The headlines were dominated by the lively, provocative and sometimes confrontational Parliamentary debate of conscience on and second reading of the 4 Constitutional Bills and passage of the Value Added Tax Bill (VAT) and regulations. A vote on the amended constitution bills in addition to the amended Status of Children Act is scheduled for Monday, 25th August 2014.
The VAT Bill passes in Lower House
With a vote of 22 yeas, 8 nays and 6 absent, the landmark VAT Bill was passed into law and onto the Senate on the 20th August 2014. This consumption-based tax regime essentially reforms our existing tax system and will be assessed at a rate of 7.5% on goods and services effective 1st January 2015. With services comprising 60%-70% of the Bahamian economy, VAT is expected to capture a significant percentage of the economic activities currently untaxed and effectively broaden the tax base. VAT is predicted to increase the cost of living by as much as 5%.
These policy and legislative actions come many years after The Bahamas was advised by international agencies to broaden its tax base as Customs Duties, Stamp Taxes, Excise Taxes, Business License Fees, Real Property Tax and Transportation Taxes etc. were inadequate in meeting the growing costs necessary to fund the delivery of public goods and services across our archipelago.
Having incurred burgeoning deficits for 17 and the last 21 fiscal years, there was general agreement on the need for tax reform. There are estimates that the government currently collects between 16.2 and 18.2 cents in taxes and fees for each dollar generated by the economy; this was unsustainable given the growing demands for public services.
As tax hikes tend to affect the poor disproportionally, a safety net program, inclusive of the IDB funded Conditional Cash Transfer regime, is being developed by the Ministry of Social Services and Community Development to offer financial assistance to the poor and most vulnerable in our society. Of course VAT is being implemented in conjunction with other policy initiatives geared to stimulate economic growth, improve public revenue performance, enhance revenue collection and control spending as a percentage of GDP.
In making the case for tax reform by way of announcement through his 2012/2013 budget communication in the House, a White Paper on Tax Reform was subsequently released in February of 2013 in which the Prime Minister stated the following:
“The provision of programmes, services, and infrastructure by the Government is vital to the general welfare of the citizenry of The Bahamas and the orderly, progressive development of our nation. However, for this role of Government to be financially sustainable, it is incumbent upon citizens to conscientiously discharge their tax obligations to the state. This is the only way in which the government can, in turn, amass the necessary financial resources to meet its own obligations to the Bahamian people.”
In his House presentation on the VAT bill this week, the Prime Minister spoke rather extensively on the deep and broad consultative process that brought his government to this point. He stated that one of the reports which the government had received was the “Compass Lexecon study which concluded that a VAT is by far the superior new tax policy instrument for The Bahamas. A VAT provides the best combination of revenue generation, enforceability, efficiency, fairness and compatibility with economic growth. On the latter point this study is consistent with the vast international literature that ranks various instruments in respect to their so-called “friendliness” to growth, with VAT being a much better choice than personal and corporate income taxes and payroll taxes.”
Other local and international organizations the Bahamas government consulted with were The Coalition for Responsible Taxation, Crown Agents, the Bahamas Hotel and Tourism Associations; Dr. Don Brash and Mr. John Shewan, consultants from the government of New Zealand; the International Monetary Fund (IMF) and the Inter-American Bank (IDB).
Prime Minister Christie also commented on the consequence of inaction by repeating the current reality that the country was potentially facing another downgrade of its sovereign credit rating and a hit on its international reputation if the government did not act decisively. In the end it was a tough, difficult, unpopular, but necessary decision the government had to make…….and it did.
COB gets a new President
In formally announcing Dr. Rodney Smith as the new President of COB, Education Minister Hon. Jerome Fitzgerald told reporters that he consulted with and received assurances from three stakeholders before advancing Dr. Smith to Cabinet. They were the community at COB, including UTEB, COBUS, the Public Service Union and the alumni representative; the wider community and international accreditation bodies.
In consulting with the accreditation bodies, Minister Fitzgerald said that he wanted to ensure that the appointment of Dr. Smith as president would in no way adversely impact the ability of the college to receive the accreditation necessary for university status. “I have spoken with persons associated with the accreditation process in the United States and have been assured that Dr. Smith’s past mistake, for which he has taken full responsibility, will not be considered in the accreditation process” said the Education Minister at a press conference at the Ministry of Education on the 20th August.
COB gets its own law program
Following the Council’s approval for the establishment of an autonomous Faculty of Law at the College of The Bahamas (COB) beginning this fall, Deputy Prime Minister and Minister of Works and Urban Development the Hon. Philip Davis addressed COB law students at the Harry C. Moore Library under the theme, ‘The Importance of Law in The Bahamas and its impact Nationally and Globally.’
This autonomy will end the existing franchise with the University of the West Indies (UWI) over a three-to-four-year transition period.
The Deputy Prime Minister assured the students of the Government’s support, which will manifest itself by way of amendments to the Agreement forming the Council of Legal Education (CLE) to recognize and facilitate this relatively “novel concept.”
He said, “as a consequence, students of UWI and other accredited law faculties in the region (Guyana, Jamaica and COB) will be granted direct entry into the Eugene Dupuch Law School upon satisfying the requirements.”
DPM Davis addressed students on Tuesday, 19th August 2014
Last but not least and on a lighter note, the Prime Minister of the Commonwealth of The Bahamas got his three score and ten and then some when he celebrated a birthday on Thursday, 21st August 2014. I join many Bahamians and well wishers outside The Bahamas in wishing him a Happy Birthday.
