PLP ‘outrage’ over planned VAT hike
The official opposition yesterday expressed outrage over the announcement that value-added tax (VAT) will increase to 12 percent as of July 1.
“Today, ladies and gentleman, is a very sad day,” said Shadow Minister of Finance Chester Cooper at a press conference in the Minority Room of the House of Assembly after Minister of Finance Peter Turnquest delivered his budget communication.
“The government shamelessly announced an increase in VAT from 7.5 percent to  percent, a whopping  percent increase.
“This is an outrage. The minister of finance showed the Bahamian people that he has no idea what he and his government are doing. This is a budget of pain and no gain.
“They come yet again to blame and have no shame for their one year of failure – loss of jobs and more people accessing social services. Added to that, they are raising taxes on the backs of the poor. People [are] crying in Grand Bahama to fix Grand Bahama.
“No good news here. Bad news all around. They have truly depressed the nation today.”
In his communication, Turnquest said the government must find a way to pay off its “massive backlog of arrears” and set the stage for pending reductions in customs duties when The Bahamas accedes to the World Trade Organization next year.
Cooper insisted, however, that the government’s plan to increase VAT is not only “treacherous” but also “reckless”.
“Let me emphatically state that the PLP does not support any increase in taxes in this budget exercise,” he said.
“We will vote against these tax increases. The key to raising revenue is to grow the economy – something that the PLP has been shouting in the House of Assembly since the last, disastrous budget communication.
“But more basic than that, it flies in the face of widespread agreement among experts that adding exemptions to value-added tax is the least efficient way to make VAT collection work. This is not economics. This is politricks and obeah economics.”
Cooper added, “The Inter-American Development Bank, the International Monetary Fund, Standard and Poor’s, Moody’s, New Zealand VAT experts and the Chamber of Commerce’s consultants from Oxford all agreed that VAT should be implemented at its current rate with no exemptions.
“What research has the government undertaken to determine that exemptions, despite the best advice form throughout the world, is the best course of action and not merely a political gimmick?”
Cooper told reporters, “The FNM is undoing progress on the most progressive tax reform in generations without understanding what it is it is doing. This is the same FNM that voted against VAT, claiming it would inflict pain and stress on the middle class and the poor; they called it double taxation.
“In opposition, the now prime minister said it would remove the hope of a better life.
“Now there is a move afoot to throw what has worked successfully out of balance.”
Cooper quoted comments Free National Movement Leader Dr. Hubert Minnis made in December 2016.
Minnis said, “I don’t believe in increasing taxes. I believe in decreasing taxes and increasing opportunities. Increasing taxes is a lazy way out. When you don’t want to think, you just tax.”
‘Smoke and mirrors’
Along with the VAT increase, the government also announced yesterday the removal of VAT on breadbasket items, except sugar.
The government is also eliminating VAT on medicines and on residential property insurance.
VAT will also be waived on residential electrical bills that are $100 or lower and on water bills that are $50 or lower.
“While we recognize the government has waived VAT on breadbasket items, we must be careful that we do not in the end, cause the poor people in our country more hardship by doing what was done,” Cooper said.
“All the advice which was obtained suggests that you think you are helping the poor but by the cost of administration being more expensive, you actually make it worse for the poor.
“In the end, you have to make up the loss of revenue with higher taxes, as we have seen announced today.
“This is a shameful exercise of smoke and mirrors. One hand giveth whilst the other taketh.”
VAT was initially proposed in 2013 by the Christie administration at a rate of 15 percent.
However, strong opposition from the business community and widespread consultation resulted in the implementation of VAT at its current rate of 7.5 percent.
Cooper said, “What was different then from today was that the government consulted widely, and they listened to the various consultants that I mentioned and it was determined that the 7.5 percent with no exemptions was the best methodology.
“They listened to the consultants, they listened to the business community and they consulted widely. That has not happened in this case.”
Englerston MP Glenys Hanna-Martin questioned the government’s management of VAT during its first year in office.
“The record of 7.5 percent has been high performing revenue, very adequate and the question [on the campaign trail] was ‘where the VAT money gone’,” she said.
“…I think the question [now] is, in the last 12 months, what happened? All of a sudden it’s underperforming.
“They need to explain to the Bahamian people, why have [they] not been able to maintain the revenue levels and…have turned around now seeking to burden the Bahamian people to make up for [their] shortfall.”
PLP Leader Philip Brave Davis insisted that the government’s budget is in contrast to its recent comments on the turnaround of the Bahamian economy.
“To have them today painting this picture of crisis and this is the only way out of it, to support and to justify the raising of VAT by  percent, that is ridiculous,” he said
“…What has happened within the last year that has caused you to have to go this high?”
Davis added, “I’m even more firm in my belief that it is a recessionary inducing budget. It’s no doubt and it’s very scary.
“I share the view of my colleagues that the competence of this government has to be called into account.”
Education: Vrije Universiteit Brussel (University of Brussels), MA in Mass Communications