“IRRESPONSIBLE”: Minister of state for finance says PLP VAT pledge would lead to $100M revenue falloff

Thompson blasts PLP’s economic plan as “self-serving populist politicking”

NASSAU, BAHAMAS — Minister of State for Finance Kwasi Thompson yesterday blasted the Progressive Liberal Party’s (PLP) pledge to reduce value-added tax (VAT) from 12 to 10 percent for 12 months as “irresponsible”, stating that such a move would lead to dramatic revenue falloff in excess of $100 million.

Thompson said in a statement: “It is regrettable that the opposition would use a matter as serious as our fiscal and economic health to choose to engage in rank populist politicking. They will say anything to win an election.

“We remind the opposition that the government operates under the Fiscal Responsibility Legislation — enacted by this administration — precisely to eliminate the kind of arbitrary and self-serving positions put forward by the shadow minister of finance (Chester Cooper) over the weekend.

“The opposition’s plan would lead to a dramatic falloff in revenue likely in excess of $100 million during their proposed 12-month period, at a time when the country’s fiscal resources are under tremendous strain and the needs for government to support social and economic programmes are even more pronounced.”

On Sunday, while unveiling its 10-point economic plan to “Recover, Rebuild and Revolutionize” the Bahamian economy, the PLP promised that if elected to govern, it would recommend the country’s minimum wage be increased to $250 per week and reduce VAT to 10 percent “across the board” for 12 months.

Thompson, in responding to the PLP’s pledge, however, said: “The government cannot operate by trial and error. The 12-month period will only destabilize the economy, causing the PLP to have no choice but to return VAT to 12 percent the following year or increasing to 15 percent.

“The country needs stability and consistency. And to compound their folly, without any analysis on the impact, the opposition is promising to spend even more on programmes while they gut the revenue base on a short-term political adventure.”

He added: “It would be impossible for the government to maintain its spending levels with that level of loss in revenue. It is completely irresponsible.

“Which existing programmes will be cut to make up for this $100 million revenue loss? Will they cut back on the free tuition to UB (the University of The Bahamas) and BTVI (Bahamas Technical and Vocational Institution) students?

“Will they cut back on the extension of free private school pre-school grants for Bahamian mothers? Will they cut back on the benefits under NHI (National Health Insurance)?

“Will they cut back on critical Family Island infrastructure? Will they cut civil servant salaries and benefits?

“They themselves claim that they will do an analysis of the fiscal situation once they are in office. But without this review that they claim is critical, now that we are on the verge of election, they have already decided the course of action.

“Bahamians would do well to note that they themselves have admitted that they plan to act first before assessing the situation. Perhaps they do not yet realize that that approach to governance is why the Bahamian people fired them in the first place.

“This FNM government does not play dangerous games with the fiscal health of the country. That is why — despite the two most impactful economic disasters in the history of the country — our plan has been clear and effective.

“We must take care of our people by providing the necessary support. The plan calls for better tax enforcement, reforming state-owned enterprises, managing our expenses with more focus on public-private partnerships for critical infrastructure and sustainable debt management.

“We must also be focused on growing the economy, improving the ease of doing business, growing the digital economy and digitally transforming government.

“There is no magic bullet or quick fix.”

Thompson argued that the Minnis-led administration “has set the standard for fiscal transparency and accountability” in The Bahamas, adding that the country will rebound from the current economic situation stronger and more resilient.

“This government will continue to make the investments in education, in small business support, in agriculture and in infrastructure. We will do so on the basis of sound economic and fiscal planning,” he said.