Former Prime Minister Dr. Hubert Minnis’ claim that he never saw an International Monetary Fund (IMF) report that recommended an increase in value-added tax (VAT) to 15 percent because the election was ongoing is the “height of political mischief and ineptitude” and proves why Minnis was not fit for the job, Attorney General Ryan Pinder said yesterday.
“Not only is this shocking, but the political mischief…of the member for Killarney when he says he had no sight of the IMF report — this is the sitting prime minister of the Commonwealth of The Bahamas who commissioned the very same report and says he did not receive the report, he did not see the report because he was too busy campaigning,” Pinder said in the Senate during debate on the supplementary budget and an amendment to the VAT Act.
At this point in Pinder’s contribution, Senator Viana Gardiner rose on a point of order and said Pinder was seeking to impune the character of Minnis.
But Pinder pressed on.
“Not seeing the report that he commissioned is worse than the bad decisions he made as prime minister,” he said.
“As such, it is more and more clear that he was not fit for the job.
“It can’t be good governance to say that the prime minister of a country can no longer govern and turn his attention to matters of such important national interest as its tax regime because he was campaigning for an election in which he and his woeful administration got rolled out.
“This is the height of political mischief…and/or ineptitude — you choose. Or, even worse, it’s an insatiable appetite for power no matter what the consequences are to the country.”
Last week, Prime Minister Philip Brave Davis said that the IMF recommended to the previous government that if it did not change its VAT structure, the tax would need to be raised to 15 percent.
He suggested that this recommendation was why Minnis decided to call an early election.
“Now, I know you all remember that the member for Killarney told the Bahamian people that he went to election eight months early because the country faced headwinds and tough decisions,” Davis said.
“We said at the time that he wanted Bahamians to vote before he raised their taxes, and this major tax increase appears to be what he had in mind. Raising VAT to 15 percent would have turned headwinds into a hurricane.
“Raising VAT to 15 percent wouldn’t have been just a tough decision, it would have been a terrible decision that would have plunged our economy into a downward spiral, past the point of no return.”
But Minnis said while his government approached the IMF to assist with a tax study, he had no intention of raising VAT and he never saw the report.
“I never saw this report,” he said.
“Cabinet never saw this report. The report would have come during the time of election and [the Ministry of] Finance had the report. I never, nor Cabinet, saw the report.”
Minnis recently said he called an early election because difficult times were ahead for the country and the government needed a new mandate to make some “very, very difficult” decisions.
The Free National Movement was voted out of office on September 16.
Under Minnis, VAT was increased from 7.5 percent to 12 percent and several items were zero rated.
Pinder said this was a bad decision.
“…Increasing the rate of VAT 67 percent on the Bahamian people wasn’t enough for the prior administration,” Pinder said.
“They went on to [change] the VAT regime by including multiple exemptions and zero rates, against the advice of experts, international advice, domestic advice, and best practices.
“The evidence of this ill-advised decision on how to administer VAT is clear in the recent report of the auditor general, where, as a result of the direct decisions of the former administration, consumer spending nosedived by 34 percent or $2 billion in the year, and VAT revenues, as a result of the increased rate and adjustment in exemptions and zero-rated items, rose a mere $27 million.
“The evidence of the prior administration’s management of VAT is evident; you decrease the economy by $2 billion and you raise $27 million. The math makes no sense to anybody who can look at it.”
Members of the opposition, when debating a bill to decrease VAT, have repeatedly criticized the decision to reintroduce VAT on breadbasket items and medication.
Pinder, however, said that a return to a VAT regime that incorporates zero-rated items and exemptions will result in “the same mismanagement of the prior administration of the VAT regime and would have resulted in a likely increase in the VAT rate consistent with their commissioned IMF report”.
He said the Minnis administration made the tax decisions naively and not based on actual evidence.