On July 7, 2005 The Nassau Institute came under fire from a government official for suggesting that The Bahamas is “heading toward bankruptcy” in an article titled “Taxes: Every Bahamian’s Burden”.
Maybe to suggest that The Bahamas is heading toward bankruptcy is a bit of a stretch, as a governments ability to obtain credit extends well beyond the limits usually allowed individuals. However, the facts clearly show that with the exception of fiscal periods of 1999/2000 and 2000/2001, when the deficits were smaller, expenditure is well above revenue for the past ten years.
Source – The Central Bank of The Bahamas.
When looking at the numbers above, it is patently clear that The Bahamas government must reign in expenditures and improve tax collection within the present tax regime or face increasing taxes. Of course, balanced budgets and cutting expenditure without raising taxes on the private sector leads to economic growth as it leaves money available to the private sector for investment.
Fast forwarding to August 24, 2005, The Tribune carried a story quoting a senior official indicating that government revenue for fiscal year 2004/2005 was just $2 million short of forecasts. This sounded very impressive until The Central Bank of The Bahamas released its monthly report and indicated that the government still ran a deficit of $137.2 million (spent more revenue than was collected) for the first eleven months of fiscal year 2004/2005.
So even though the country was provided with impressive sounding revenue numbers, the facts are that excessive spending by the government remains the order of the day.
Government’s aggressive response to The Nassau Institute’s claim that The Bahamas is headed toward bankruptcy is reminiscent of the old Bahamian adage that: When you throw a rock into a pack of dogs, the first one to yelp is the one that was hit.
In view of these facts, the point made in July 2005 is even more valid today, in that “it is important to note that government’s portion of the National debt is an accumulation of past deficits, and continuing to incur them (large deficits) will result in further growth of the country’s debt, and tax increases usually follow”, unless more dramatic action is foisted upon the country by the International Monetary Fund (IMF).
The Nassau Institute remains convinced that The Bahamas government must reign in expenditures or the Bahamian taxpayer will be in for a rude awakening someday for the country’s reckless spending habits.
Politicians and civil servants are obliged to put a “good face” on the country’s finances, but the Central Bank of The Bahamas, thankfully, reports the facts. Albeit there are delays in the reporting, but the Central Bank is the proper source for this information.
Regretfully governments all over the world see projected growth (not actual growth) in the economy as an excuse to spend more money. But when the day of reckoning comes, the politicians responsible for the debt are usually collecting pensions for life off the taxpayers.
So, what do you believe, the impressive sounding speeches about fiscal prudence or the facts and figures released by The Central Bank of The Bahamas?
THE NASSAU INSTITUTE
