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From the Editor’s Desk: VAT Increase

The morning after publishing the last issue of The Abaconian, Parliament dropped a bombshell on the Bahamian People. A VAT Tax Hike from 7.5% to 12% with less than a month for businesses to prepare for it. That was coupled with a bleak reflection of our country’s finances. I’ve been digesting the news, as many of us have, for the last few weeks. My feelings on the subject have ranged from it being an outright slap in the face to it being a necessary evil required to right the ship. I’m still trying to comprehend all the pieces that are being leaked out during the ongoing Budget Debate.

Pieces like: proposed drops in customs and duties, taxes on gambling houses, will the rate be lowered after the supposed three-year debt payoff plan, and many others. This is not good news. It is going to hurt. The question now is: “Will it be worth it?”

VAT hits the poorest of us the hardest. Removing the tax from breadbaskets (a laughably outdated and specific collection of items) is something nice the government can point to, but I believe at the end of the day whatever relief it brings our nation’s poorest will be negated by the increases elsewhere combined with the increased accounting responsibilities.

Speaking of businesses having to change their accounting, the private sector would swallow a general tax increase far less begrudgingly if the new budget included remedies to our country’s notoriously difficult “ease of doing business.” I’ve been running this newspaper for over five years and I do not think there has ever been two consecutive years where my license renewal was A) processed on time or B) listed the same requirements to apply.

If I am to take the government at face value, and give them the benefit of the doubt, then I do understand why they feel this proposed increase is necessary. For far too long we have been presented budgets read to us through rose-coloured glasses while glossing over the true crisis brewing in our nation’s financials. But the plan to pay down our country’s debt in only three years I find to be a little overzealous and negligent of the true price businesses and the people will have to pay.

The private sector is not the “big bad” here. The government fired over $110 million worth of public servants last year. A move, as painful as it is, I applauded considering The Bahamas’ ballooning civil service and red-lining pension fund. However, the private sector, in turn, needs to be healthy enough to pick up the slack of all that human capital.

And slack is the last thing tourism, our biggest industry, needs right now. The proposed implementation of the tax hike with less than a month’s notice is a thorny problem. Places like Hope Town are booked out up to a year in advance. Are all our resorts now to call up their customers and renege on agreed upon room prices or will they just have to eat that 4.5% for each reservation for the next twelve months?

While discussing these problems, and there’s no way to sugar coat them, I still try and remain warily optimistic about the projected end-results. We are in dire straits and tiptoeing along the precipice of ruin. The Prime Minister remarked, noting the surging political backlash, that it will be “Better to lose an election, than a country.” That is refreshing to hear.

However, I think the Bahamian people need a little bit more of a show of good faith if we are tasked with tightening our belts yet again. Things like a Fiscal Responsibility Act with more teeth, the long-awaited Freedom of Information Act and smarter government spending. It will be a disaster if in three years we’re handed another tax increase because the government couldn’t get their own house in order. I plead, if this is the direction you are taking to solve our problems, do not squander it.


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