Cooper: The Minister of Finance has a CREDIBILITY deficit!


JUNE 6, 2018

Exuma and Ragged Island MP Chester Cooper arrives at the House of Assembly yesterday to destroy the FNM Government. (Photo by Torrell Glinton)

Mr. Speaker,

I am honored to contribute to debate on this 2018/2019 budget and I thank the people of Exumas and Ragged Island for allowing me to represent them in this place.

Mr. Speaker, in my constituency, I represent people of all races, all socioeconomic backgrounds and all varying political stripes.

I maintain the belief that they sent me here to represent what is best for all of them; what is best for the country; and to give them a voice.

Yes, I am a proud PLP, but I have pledged to support all my constituents, through thoughtful, prayerful deliberation and sound reasoning.

With that said, Mr. Speaker, I will state from the outset, that if the governing side proceeds with its ill-conceived plan to raise value-added tax to 12 percent as of July 1, we will not vote for these taxes.

But we already knew that.

Exumas & Ragged Island

Before I get into the specifics of this visionless, duplicitous, disingenuous Ill-conceived budget, let me speak for a minute about Exumas and Ragged Island, home to the most beautiful places and people on earth.

Pretty soon, Mr. Speaker, we’ll be launching our Exuma Pride initiative to rejuvenate and beautify Exuma. That’s happening this summer, a June 21st launch, so we want all those in Exuma to look out for that.

Meantime, Mr. Speaker, Exumians are resourceful people. We don’t sit around and wait for the government, but there is only so much Exumians can do without the assistance of the central government.

At the moment, we’re faced with crumbling infrastructure that’s stifling development and adversely impacting the way of life for Bahamians, residents and visitors.

The pot holed roads are a national disgrace, and dangerous, to be honest.

The other day, I had to take matters into my own hands with my constituency team buying cold patch and going out to fix holes.

I do want to thank the honorable minister of works, as he has been helpful. Though, as I’ve made him keenly aware, more help is needed.

Mr. Speaker, last year in my budget speech I called for the advancement of a Public Private Partnership (PPP) to expedite the construction of new terminal at Exuma International Airport with world-class facilities in order to maximize the potential of George Town as an air hub for the southern and central Bahamas. This would allow visitors to fly directly into Exuma and travel to more distant islands, making the commute smoother and increasing traffic into these islands, whilst creating jobs and industry and allowing Bahamasair to focus on bringing tourist to the Bahamas whilst allowing Bahamian aviation entrepreneurs to thrive. I’m willing to assist the government in this regard, Mr. Speaker. It would also make use of the mini hospital, were it properly staffed as a mid-point for those who find it inconvenient to fly all the way to Nassau for services. If we take my recommendations to encourage a proper public private partnership or management contract with the hospital facility, there; this could spur medical tourism as well. This could be one of those economic growth initiatives this budget is so sorely lacking.

As I indicated, as it stands, the mini hospital is understaffed and under-utilized, I hope the minister of health will take some time during his budget communication to explain what the plan is to make this much-needed facility fully functional.

Also, Mr. Speaker, as I reminded last year, the runway at Black Point airport needs lengthening. Still.

It is stifling development. What we need to do is create a proper port of entry at Black Point. Exuma and Exuma Cays are poised for continued growth, Mr. Speaker, yet the government’s disregard for the infrastructure of what could be the model economy for The Bahamas is only going to end up costing the government more in the long run, when they could be pivoted to create wealth and reduce government dependency.

Exuma is also still in need of a coordinated marine enforcement unit for policing the cays inclusive of Police, Immigration, Customs, and Fisheries. I know the government is extremely concerned about taking on any new spending, but I promise them, and I can show them, that this unit will pay for itself in short order as it will reduce poaching, protect the environment and preserve government revenue.

Mr. Speaker, I saw the other day that we’re talking boldly about local government in Nassau. But I don’t understand where we’re going with that when it’s not properly working in many Family Islands. The budgets are completely inadequate and end up frustrating those dependent on it and it makes the local practitioners look bad, really.

Local Government funding is really a non-starter and the limitations are stifling our islands. With the coming tax increases, it really begs the question: Why should Exuma not have a reasonable percentage of revenues earned. Andros get $1.5m, Eleuthera $2.1m, Abaco 3.5m whilst Exuma get $777k. Inequitable. Unacceptable Mr. Speaker. Exuma makes a healthy contribution to the treasury, yet it is not shown the consideration it should be by this administration. While the government is trying to cobble together some local government for New Providence, consideration should be given to changing the current model for the Family Islands. I can assure you, it’s not working.

I also call on this administration to be reminded that we are still in need of potable water for Harts Well, The Ferry, Forbes Hill, the Cut and Moore Hill; these are the last remaining areas on the main island.

Also, Mr. Speaker, the old buildings at L.N. Coakley High need to be demolished. They had a 20-year life span when they were built 41 years ago. Let’s not ignore that for the future leaders coming from Exuma.

And speaking of our future leaders, I will also take this opportunity to remind the government that we are in need of a new primary school in George Town.

As for Ragged Island, Mr. Speaker, the people are still abandoned, still waiting for relief from their government, which has done nothing of significance since the last storm. You’ve heard me lament it so I’ve sought to find solutions!

Private funding is being used to restore the Anglican Church as a hurricane shelter.
A private residence identified being restored as nurse residence/temporary clinic.
But let me be clear that the Gov’t must not abdicate its responsibility.

The situation is dire. There is no myth, no embellishment on my part. News cameras recently documented what is happening: water rationing, a lack of government services, promises unkept.
Perhaps shame, if not duty, will finally cause this government to act in the case of Ragged Island.

Meantime, they can use all the help from the private sector that they can get.

A budget without a cause

Now about this incredibly flawed budget this administration is perpetrating on the Bahamian people, Mr Speaker.

If nothing changes, I don’t intend to vote in support of the tax increase, like I said. And let me tell you why.

Mr. Speaker, I noticed that on the day the member for East Grand Bahama gave the budget communication in this House, last Wednesday, there was a lot of laughter, a lot of banging on tables, nodding and cracking jokes about matters that some of them should perhaps research a little more.

They were having a grand old time, Mr. Speaker, crowing about no VAT on corned beef and grits, laughing themselves into a tizzy – until the member dropped his bombshell.

Then the laughter stopped.

When the member for East Grand Bahama dropped that bomb, you could see the process going on in the minds of perhaps some of them who their own Cabinet members didn’t bother to explain what was happening.

I suspect some of them have had some very sober conversations with their constituents, if they had the courage to face them, since then.

I wonder what you all told them? Did you try the excuse that if you don’t raise the VAT then the dollar will be devalued as we heard from the Prime Minister?

I hope you didn’t tell them that.

Surely members of this house, the prime minister among them, understand how our currency and foreign exchange regime work, and that raising taxes has nothing to do with dollar devaluation. Indeed, the Minister acknowledged on page 67 of his communication that foreign reserves are almost double the international benchmark.

Or did you try the excuse that the PLP wanted VAT at 15 percent in the first place, so we might as well raise it to 12?

I doubt they tried that, Mr. Speaker, as the record will reflect that 15 was the proposal (but that’s old story) and 7.5 percent was what was passed; what was recommended after consultation and was what they voted against.

The former minister of state for finance clarified over the weekend that there was no plan by the Christie administration to raise VAT. So that one wouldn’t work.

I wonder, Mr. Speaker, if they tried to compare The Bahamas to Barbados or Greece and warned that we would be in the dire straits that that country is now in, even though, the only thing similar to us and Barbados in that context is the size of our population. I know our good people in this House won’t seek to castigate and knock our Caribbean brethren while they are down and make light of their plight in order to make a silly political point.

I wonder, Mr. Speaker, if any of them who found themselves having to explain this nonsense, just reverted to the old playbook – blame the PLP.

The PLP got us in this mess, they probably said. I figure those who used that one are beginning to find that it’s wearing thin on the public. I don’t think anyone other than their hardcore supporters are buying it. And we know the number of those is dwindling by the day. Yes, I counted more than 15 references to the PLP in the communication. One year in and the PLP still on their minds.

I wonder, Mr. Speaker, which one of them had the courage to just level with their constituents and apologize for the FNM’s hypocrisy and level with the Bahamian people that their party has no idea what they’re doing and in the absence of any sensible plan to grow the economy, they did what the prime minister previously described as the lazy thing to do and hit the public for more taxes.

Hopefully, some of them have learned that certain things are no laughing matter, even when a minister of finance who knows he’s about to have a problem on his hands calls for cheerleaders.
However, Mr. Speaker, I expect that given the level of maturity often applied to debate in here, there will still be some heckling from those who know better and understand the depth of their betrayal of the Bahamian people by these actions.

I also expect there will be those who don’t know much about our economy at all and will foolishly cling to straw man nonsense about dollar devaluation and what other regional countries pay in VAT, as if that helps their case.

But through the noise that accompanies this debate, I want members to understand something: What you say in this place matter!

The arguments ginned up by those in government who were staunchly opposed to VAT when they were in opposition are there for the world to see.

The hypocrisy of certain members is clear evidence that they will say anything to get elected.
That they will hold any position for a time if it benefits them politically and promise everything to anyone if it will get them elected.

They insisted the PLP stole the VAT money and days after election they confessed that they knew it was untrue.

What has become clear is that this government operates under no single guiding principle.
It has no philosophy, no center, no soul.

And you may support this governing party, but bear in mind that history will judge all of us long after today.

We should all be sure we can live with the decisions we make; that our children can live with those decisions and that we have valid reasons for our decisions, not boogeymen drawn out of thin air to help us escape ownership of what we do.

As for why I will not support this proposed VAT increase, let the record reflect that I believe the increase in VAT is unjustified at this time.

I believe the increase is meant to take effect much sooner than the business community and the public can adjust, no consultation with civil society and social partners. I believe there is a lack of peer reviewed research and available data to bear out the government revenue projections, and I believe that adding ill-conceived exemptions will likely lead to fraud, inefficiency and increased costs of doing business and a spike in the price of consumer goods. The 60% hike is too steep, too quickly.

Politics aside, a bad idea is a bad idea.

And this is a tremendously bad idea.

And no amount of spin and talking points and press briefings and confidential booklets about who is to blame can mask the lazy, predatory nature of this tax increase making it easier to swallow for the public that will pay for your bad decisions.

The Bahamian people will not easily forget how this administration put their future in jeopardy.

But what is even more egregious than this tax grab, Mr. Speaker, is, as I keep alluding to, the lack of a plan to spur economic growth. This budget is recessionary and inflationary in its very nature.

Are they merely debt managers on that side?

Are they just looking at the books and wanting to see a clean, balanced budget without identifying and fostering opportunities for growth? The timing is incredibly bad strategy. With the increasing oil prices and the spike in taxes. This is a perfect storm to send the economy into a nose-dive.

I have talked about growth strategy and the absence of one ad nauseum in here, again, to the heckles and giggles of members on the other side.

Everything is a big joke, I guess, Mr. Speaker.

Now that they plan to significantly raise the rate of a consumption tax on Bahamians.
But guess what? Nobody is laughing now.

A budget of politics

Mr. Speaker, what is before us is not a budget for the people, as was promised, but a budget for politics. It has no soul and articulates no discernible philosophy on taxation or economic development.

Made and crafted with political ends and excuses in mind, now being sold as something that makes sense from a fiscal point of view.

At the core of this budget, Mr. Speaker, is hypocrisy.

On June 17, 2015, while contributing to the 2015/2016 budget debate in this House, the member for Killarney, now prime minister, then leader of the opposition, remarked on why the FNM voted against VAT – an “evil” as he referred to it.

The record of this House will reflect, Mr. Speaker, that he said, quote: “We in the FNM feel even stronger now that it was wrong of this PLP government to cause our poor; our pensioners; our disposed and our middle class to suffer such a huge financial burden as VAT.”

Now here he is, Mr. Speaker, hiding behind a minister of finance spearheading the charge to institute a massive VAT increase on the poor, pensioner, the disposed and the middle class. A tax grab.

The hypocrisy is boundless. Laziness abounds!

The member for East Grand Bahamas, once a staunch VAT opponent, said about VAT at an FNM rally in November 2013, quote: “We don’t want to be like Barbados. We don’t want to be like Grenada.

We don’t want to be like Haiti. We don’t want to be like any of those countries. They are crying about VAT. St. Lucia is crying about VAT. We don’t want to be like that. We are a prosperous nation. We have a lot to protect. So, let’s be careful; we don’t have to follow the crowd. Everyone is jumping off the cliff. That doesn’t mean we have to jump off the cliff. We can chart our own territory”.

Now, the member for East Grand Bahama has apparently seen the light about VAT, yet he is ignoring the key steps taken by the last administration to ensure implementation was smooth and there was stakeholder buy in. The Christie Administration proceeded cautiously and consultatively.

The member for East Grand Bahama, who is my good friend, loves to talk about the government’s GFS deficit.

There is indeed a deficit problem with this government, but it’s far worse than a financial one. This administration has a credibility deficit. And it is little wonder that people no longer trust this administration. The credibility deficit is far larger than the budget deficit itself.

The FNM was against Bahamas Resolve Limited, now it is supports Resolve, put more money into than the previous administration.

The FNM was against the so-called ‘Spy Bill’, now they love it.

The FNM was against not consulting the Bahamian people on major developments, but I guess that was before they became the government and Oban came calling.

And so is the case with VAT. What they once saw as a scourge, they now tout as a useful tool, yet they still don’t know how to properly use it.

With all this hemming and hawing and stances built on the shakiest of ground, it is little wonder that Bahamians are becoming more cynical and increasingly disrespectful of politicians.

We, meaning they, compromise our principles by saying one thing to get elected, then do something else.

They promised a recall system, and term limits on prime ministers and a Freedom of Information Act, free education at University of The Bahamas, and to follow through with NHI, yet they do none of this.

This budget and the communications and subsequent aggressive PR exercise surrounding it are rife with the politics of fearmongering.

Triggering people about potential dollar devaluation when the minister himself last week boasted that foreign reserves are up.

Talking about how many more thousands could go home if they don’t do this when the minister himself last week bragged about the economic growth forecast his administration had nothing to do with.

The PLP was instrumental in getting Baha Mar opened.

The PLP brought The Pointe project to The Bahamas.

The PLP brought the Wynn Group to the table.

The PLP attracted and successfully negotiated the now floundering cruise port in East Grand Bahama and the Children’s Bay Cay project in Exuma.

The PLP implemented the efficient value-added tax system that the FNM now loves so much.
Yet, the FNM has yet to orchestrate much of anything.

What is there to show in the way of foreign direct investment or local direct investment courtesy of the FNM?

The project at West End, Grand Bahama? We keep hearing the minister say it will be complete soon, but so far, nothing.

The Oban scandal has produced nothing but scandal so far. Shame and scandal.
The sale of the Our Lucaya properties – nothing.

Five Seats, five Cabinet ministers, three senators; two parliamentary secretaries in Grand Bahama and Grand Bahama has nothing to show and very little in this budget.
The projects the PLP had in the pipeline, seemingly left to die on the vine by this administration.

You say in one breath that the economy is growing yet cull the civil service of thousands of jobs.

And before my friend from Elizabeth challenges my information on unemployment, he should refer to the Department of Statistics most recent labor force survey released in January of this year that showed that the rise in unemployment from 9.9 percent to 10.1 was largely attributed a six percent or 2,555 jobs lost in the public service.

Why fire people as the economy grows? To make the numbers look good? Just last week Thursday the government sent home hundreds of workers the day before Labour Day.

It shows a lack of compassion, which belies all the great things they say are in the People’s Budget.

I also found it interesting that the finance minister used labor data to paint a portrait of lower unemployment than actually exists by comparing year on year labor force reports, when he is quite aware the most current report shows unemployment trending up. This is most disingenuous! Crafty!

And again, we see where the credibility deficit with this government widens.

We sit in this House, Mr. Speaker and all we see is an administration that will use any excuse to blame the previous administration for its failure to perform.

Bahamians are unimpressed with the political bantering and back and forth between the PLP and FNM whilst the problems that confront us remain unsolved. We already see too much of it. And unfortunately, it is how this debate began.

Bahamians have lost their appetite for the “Blame the PLP” politics of the Minnis administration. This government has done nothing but consistently blame the PLP for its failures for the last 12 months.

Is the PLP not far enough removed from office for the FNM to accept responsibility for its decisions?

While you blame the PLP, what have you done to improve the lives of the Bahamian people? How did you squander so much goodwill in just one year? With the economy growing and the debt to GDP ratio of 57% why the drastic actions?

Has a sense of disgrace in your underperformance not set in yet? How much longer can this administration sit there with a straight face pretending our country’s issues only surfaced within the last five years?
The FNM was in power for 16 of the last 26 years and counting. When does the FNM accept responsibility for the actions it takes?

Is one year of blaming someone else for where we are not enough? Can you now focus on economic growth through radical reforms?

Or is there more blaming to do?

A better approach to budgeting

Why would you spring an announcement of a major tax hike on people with four weeks’ notice? Businesses need to adjust. The hotel industry for example, pre-sells packaged deals. Who will absorb the difference? How will it impact their business and employment? How many will they lay off in response.

The Christie administration went through a transition for 18 months.

The right thing to do was to engage industry and civil society.

When I was chair of Chamber of Commerce, I lead a National Symposium on Tax Reform with the financial support of Corporate patrons.

I supported VAT, unlike some of those on the other side.

During my term the Coalition for Responsible Taxation was formed. Now former chairmen Meyers and Bowe appointed as co-chairs liaised on our behalf with Minister Khaalis Rolle facilitating. My friend from Free Town, a former Chamber chairman, was involved too, Mr. Speaker.

Last time, information was made available to the public, and to the world. The opposition had an opportunity to give input, to form sensible positions, though it ultimately refused to offer anything of substance.

This time, we see no consultation with the opposition. No consultation with the private sector. No consultation with Tourism or Gaming industry or consumers who will suffer adverse impacts. // Such a great sense of arrogance. Disrespect for the Bahamian People.

Tell me, who will collect the VAT revenue – the private sector? They are the government’s partners. Is this how we disregard the private sector?

We must get this right if we are to avoid a contraction in spending, contraction revenue and contraction in our economy. I’m afraid that this is what will happen on this current path.

A contraction is what we will possibly see if people continue to be uncertain about the plan. Blatant arrogance and disrespect for civil society will not make this plan work, it will have the opposite effect.

The overall message coming from the public is that the minister and the government are untrustworthy, that they lack credibility. They say one thing and do another.

In the art of political day trading this seem to be the fate of most politicians these days. We must elevate the standard, Mr. Speaker.

I’m not saying that no one is allowed to change their mind in light of new evidence, but there is a deep concern about credibility on this issue, and, more importantly, competence.

Incompetence and not following reasoned advice is an unforgivable sin, in my book.

A closer look

Mr. Speaker, as we take a look at the People’s budget, the People want to know:

Where’s all the money gone that the government borrowed over the last year? On the top of the borrowing, with the economy growing and all the people laid off, why the need for sharp hike in taxes?

The people hear all the buzz words of accountability and transparency and fiscal management. I support those notions. But the People are not satisfied that this government has properly given account of its stewardship over the last year.

I’d like to take some time to examine some of the things at the heart of this so-called People’s Budget.

The government proposes to use the $400+ million from the VAT increase to pay off $360 million or so ($172 million this year, plus, $106 million next year and $75 million the year after) over a three-year period. The government claims it will give back what looks like $100 million in customs duty exemptions in the fourth year. Over four years the VAT increase alone should yield, according to the government’s math, $1.6 Billion, or $400 million per year. All things being equal.

So, the quick math tells you that the taxpayer is going to be putting in $1.5 billion dollars. That well over a billion dollars more than is needed. In addition to the 1.5bn net already borrowed.

It is unclear why there needs to be this sustained level of a tax increase to the tune of $1.5 billion for bills that total less than $400 million.

If we believe the simplistic assumptions. But wait, we also see recurrent expenditures budgeted to increase by $500 million by an administration who said things tough and the former administration was loose and free and spent too much.

The $360 million in arrears being paid off over three years proves that what the minister did last year in creating such large deficit was avoidable. Now he boasts of beating his deficit budget by $13m. How Impressive?

How is it that you can pay these bills off over time, yet the unbudgeted bills you claim you met when you came to office had to be paid off immediately? Doesn’t make much sense to me. This Minister has a credibility deficit, I’m afraid.

The cash basis, that the Minister now concedes after flipping and flopping, requires management of cash and payments. There is a need for consistency. This administration would have us believe that they just found out about this $360 million. This is the same administration that had every civil servant including the Governor General come forward with their passport to verify that they are alive. They could have done the same for creditors.

It has also been established that the finance minister has changed the rules between last year and this year on how you account for and fund arrears. Last year, he attempted to push all of the arrears in to the end of year calculation. Yet, this year, he is proposing to amortize the arrears over three years. Flipping and flopping. Flimming and flamming. For the good of country, to inspire confidence in our economy we require a minister of finance who is consistent and predictable. Last year in justifying tax reductions to big business he said tax reduction was good for economic growth. Well this year he seems not to retain that view. No surprise then that the budget has No Philosophy, No center. No Soul!

Mr., Speaker, I’d like to take this opportunity to call for an investigation by the auditor general and the PAC into the treatment of arrears between last and this year. We cautioned the minister last year to not undermine the reliability of the numbers internationally, which increases the risk of downgrades and leads to higher borrowing costs.

Further, I also question whether the government revenue estimates were done without accounting for tax elasticity, meaning that the targets would not be met due to the very impact of the taxes on the economy and the change in behavior of the people it impacts and therefore tax revenues.

In short, will the tax hike increase business costs and reduce consumers’ willingness to buy and spend, reducing the taxes the government collects? I predict that it will.

Every former Minister of State for Finance who has spoken publicly has acknowledged this position, including Bill Allen.

They tell me that the government’s models say no. But these models are not public. I need to see this to better understand where they are coming from. As it stands, I don’t trust it and I don’t believe it.

Perhaps the models would even find favor in a graduated scheme of tax to allow notice and clarity and allow consumer, businesses and the economy to adjust, thus making the revenue projections more palatable and reliable.

Maybe more reliable revenue projections would eliminate the need for the crude $80m plug number for customs, excise and real property tax, above the “run-rate”. By doing this, the Minister acknowledges that he has no idea how the revenue he estimates and presents can be achieved.

Mr. Speaker, right now, over $400 million is owed to the government in property taxes which are collectible by the sale of property under the act, it would be less painful on the public if delinquent taxpayers were pursued with the same vigor used to settle old bills owed by the government.

Why are we being so aggressive with payables, but not going after those who owe the government money – especially commercial building? Does this also fit the mantra of Family, Friends and FNMs,?

Shouldn’t both be treated the same way? Mr. Speaker, the minister must give an account for the Revenue Enhancement Unit. He says it was floundering, but on investigation the gains of the unit were squandered by this minister because the unit was effectively dismantled.

This budget communication states, for the first time I can recall, that previous administrations were responsible for leaving unpaid bills.

Not just the last administration. This is what we have been saying all along, Mr. Speaker: governments are continuous.

When we look at debt servicing in this budget, we see a huge figure, but have had very little detail explained about it.

Mr. Speaker, this could easily become an albatross around the neck of future finance ministers. The interest charges this fiscal period are over $300 million, which, if I’m not mistaken is the highest in our history and a disproportionate increase.

I hear East Grand Bahama using fancy buzzwords like “inter-generational fairness”. Well we hope that this won’t be an “inter-generational curse”.

And to me, Mr. Speaker, it appears that the rescheduling of too much debt at a bad time by this administration might be the trigger.

The previous loans, Mr. Speaker, were taken out when The Bahamas was enjoying higher ratings and therefore, receiving 100 to 200 basis points above prime.

The rescheduled loans are probably 500 basis points above prime or more; have a grace period where no principal payments are due, hence the announcement about starting a sinking fund; and may have provisions for balloon payments at the end of the period.

In the coming years, global interest rates are likely to rise, and the cost of the loans would be much higher if they are floating rates tied to prime or LIBOR as the case might be.

Mr. Speaker, I’m hereby requesting the minister of finance table the specifics of the loans that were settled and rescheduled in the past fiscal year, along with all payments associated.

I further call on the Auditor General and the PAC to look deeper into this matter.

It is also fair to ask whether the banks advising on these loans earned commissions and therefore earned more, the more this administration borrowed.

Mr. Speaker, I’m also hereby asking the minister to table the total cost the treasury paid for arranging the loan, so that we can compare the fees with similar loans obtained by other countries during that period.

What we want to be sure of, Mr. Speaker is that our finance minister didn’t unintentionally add higher future costs to the budget than the arrears he borrowed money to settle.

For the record, Mr. Speaker, I must reiterate that this minister met in place a plan to increase revenue through greater compliance, but he ended that initiative. Had he left the Revenue Enhancement Unit alone, the revenue situation would likely be much improved by this point, rather than down by $130 million. I also notice what appears to be a sharp underperformance in Customs revenues. The Minister must also explain that?

The minister should perhaps also explain why he abandoned the central purchasing strategy he also met in place a plan to lower costs through smarter buying, where homogenous products being purchased in bulk and distributed from a central warehouse. This was cancelled despite the immediate savings provided to the government.

The cost of concessions

The minister should also explain to this House, what is the cost of the tax concessions so adamantly touted.

Will the Minister present to Parliament information with respect to the total revenue from clothes and shoes last year, which is believed to be substantial, and on medicines?

Will the minister explain whether this concession applies to prescription medicines or all medicines, such as over the counter drugs, and what exactly constitutes medicine by his definition? And again, how much revenue are these concessions costing the treasury.

I suspect that the revenue loss is substantial.

It is also noteworthy that the concession on new vehicles for the bonded warehouse applies only to new vehicles. Seems that only the large wealthy car dealers will benefit from this. That’s fine though since this is the People’s Budget and The People’s Time.

The same can be said about exemptions on planes and helicopters. I guess we will see million dollar helicopters on rooftops all across the island now. After all this is the People’s Budget and it is The People’s Time.

The high level, $50,000, threshold conveniently allows the average Bahamian to bring in that Lexus NX 350 on the cheap. That’s fine since it’s the People’s Budget and it is The People’s Time.

If this is a benefit to the poor and average Bahamian, why is it that used cars within a certain year range were not granted the bonded warehouse and got these concessions? Will the government explain what, if any, empirical work or consultation they had with the wider industry on this matter?

I wonder if the mantra of friends, family and FNMs is relevant here.

With respect to hotels, no doubt the minister is aware, as I pointed out earlier, that hotels pre-sell packages well in advance.

No doubt the July 1 start date for the VAT increase is imprudent and would inflict much pain on the hotels. Will the responsible minister speak on what allowances he has given the major hotels in the country in this regard? Or how will these sudden draconian steps?

I really do wonder whether the government consulted with anybody, or whether they were all- knowing, or whether they simply knew not what they do. Or perhaps they simply lacked compassion, after all this is the People’s Budget and it’s The People’s Time?

After this consultation exercise, I would not be surprised if we see some adjustments by the end of this budget debate that would further erode the revenue targets.

Did the minister consider that by swapping VAT for stamp duty he is increases the cost of real estate under $100,000 for many Bahamians and increasing the cost for businesses, since The VAT paid by a business could have been claimed as input credit, so this change may inadvertently have the impact of stifling real property purchases and domestic investment by businesses and does not lead to any significant revenue increase. Will the government explain its rationale for this change?

With respect to police certificate costs going from $3 to a whopping $20, this seems to reverse a stance taken by the Rt. Hon. Hubert Ingraham and adopted by all subsequent ministers of finance that these documents, which are an important entry way into the job market for the poor and unemployed, should be off limits as revenue generation source for the government. Seems nobody consulted Papa either.

So on the unemployed now pay $20 tax for police record, $20 for health certificate, and you have to have $200 in the bank to open the bank account before you can get the job. Sees the poor and unemployed will soon not be able to afford to get a job. But I guess that’s OK since this is the People’s Budget and it’s the People Time.

Will the minister advise whether the change in the VAT rules is going to give several large companies in Grand Bahama all hugely profitable companies, more tax refunds – a windfall without receiving anything in return? The government is expanding the definition of transshipment beyond what is generally accepted. Will Oban also benefit from these concessions?

Why is the government seeking to tax Bahamians more whilst giving these companies greater benefits for nothing additional in return? I guess it really is the People’s Budget and the People’s Time.

Has the government considered the impact of higher VAT on deals currently being negotiated especially in Grand Bahama, such as in the proposed Wynn deal for the our Lucaya properties?
Will the concessions given further trigger additional concessions to the major hotels through most favored nation clauses, and how will this further undermine the tax base and their projections?

There are various items exempted rather than zero-rated that the Government bragged about. I wonder whether this Administration understands the gravity of this, how VAT works and what adverse impact this will have on business costs and ultimately higher cost to consumers.
Mr. Speaker, I also note the discussion on pension reform on page 96 of the budget communication. How about the government just get on with this?

Encourage private pensions and create a clear path to implementing mandatory private pensions. It will not only prepare people for retirement but a new pool of funds from these schemes can help to drive economic growth and national development.

The Central Bank has provided data that half the population has trouble making ends meet and most people have next to nothing saved. We have to start teaching people better saving habits and build an economy that provides them with the opportunity to make money. The two must go hand in hand.

With respect to hurricanes and a Disaster Relief Fund. I must say that I find it shocking that given the impact of hurricanes on previous years’ revenue and economic activity, and the mantra of fiscal prudence espoused by this government, that this important item was relegated to three lines in a most voluminous, and wordy document. Perhaps the Minister’s Fiscal Stabilization Plan could take a dose of reality from the former PLP administration who evidenced that but for the catastrophic hurricanes that the deficits trended downward to a projected balanced budget by 2019.

To this end, the government should work with the private insurance industry to design a program that will help to mitigate the volatility caused by these shocks.

As for the Catastrophic Care component of NHI to be implemented this year and the current state of the nation’s healthcare infrastructure, I eagerly await the minister of health’s contribution on how this will be paid for. I see a cut in the budget for health by $15m. He has been talking about a sin tax, I wonder whether that would have made its way into the new user fees schedule somewhere.

In any event, I am pleased that this administration is sticking with this PLP policy initiative.

I’m also encouraged that the government is continuing the City of Nassau Revitalization Act and the Family Island Development Encouragement Act.

Active engagement with the downtown partnership on the long overdue downtown project can inject significant sums into the economy and make a significant boost to the ailing infrastructure and tire tourism product. The government really should use its moral suasion and influence to encourage Bay Street to get on with it.

Mr. Speaker, when it is all said and done, the PLP is aware of the realities in this House. We are a very small minority, though, I would argue more effective than the majority in this place.

We are aware that the government will have its way, whether we believe it is right or wrong. I made these comments today so that history will reflect where we stood and that we tried to warn this administration in its folly.

So let me state what I believe is the most likely scenario.

If we are not careful, a further increase in the VAT is likely if the revenue targets can’t be met – and, unfortunately, I am confident that they won’t be. Said differently, this government will likely be back for another increase in this term, perhaps as high as 18 percent given the exemptions and the impact of tax elasticities and the minister insisting that the government adopt wholeheartedly what appears to be the poorly conceived fiscal stabilization plan of the IMF.

Let us not forget the constraints on other taxes like customs/excise rates given the stated desire to join the WTO by December 2019. It will take time to get the revenue enhancement unit back to the level of efficiency the FNM government met when coming to office.

I urge the minister to slow this down, consult widely and seek some advice from tax experts with established modelling tools and not just swallow the formulaic IMF’s advice hook, line and sinker.

Economic Growth

Mr. Speaker, let me take the time I have left to speak a little bit about what this administration is loathe to talk about: economic growth.

For the past 60 years or more, 80 percent of The Bahamas’ GDP was generated by the two major economic sectors: Tourism and Financial Services. Both sectors were driven by foreign direct investment and foreign currency expenditure by visitors in tourism and foreign clientele in financial services.

Ownership of the Tourism plant and most top management positions in the sector are foreign; likewise, in the banking sector. In other words, the traditional Bahamian economic model is highly dependent on foreign inputs of both labor and capital.

Global changes in the tourism market, increase in cruise shipping, and increased competition from neighboring countries, plus the adverse impact of OECD / EU measures to impose tax information reporting have together curtailed the ability of this model to produce the desired growth rates to transform the economy to a modern competitive state.

In those circumstances, the traditional model appears to be nearly obsolete and should therefore be abandoned or re-constructed to achieve the desired end of sustainable economic growth.

In that regard, policies that are geared towards increased ownership and participation at high levels in the tourism sector by Bahamians could be aggressively pursued recognizing, however, that there is a need for increased local savings to facilitate the investment, as well as a critical need for increased training for high level replacement in the labor force.

Tourism is still one of world’s fastest growing economic sectors and should continue to lead in Bahamian economic development, but with Bahamians at the forefront. In that regard, a policy objective might be to set targets to move ownership and participation rates from the current levels to some desired level over the next decade to foster more Bahamian ownership and wealth creation.

Financial services should be geared inwards to serve the local market offering appropriate services and products commensurate with the needs of the local economy maintaining boutique offshore operations in profitable niches. The compression of the offshore sector is unfortunately, probably irreversible, given the sustained attacks.

I note however, a brewing fight between the USA and the EU on these issues of tax-cooperation. This could be a game changer. Rather than willful capitulation under pressure and flying off to the EU hat in hand, this perhaps demonstrate the foreign policy opportunity to co-ordinate our strategies with our large powerful friends to protect our national interest.

Just suppose, for example, the prime minister had used the platform from his meeting in South America or at CHOGM to have taken a public position soliciting a joint and sophisticated response to the EU. This might that have been more strategic and helpful for the country, rather than continuing the on the corruption soap box.

Mr Speaker, for far too long the country’s focus on Foreign Direct Investment to the disadvantage of Local Direct Investment has placed local investors in a non-competitive advantage.

We need to focus on providing the same and even more incentives and encouragements for local investors to assist them in positioning their business to own our Economy and to compete in the global world today and once WTO goes into effect.

The growth prospects for the Bahamian economy in the short-term are dependent on growth rates of the U.S. economy and there appears to be positive movement in that direction which should benefit The Bahamas, generally, despite what appears to be the government’s efforts to erode any gains.

In the medium or long-term, the structural constraints of the local economy, such as improvements in the skill sets at all levels and a dramatic increase in the savings rate, would need to be vigorously addressed.

Increased resources directed to the educational system and the introduction of a countrywide financial planning program would be a good starting point.

More attention needs to be paid to the adverse effect on the economy because of the over-cautious stance taken by the local banking sector following the great recession in 2008.

The reluctance to extend loans to households, businesses and government is a major impediment to economic growth because it reduces consumption, investments and government spending.

Government, the Central Bank and the Clearing Banks association need to engage each other with a view towards resolving this issue even if it is necessary to employ measures aimed at mitigating the fears of the banking system so that credit flows could be restored to pre-recession levels and ultimately, stimulate economic growth.

Excess liquidity in the banking system is in the region of $1billion; symptomatic of an inefficient use of financial resources.

Foreign Banks are streamlining and leaving Family Islands. This is an issue of connectivity for family islands and a 5% tax on webshop deposits in these remote areas in counter-intuitive.

Perhaps we need to develop an asset allocation model for NIB and allocate a minimum of 10 percent of total assets to alternative investments which will target local entrepreneurs and startups; of course, with appropriate oversight.

We need to provide funding to empower Bahamians. We need to stop granting land and providing concessions to foreigners without obtaining equity participation for Bahamians in some sort of National Wealth Fund.

High energy costs, high labor costs and restrictive access to foreign capital remain critical challenges.

Job Creation and Economic Empowerment

When we talk job creation and economic empowerment, Mr. Speaker, the rate of unemployment in the country is about 10 percent of the labor force, however, the unemployment rate among the youth is in the region of 30 percent.

The youth are the future of this nation and cannot be ignored without dire consequences, Mr. Speaker. It is therefore imperative that any employment policies, including education and training must concentrate on enabling the youth to participate in the labor market and consequently, make a meaningful contribution to the economic growth and development of the country.

So we need to continue to invest in BTVI and the University, and I think that is something that even some of those on the other side recognize: the need for an educated, motivated work force.

Mr. Speaker, if I had three hours I would speak on economic development for two of them. The key to our future is not simply in bean-counting and managing debt. Yes, it is important. More important is moving The Bahamas forward into the future in a determined, smart way. Not trying to out the flames of Bahamian determination by killing off our ability to achieve our potential.

I shall have more to say on the issues of economic growth and development. But I will pause for now, as I thank the wonderful people of Exuma, Exuma Cays & Ragged Island for the good fortune to serve them and speak on their behalf.

May God Bless, Exuma, Ragged Island and the Commonwealth of the Bahamas. Thank you Mr. Speaker.



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