Opposition not surprised by IDB review of price control policy
‘There are other alternative policy approaches that would be much more effective’
Opining that it is not surprised the Inter-American Development Bank (IDB) declared the Davis administration’s recent price control adjustments a “a de facto combined turnover tax and income redistribution policy”, Kwasi Thompson, the shadow minister of finance, said yesterday the Free National Movement (FNM) is hopeful but not optimistic that the government would end its “ill-conceived and horribly executed price control revisions”.
Suggesting a more targeted approach to provide relief from the inflation crisis to vulnerable Bahamians, the IDB said in its Caribbean Economic Quarterly that the expansion of the price control list is likely to impact small and medium-sized enterprises negatively and disproportionately, because they are more likely to have neither the volume of sales nor the economies of scale to absorb the per unit loss of revenue.
“The opposition makes this exact point in our press statement on November 7th, 2022, when we explained to the Davis administration that their approach put an extremely unfair burden on small businesses throughout the country. The FNM has been saying long before the price controls were implemented that the government needed to act decisively to address the spike in inflation. More so, we have repeated our recommendations on what could be done,” Thompson said.
“We note that the IDB report also agrees with the opposition, that there are other alternative policy approaches that would be much more effective in helping vulnerable Bahamian families navigate the direct impacts of this inflationary spike on their standards of living. The Bahamian people are hurting.”
Contacted yesterday, Minister of Economic Affairs Michael Halkitis declined to comment.
The IDB suggested that instead of a “blunt policy” like price controls, the government should consider a more targeted response, such as conditional or unconditional cash transfers, including transferring Sand Dollars to restricted digital wallets.
Thompson said the Davis administration should go further and again called for the immediate elimination of value-added tax (VAT) on the medicines, food supplies and other items that had been zero rated under the Minnis administration.
“Indeed, the FNM supports expanding that list to include other critical food supplies as necessary. Expand the social services voucher program to provide direct support to needy qualifying families, to assist with the purchase of medicines and critical food supplies. Because the FNM believes in fiscal discipline and order, we propose the following to help offset revenue lost with the VAT reductions and the increased spending on social service support programs: reinstate the 12 percent VAT on real estate transactions over $2 million,” he said.
“This was a tax break to the wealthy that was not and is not warranted! End the tax breaks provided to the wealthy after the budget ended for the purchase of their yachts and pleasure craft. Cut in half the allocations for foreign travel, for consultancies and for special celebrations and events. This would provide tens of millions of dollars in budgetary allocation to support the expanded spending on social welfare programs. We hasten to remind the public that this government increased travel and consultancies in its first full budget, June 2022, while cutting substantially the allocation to social services.”
