NASSAU, BAHAMAS — As 2022 comes to an end, the government has not reached a decision on whether the National Insurance Fund increase will be introduced in the upcoming year nor specifics on the amount, according to Minister of State in the Office of the Prime Minister with Responsibility for National Insurance, Myles LaRoda.
On Wednesday, the minister said that the fund is expected to lose an estimated $70 mil in the upcoming year and explained further that an audit showed that the fund is expected to run out in six years.
“That’s about $6 mil per month and in the upcoming year, even though there is projected improvement in revenues it’s still not going to make up that black hole.
“So notwithstanding the economy just opening up and businesses may be doing a bit better but there are still tough times in our community; but that decision will have to be made and its being considered we just don’t have a date yet for informing the public on what the decision is going to be,” LaRoda said.
With the clock ticking on the issue that will impact thousands of Bahamians, Economist Gowon Bowe explained that holding off on the implementation of a tax strategy will inevitably cause more problems in the future.
“I think that this is one of those circumstances where indecision is the worst decision, even if they are making slow and incremental changes that are built toward the long-term goal of saying that, I need to get to this particular rate and I started to increase it immediately but not with its full intent and purpose,” Bowe said.
Increasing the NIB contribution rate, looking at a greater return on investment, and lowering administrative costs to be as efficient as possible are some ways that Bowe said the government can begin chipping away at the issue.
Bowe said: “If I start addressing it then I will be better suited to have some positive outcome than if I continue to just defer and delay because ultimately all its doing is increasing what is eventually going to have to be taxed from the very persons and participants with national insurance.”
“The government is going to have to make a decision in the upcoming year as to what its position is going to be as we move forward as it relates to the increase.”
Bowe explained that he understands that it is a tough decision to be made, he however pointed to other circumstances where the government had to make tough calls financially for the economic sustainability of the Bahamian society, like price control and value-added tax.
“National Insurance sustainability should be seen as intricacy linked with the future of the sustainability of the country’s finances because of their integrated financial circumstances but more importantly for individuals that do not have any other benefit for pension other than national insurance,” he said.
The economist said that taking into consideration, what can be afforded, where the needs are, and how long the problem can be delayed without repercussions are the main questions government needs to look into when deciding on how long they are willing to hold off on the increase.
Bowe said: “We should have been making these decisions decades ago so if we want to look at it in a particular manner, the failure of previous administrations, multiple administrations to make the revolutionary adjustments in order to protect its future sustainability, means that every year that passes without those will make it more expensive and costly in order to correct it.”
He added: “[…] Government unfortunately allowing its desire to be politically popular influence and negatively enable it to actually demonstrate that it is taking the steps necessary to sustain the future benefits that will be provided by national insurance.”
