No new taxes or tax hikes to close Dorian deficit gap
The government anticipates using a mixture of lenders to close the expected deficit gap brought on by Hurricane Dorian, Financial Secretary Marlon Johnson said yesterday, adding that the government will not introduce new taxes or raise taxes to make up for the added expenditure in the wake of the storm.
Johnson, who was speaking to reporters following his address to the Bahamas Institute of Chartered Accountants’ (BICA) Accountants Month seminar at the Melia Nassau Beach resort, noted that the government will explain to the Bahamian people, in-depth, the fiscal effects Hurricane Dorian wrought on the country and the government’s fiscal adjustment plan, when it brings its supplementary budget to the House of Assembly.
The recently passed Fiscal Responsibility Act requires that the government produce a fiscal strategy report on the way forward after making adjustments in its spending.
“The government is going to bring a supplementary budget that will account for both the lost revenue and the increased expenditure to rebuild all the infrastructure on the affected islands and to be able to make good on some of the incentive programs it is doing,” Johnson said.
“We anticipate a revenue falloff of $200 million as a result of Dorian. It will throw back the government’s plan a few years. It will delay some of the fiscal consolidation, but it will not cancel it.
“The law requires you to come to Parliament and explain what the impact will be.”
He contended that, due to the country’s strong tax measures, the economy will be resilient enough to withstand the economic fallout as a result of the storm.
“It will take several years to make up some of the lost economic ground and our happy challenge is to see how quickly we can get the rebuild effort ongoing, so that Abaco and Grand Bahama can get back on their feet and start contributing again,” Johnson said.
Johnson explained that for now, the government will borrow to make up the difference between its projected $137 million deficit for fiscal year 2019/2020 and the more than $500 million increase in the deficit expected as a result of Dorian.
“That’s the gap where we have to borrow,” said Johnson.
“There are only two ways for the government to gain revenue, the government has to borrow or the government has to tax. And so the government has taken the step that instead of increasing taxes in the near term, it will borrow to meet the shortfall.
“While I anticipate an inevitable impact in 2020, the rebuilding activity will allow us to survive fairly readily. What’s important with both the government and the private sector is that reconstruction efforts move ahead as quickly as possible.”