Bahamas Blog International
The implementation of Value Added Tax (VAT) in The Bahamas is not an option, but a necessity
Related to country: Bahamas
The Democratic National Alliance (DNA) asks: WILL THE FAT LADY BE SINGING AFTER VAT?
The public is becoming irate over the July 1st 2014 deadline for the enforcement of VAT. There’s an air of trepidation around lately, and it’s not going away any time soon. According to the PLP the IMF has us over a barrel, and the implementation of Value Added Tax is not an option, but a necessity. However, each country is not affected in the same way, since a lot depends on how it impacts their residents socially. The current administration doesn’t seem to comprehend the ramifications of taxing the Bahamian people at this point in time, with so many families struggling beyond belief. While the PLP Government is pushing VAT as the solution to our financial woes, they are not educating the average citizen or being honest about the potential pitfalls of this regressive tax. They must prove to taxpayers that studies have been done comparing nations with similar economies and populations, by looking at the ratio of upper, middle, and lower classes, and how their quality of life has been affected since the implementation of VAT. This should include how VAT impacts industry, investment, tourism, unemployment, currency stability, crime, minimum wage, cost of living, the size of government and the public service sector. It must be challenging to look at parallels when no two nations are identical, but it’s something that hopefully has already been done by this administration, rather than diving headlong into something which could be disastrous economically and socially.
These were the words of our Minister of State for Finance in February of this year; “Notwithstanding the fact that the government inherited some $100 million in unpaid bills left behind by the previous administration, today the government reiterates its commitment to no increases in taxes on the backs of the Bahamian people.” We in the DNA ask how can there be such a radical change in this government’s outlook for this nation in 9 months that it is compelled to break its promise? Now we find ourselves being forced to accept a tax known to have a negative impact on the middle and working classes, though numerous alternatives have been put forth.
The Minister of State for Finance also stated that; “The government will also enforce fiscal discipline across all government ministries and public corporations. The Ministry of Finance will be restructured to strengthen its organizational capacity to facilitate this.” In this regard the DNA states that recent expenditures on trips overseas seem to suggest we should not have taken that statement seriously, regardless of how adamantly they claim funds in the annual budget were set aside for travel expenses, in order to expedite the nation’s business. We in the DNA ask, did the Council of Economic Advisors promised in the PLP Charter of Governance ever materialize and did they give a unanimous thumbs up on VAT? What irony that employees and businesses feel uncertain about the future, while the aforementioned group (if it exists) was mandated to promote economic growth and stability!
The rising cost of electricity is a major problem for private households and businesses alike, yet once again this government has done an “about face”, and VAT will now be added to our bills essentially doubling up on a service that has already been taxed. The lengthy PLP Charter of Governance doesn’t seem realistic, while plodding through the fool proof strategies and good intentions. Most of us know this administration can talk the talk, but expecting them to follow through is a pipe dream. Reneging on their promise of no increased taxes, and pushing VAT on us should not come as a surprise. In their Charter they stated their intention to lower the cost of electricity (more than once), yet we can expect to have VAT added to our bills next July. We were promised increased efficiency at BEC which has proven to be false considering the number of blackouts many communities have suffered over the summer. The $30 million dollars in lost revenue the PLP is afraid of losing if VAT is not charged on electricity bills, could easily be recouped by legalizing, regulating and taxing the numerous web shops.
A substantial amount of money was wasted on a gambling referendum which turned out to be completely misleading for many Bahamians. Web shops are multiplying daily as a result, while the Gaming Bill has been tabled, so these businesses can’t be taxed. This is a means of collecting revenue that the government seems reluctant to pursue, along with a National Lottery.
After acknowledging that certain food items will be exempt one must still consider other necessities. There seems to be no mention of clothing or household supplies. To an impoverished family, items as basic as a broom or mop may not be in the budget with 15% tacked on. What about men’s razor blades and personal toiletries for women? Will shampoo be exempted and considered the same as soap? What about deodorant and toothpaste? For some families simply affording food items is already challenging! Imagine a family with several children of school age. Consider the mother whose budget is already stretched, trying to calculate the cost of uniforms, books and other supplies after 15% has been added to her bill. There are numerous possible unfortunate scenarios for the middle class and poor. Minimum wage must be revisited. Then we get into the problem of illegal workers in the private sector whose earnings leave the country. Will the 15% be levied on Western Union? What about commission based salespersons? The added tax on the price of the merchandise may discourage customers and would commission be calculated before or after VAT? There are simply too many unanswered questions.
In the end, I expect many Bahamians will opt to make purchases via the internet, cutting out local vendors. Some persons on social media are already upset at perceived increases, which they put down to anxious business owners testing the waters. Increased shopping online and trips to the US will mean less revenue for government and more unemployment if businesses close down. The PLP should not ignore the electorate on this issue. If they do, and VAT causes further hardship for the Bahamian people, the fat lady is sure to be singing.
December 14, 2013
|December 4, 2013 | 7:18 PM
What are the facts on the state of The Bahamas’ finances
Related to country: Bahamas
The VAT series, pt. 2
By PHILIP C. GALANIS
Nassau, The Bahamas -
“... paying down the national debt is beneficial for the economy: It keeps interest rates lower than they otherwise would be and frees savings to finance increases in the capital stock, thereby boosting productivity and real incomes.” – Alan Greenspan, former Federal Reserve chairman
Over the past few months, there has been considerable debate about the government’s plan to introduce a value-added tax (VAT) regime in The Bahamas by July 1, 2014 and about the likely effects that such a tax will have on the Bahamian economy. In fact, the government has made the introduction of VAT the cornerstone of its efforts to reform the country’s taxes.
Last week, we started a series of articles on VAT, with a view to addressing the benefits and costs associated with this new tax system and the challenges that we are likely to face with its introduction and operation. In part one, we reviewed the nation’s gross domestic product and government revenue. This week, we will invite our readers to Consider This... just what are the facts on the state of the country’s finances relative to government expenditures, and the resulting impact on increasingly challenging deficits, and the national debt and do these components necessitate a quantum shift in our tax system?
Government expenditures fall into two categories: recurrent expenditures and capital expenditures. The former includes the on-going annual expenditures that are required to run the government and the latter includes expenditures on infrastructural items such as schools, roads, docks and airports, to mention a few.
The major components of recurrent expenditures include the following:
As we can see, the overwhelming majority of the components of public expenditure are generally fixed, with little headroom for discretionary expenditures. Personal emoluments, or government salaries and wages, debt servicing, comprised of interest on and repayment of the national debt, and payments to public corporations represent approximately 74 percent of recurrent expenditures, leaving only 26 percent of total recurrent expenditures to be spent on discretionary items across the entire government. Difficult decisions have to be made on how such limited funds will be expended and the choices are often motivated by commitments that were made during election campaigns.
Average annual capital expenditures for the same period presented above have amounted to $307 million, which, given our country’s archipelagic realities, is arguably insufficient to meet the growing demands for infrastructural development.
Notwithstanding the increases in annual expenditures, one of the greatest challenges that any government faces is the enormous pressure to reduce or at best limit the rate of increase in spending public funds.
The other pressing issue relative to the facts about our public finances centers around successive governments’ fiscal deficits. Since the turn of the century, we have witnessed an alarming growth in the GFS deficits, ranging from a low of $14 million or one percent of gross domestic product (GDP) in 2001 to a high of $445 million for 2012, 11 percent of GDP, to an even higher projected $532 million or 12 percent of GDP in 2013.
The implications for the economy are immense because these historically high deficits will have to be financed either by increasing taxes or additional borrowings, neither of which is sustainable in the long term. The table below depicts the actual performance of fiscal deficits.
The crux of the fiscal morass that has developed under successive administrations is that, for the first 13 years of this century, recurrent expenditures and the national debt have rapidly expanded at a rate of 185 percent and 226 percent, respectively, while, during the same period, recurrent revenue and GDP have achieved a significantly slower growth rate of only 147 percent and 127 percent, respectively.
The national debt
During this century, the national debt has increased at an alarming rate, from $1.93 billion in 2001 to a high of $4.43 billion in 2013, more than doubling in that period. During the last Ingraham administration, the national debt shot up by almost $1.5 billion, from $3 billion. Another $532 million has been added to the national debt in the past 15 months of the current Christie administration.
The national debt as a percent of GDP has increased from 30 percent in 2001 to 54 percent in 2013. Rising debt-to-GDP and comparatively low revenue-to-GDP have highlighted the critical need for a broadening of the tax base in The Bahamas. A core objective of tax policy must be to raise sufficient tax revenues to finance public expenditure while maintaining sustainable public debt ratios.
If confidence is eroded by lax fiscal policies, we all bear the dire consequences: credit downgrades and higher interest rates for the government and Bahamian businesses and citizens, as well as the potential for further downgrades and higher rates if we fail to act decisively and stop mortgaging our future to support today’s spending. Lest we believe these issues are confined to the government, remember that these higher rates of interest brought on by high government borrowings and debt affect the daily lives of all Bahamians through higher monthly payments for consumer loans and mortgages.
According to IMF predictions, if left unchecked, the central government debt is projected to reach 62 percent of GDP by fiscal year 2016/17. Adding the debt owed by non-financial public corporations the total public sector debt is projected to increase to about 76 percent of GDP by then. And, as a consequence, the ever-higher levels of public funds that are being directed towards debt servicing mean that significantly fewer resources will be available to finance critical investments needed for our country’s economic growth.
The consequences of failing to act promptly and firmly are evident around the globe. Countries that have allowed their levels of government debt to increase sharply relative to the size of their economies have faced sharply higher interest rates and very real difficulties in obtaining financing to pay for ongoing expenditures. In those circumstances, they have had to resort to borrowing from both the IMF and other external sources, which borrowings have been done only on the condition of the implementation of draconian cuts in public spending and public sector jobs, as well as higher levels of taxation. The Bahamas does not want to go down that road.
Minister of State for Finance Michael Halkitis, at a recent address during Accountants’ Week, put it very succinctly: “The Bahamas is at a very important junction in its economic history. We have come to the realization that while the current tax environment has worked to the benefit of our country in the past, if steps are not taken now to make the necessary adjustments to improve the efficiency of revenue collection, our fiscal stance will be significantly worsened in the very near future. We face debt levels cascading to unsustainable levels, credit ratings downgrades, and the need for much severe tax increases and reductions in spending if we do not act now to reverse the trend.”
• Next week, we will examine the government’s plans to introduce value-added tax and explore some of the challenges that face us in the light of that decision. Philip C. Galanis is the managing partner of HLB Galanis & Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to firstname.lastname@example.org.
December 02, 2013
The Nassau Guardian
|December 2, 2013 | 8:28 PM
Coming to terms with HIV in adolescence
More than 2 million young people aged 10-19 are living with HIV. Adolescents are especially vulnerable to becoming infected with HIV and to dying from HIV-associated causes. For the first time, a WHO guideline offers advice on how to better tailor HIV services for this age group.
“I want to know what the health workers are saying to me and understand more about my HIV,” writes one adolescent girl who lives in Jamaica.
“It’s my consent that should be considered, not my parents’. We should be able to get tested at a younger age,” writes another young woman in Zimbabwe.
“I think we need more youth-friendly information related to antiretroviral treatment and secondary effects. Moreover, health providers and young people need to think together on a specific timeline in our healthcare since our needs and expectations are different from adult people,” explains an adolescent boy in Mexico.
These young people living with HIV and dozens of others across the world expressed their worries and the challenges they face in a series of surveys conducted by WHO in 2011 and 2012. Their answers reveal that in many countries and settings, young people lack sufficient access to HIV testing, counselling and treatment.
Urgent need for better tailored HIV services for adolescents
Today more than 2 million young people aged 10-19 years are living with HIV. On the occasion of World AIDS Day 2013 (1 December), WHO has highlighted the urgent need for better tailored HIV services for adolescents.
"I think we need more youth-friendly information related to antiretroviral treatment and secondary effects."
An adolescent boy, Mexico
Death rates among adolescents living with HIV are not decreasing as they are in other populations. Although the global number of HIV-related deaths fell by 30% overall between 2005 and 2012, HIV-related deaths among adolescents increased by 50% during the same period.
“It is critical that countries develop better services for adolescents now and also look to the future, since over the next decade, many children who were infected with HIV at birth will enter adolescence. In addition to the physical changes and emotional ups and downs adolescents experience as they grow from children to adults, they will face the challenges of living with a chronic infection, breaking the news to the people close to them and preventing transmission,” says Jane Ferguson, a scientist in WHO’s Maternal, Newborn, Child and Adolescent Health Department.
Guidance for HIV testing and counselling and care for adolescents
In November 2013, WHO issued "HIV and adolescents: Guidance for HIV testing and counselling and care for adolescents living with HIV" - the first-ever guideline addressing the specific needs of adolescents living with HIV. It recommends that governments review their policies on consent to services in order to make it easier for adolescents to obtain HIV testing without consent from their parents. The publication also provides guidance on how health services can improve the quality of care and social support for adolescents living with HIV.
One approach that has found particular success is provision of HIV treatment and care with additional support specifically for adolescents. A recent study in Zimbabwe, published in the journal AIDS, found that 1776 youths who received treatment in such a programme were no more likely to die from HIV-associated causes than adults – contrary to the overall trend in Southern Africa and worldwide.
Young people responding to the WHO survey made it clear that being among their peers in a health care setting – and interacting with health workers who understand the unique quandaries they face – makes all the difference to them.
“Attending clinic has been easy,” wrote one young woman from Kenya in response to the WHO survey. “We have an adolescent specific day and friendly health care providers.”
|November 30, 2013 | 5:03 PM
The Bahamas government has made the introduction of value-added tax (VAT) the cornerstone of its efforts to reform the country’s taxes
Related to country: Bahamas
The VAT series, pt.1
By PHILIP C. GALANIS
Nassau, The Bahamas -
Death, taxes and childbirth! There’s never any convenient time for any of them. – Margaret Mitchell, “Gone with the Wind”
Over the past few months, there has been considerable debate about the government’s plan to introduce a value-added tax (VAT) regime in The Bahamas by July 1, 2014 and also about the likely effects that such a tax will have on the Bahamian economy. In fact, the government has made the introduction of VAT the cornerstone of its efforts to reform the country’s taxes.
In a series of articles on VAT over the next few weeks, we will address the benefits and costs associated with this new tax system and the challenges that we will face with its introduction and operation. This week, we will begin the VAT series and ask our readers to Consider This... just what are the facts about the state of the country’s finances that have necessitated such a quantum shift in our tax system?
Central to the discussion of the country’s finances is a clear understanding of four basic concepts: gross domestic product, government revenue, the national debt and expenditures. A serious consideration of the facts about the nation’s finances must engender a discussion and understanding of each of these four components. This week, we will consider two of the four components, namely gross domestic product and government revenue.
Gross domestic product (GDP)
Normally referred to as GDP, the gross domestic product is the total value of the nation’s output or the size of our economy. Even more simply put, GDP is the total value of money that is generated annually by the economy. It is an important economic indicator for two reasons: (1) it measures the total size of the economy and reflects its growth or contraction over time; and (2) many of the other financial indicators such as revenue, expenditure, the deficit and national debt are reflected as a percentage of this widely accepted measurement in order to provide an indication of how we are doing generally and how we compare with other countries.
Based on information provided by the Department of Statistics, the GDP for the past six years is as follows:
We can see from the information above that, for the fiscal year ended June 30, 2013, the Bahamian economy returned to the general level of output achieved in 2008. The intervening years reflected a contraction in the economic output as a result of the world-wide recession.
The International Monetary Fund (IMF) forecasts that our GDP will grow at rates of between 3.4 percent to 4.7 percent for the years 2014 to 2017, reflecting both a recovery from the recession and natural growth of the economy. The projected GDP for 2014 to 2017 is presented below:
It is important to note that an overwhelming amount of the country’s economic activity is generated in the area of services. It is estimated that the services, industrial and agricultural sectors account for approximately 91 percent, seven percent and two percent, respectively, of total economic activity. Hence, The Bahamas has developed a vast services economic platform. We will discuss the implications of this reality for government revenue generation in greater detail in subsequent articles.
The government derives its revenue from three broad categories: tax revenue, non-tax revenue and capital revenue. Tax revenue accounts for approximately 85 percent of total tax and non-tax revenue, while non-tax revenue accounts for approximately 15 percent of the total. Capital revenue, which is generated from the sale of government assets, is generally negligible except for the sale of BTC in fiscal year 2011.
For a very long time, customs duties and excise taxes constituted the largest share of tax revenue. Customs duties are import taxes that are imposed at the border on imported goods and the schedule of such taxes could range from a low of duty-free items such as for breadbasket commodities to an average rate of 35 percent for certain imported goods to even higher rates in other cases.
Excises taxes are different from customs duties. Whereas customs duties are import or border taxes, excise taxes are imposed on goods manufactured or produced and sold in The Bahamas as well as certain specified imported products. For example, tobacco, alcohol and gasoline are the three main targets of excise taxes in most countries around the world as they are in The Bahamas. These are everyday items of mass consumption that generate huge revenues for governments. Tobacco attracts an excise tax of 220 percent, and gasoline is taxed at more than $1 per gallon. We also impose excise taxes on imported cars, in some cases as high as 82 percent of the first cost.
Historically, The Bahamas has not imposed taxes on capital gains, corporate earnings, personal income, sales, inheritance and dividends. Instead, we have relied on a very narrow range of revenue sources other than customs duties and excises taxes, namely real property taxes and stamp duties.
Hence according to Minister of State for Finance Michael Halkitis, “Our current system is one where the burden of taxation falls on a relatively narrow base of goods and makes us particularly vulnerable to economic shocks.”
For the years 2008 to 2012, recurrent revenue has remained virtually static in the range of $1.2 billion to $1.4 billion. The recession has adversely affected economic activity and consequently tax collection.
Additionally, the government revenue as percent of GDP in The Bahamas is approximately 17 percent, which is low by a regional comparison of approximately 22 percent, which accentuates the need to increase the revenue base in order to bring us in line with our regional neighbors. The most effective way to achieve this is to broaden the tax base to ensure that a wider cross section of the goods and services available within our economy are subject to taxation.
The WTO and taxation
In addition, The Bahamas government has applied for membership in the World Trade Organization (WTO) and would like to complete that process by the end of 2014. The WTO, whose primary mandate is to level the playing field for trading between its member states, as a condition of membership has required its member states to reduce, if not eliminate, what it perceives to be barriers to trade.
Historically, one of the most effective national tools that countries have employed to limit trade within their borders is the imposition of customs duties. Ironically, in the case of The Bahamas, we have not used customs duties as a barrier to trade because we produce very little that we would wish to protect from the importation of similar and competing products. In reality, for us customs duties have primarily been a vitally important revenue measure, as we have already noted.
Accordingly, The Bahamas’ accession to the WTO creates an interesting and perceptibly intractable quandary: How do we join the WTO, which by its very nature will require us to eliminate a significant portion of the government’s revenue, while simultaneously being able to continue to offer the level of public finance to which we have become accustomed? The answer to this question lies at the heart of reforming our taxes.
Next week, we will review the state of the nation’s expenditures and the resulting impact on increasingly challenging deficits, as well as the national debt. In subsequent articles, we will closely examine alternative tax options and provide our assessment of the government’s planned value-added tax.
• Philip C. Galanis is the managing partner of HLB Galanis & Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to email@example.com.
November 25, 2013
The Nassau Guardian
Caribbean Blog International
|November 25, 2013 | 1:01 PM
Who is Shanendon Cartwright?
Related to country: Bahamas
Résumé of Shanendon E. Cartwright
St Andrews Beach Estate
Franklin Pierce University, Rindge, New Hampshire U.S.A
Bachelor of Arts Degree: English Literature, History
- Founder/Facilitator Vision 21, an educational, community oriented lecture series
- Chairman, Judicial Board, Franklin Pierce University (First person of color)
- Presidents Award for Leadership and Influence, Franklin Pierce University
- New England Collegiate Conference Academic Scholar- Athlete
Scholarship Athlete (4 YEAR), Franklin Pierce University, Basketball (Captain)
DanBrad Limited, McDonald’s
Marketing & Development Manager
- Responsible for all aspects of Marketing and Public Relations
Including print and electronic media for the corporate brand In the Bahamas
- Tasked with the management and career development of (200) employees including entry level personnel and managers
- Charged with the creation and facilitation of all training modules for DanBrad Limited.
Starwood Hotels & Resorts Worldwide
Sales Team Manager
- Trained, managed and supervised team of (10) responsible for Achieving budgeted company goals
- Assisted with closing vacation interval sales
- Provided coaching and training to Sales Executives
Sales Executive of the Year 2005, 2007
Kerzner International, Atlantis
Special Events Manager, All Towers
- Oversaw the logistical and operational support for all High- end events; including Cinematography, music concerts, commercials, sporting and casino events
- Served as liaison between Group Managers and Hotel Operations
Public Areas Manager, Royal Towers
- Directed shift operations for staff of (65) responsible for the cleanliness, upkeep and maintenance of all public areas.
- Facilitated all human resource concerns including scheduling, training and transfers.
Uniform Services Manager, Beach & Coral Towers
- Regulated the transfer of guests luggage from arrival to departure
- Managed staff of (150) including Bellman, Doormen and Valets
- Member of Alpha Phi Alpha Fraternity Incorporated.
- Member of The Ancient, Free and Accepted Masons of Scotland
|November 22, 2013 | 10:06 AM
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