run a business of his own. Perhaps a far-out idea, but disgruntled Bahamian citizens may demand some form of coalition arrangement, or leaders without any political affiliations.
The essential principle in times of crisis is putting the technicalities of taxation in perspective; what’s more crucial is the quality of leadership chosen to carry the nation forward.