Minister Turnquest accuses past governments of under-budgeting

BUDGET DISCUSSION: Marlon Johnson, Financial Secretary within the Ministry of Finance (left) and Minister of Finance and Deputy Prime Minister Hon. K. Peter Turnquest (right) held a Town Hall Meeting on Saturday at Calvary Temple Church to elaborate on the 2018/2019 Budget. (PHOTO”: JENNEVA RUSSELL)

The government still seeks to make the case that the huge hike of the Value Added Tax (VAT) is necessary, while blaming past governments over the last 20 years of under-budgeting.

However at a town meeting this past weekend Grand Bahamians generally expressed concern over the apparent insistence of the central administration to stick with that 12 percent figure.

Minister of Finance and Deputy Prime Minister of the Commonwealth, Hon. K. Peter Turnquest, along with his Financial Secretary within his Ministry Marlon Johnson, held a town meeting this past Saturday at Calvary Temple Assembly of God Church on Clive Avenue in hopes of relaying a better understanding of the 2018/2019 Budget Communication that was laid in the House of Assembly on May 30.

While DPM Turnquest acknowledged that many Bahamians throughout the Commonwealth, “are fixated on the significant aspect of the proposed Value Added Tax hike increase by 4.5 percent” he argued that there is much more to the present budget that will positively impact Bahamians in meaningful ways, leading to overall empowerment for themselves and for their families.

The group of residents present for the meeting listened intently to both Turnquest and Johnson during their presentations. Nevertheless when the time came for them to put questions forward the main item was the significant hike in VAT, especially here on Grand Bahama. Residents expressed concern about the negative impact for the average Bahamian, during such a slow economic time, for this island in particular.

One concerned resident asked about the amount of VAT revenue that has been collected since it was implemented by the previous Administration.

DPM Turnquest responded.

“Since 2015, when VAT was implemented it was about $2.5 billion but the revenue collected paled in comparison to the overwhelming liabilities the government incurred.

“Besides all of this additional revenue, we are still worse off today than we were during the former administration, and that is because costs have gone up significantly in the same period. First of all, salaries alone, in the last five years went up $266 million. We ran up a debt, in the last five years, over $2 billion, not including the $1.4 billion that we had to borrow this year, to cover last year’s debt. So, you want to know where the VAT money has a lot of programs, a lot of hiring contracts, for questionable reasons, a lot of wastage and corruption. While we have been in office for a year, and we accept the responsibility for that year, and necessarily, we have to accept the burden of the past 45 years, because governments are continuous. To try to put that on us, without recognition of how you got here, it is not going to help us to recognize the challenges that exist.

“When we talk about this 4.5 percent increase in VAT, the fact of the matter is, we considered what we could do to generate revenue. We looked at customs duties. We looked at Real Property Tax and what we could do, to increase compliance and drive other revenues. But even after doing all of that, we still had a hole that we could not fill and so we had to look at Value Added Tax.

“The question has been asked why we had to go all the way to 12 percent. Why not nine or 10 percent? We could have done that but all you would have done ... you still have the $400 million hole. So we would have had to go out and borrow that money. You would still have this interest that is piling on you, and it would be worse because while the interest is growing, you are increasing your tax on people. So you would be getting it on both ends, building up more debt and increasing the taxes. You are not fixing the problem. When you keep doing it, you will get to the point where you cannot borrow anymore and that mix is going to cost you a lot more than 12 percent. That is the reality because the debt that you continue to borrow is not stopping. That interest rate is not stopping.

“We looked at rates, from eight percent, all the way to 12 percent and we settled on 12 percent, because it gives us the best opportunity to deliver a balanced budget. We stop borrowing and we start addressing the big problem, which is that debt, getting that back down, within manageable levels. Twelve percent was not just picked up out of the air. There was sound reasoning for it. There is no point in playing around with it and making people pay on both sides. We have to come to the middle.

Turnquest stated that the larger picture of the 2018/2019 Budget is about the empowerment of the Bahamian people, throughout the Commonwealth.

“Everyone is fixated and hung up on the 12 percent but, they are not looking at what is in there (budget), what it means to you as an ordinary citizen, the opportunities that are being presented in that budget.

“There is plenty in there for the Bahamian people, to empower the Bahamian people; that is what this is about. If you read that document, not only are we telling you what we are doing, but we are putting the money where our mouth is; we are telling you.

“In this budget, we are making provisions that you can go to Bahamas Technical and Vocational Institute (BTVI) for free, learn a skill, whether that skill takes you six months, a year, or two years. You can go on from there and get certifications; BTVI has a City and Guilds program; certifications that you can go and demand a job, or, create your own job. Not only are we giving you the skills but we are setting up a small business development center, that will help you to get into business, mentor you, through that startup phase, to ensure that you have the best chance, holding your hand in a sense.

“Not only that, we are putting $5 million in the budget for capital, for funding. We are training you. We are holding your hand and making sure that you do the things correctly; understand what you are getting into and we are giving you the money, to start your business. That is the vision of this government. We are trying to empower people.

“The budget that is presented here today, gives you self empowerment. It tells you the opportunities that are there for you to empower yourself and be beholding to no man, to take care of your family.

“That is what this is about, building up and making sure that every Bahamian has an opportunity in this country and is not disadvantaged by the fact that they did not grow up in a known family with certain resources. That is what this is about, empowerment.”

He further stated that while some people are worried about 12 percent, others are taking advantage of the opportunities that exist within the budget in terms of self-empowerment.

He said that the government felt it necessary to host such a town meeting to give persons a better understanding of the details of the budget. Both he and Johnson encourage every Bahamian to read the budget in detail, in order to obtain more knowledge on the Ministry of Finance’s thought process with respect to moving forward with the government’s purse.

Turnquest spoke of the government’s intent to explain the budget, although he did not give any reason as to why such interaction and consultation did not take place prior.

“One of the things that we decided very early on, understanding the nature of the budget and the provisions that it contains, is that we wanted to go throughout the communities of The Bahamas, to explain our rationale, to explain the makeup of this budget and to explain what it is that we are trying to achieve by the incentives and concessions that are contained in it.

“We will continue to do a series of these, throughout the Family Islands, and indeed I will be back in Grand Bahama, from East to West; ensuring that our people understand. One of the problems that we have in the country is that we tend to not want to read the details and so we hear a spin on a particular component of the budget and it becomes gospel and everything else after that gets lost in the noise.”

“Our government was elected by the citizens of The Bahamas to deliver on the plans and actions that we set out in our manifesto in 2017, to deliver stronger growth of our economy, more jobs and a better life for all. At the end of the day, that is what we all want and what we, as your government as working to achieve in this five-year mandate.

“The budget that I presented a week ago Wednesday, is therefore important to all Bahamians. It tells you how your government is managing the hard earned tax dollars that we collect from you during the year, and what we plan to do with those dollars in the next year. It is our report card to you. We are responsible for collecting and properly managing those dollars. We are also fully accountable to you, so you can see where and how we do the things that we do, on your behalf.

“For 20 years, governments in this country have failed to manage the nation’s finances the way they should have been managed, transparently, so that you could truly see what is going on, accountability, so you can get all of the facts, and responsibly, so that what is spent, is in line with what is collected, with no need to borrow for excessive shortfalls.

“Year after year, governments have in fact spent far more than they could afford, that has resulted in annual fiscal deficit. They then had to borrow, to make up the difference. As a result, we now have a large national debt, or mortgage, if you will, on which we must pay interest, year in and year out; valuable dollars that could otherwise be used to deliver on better health care, education, roads etcetera.

“Unfortunately that is not the end of the story. Year after year, successive governments have under budgeted for known commitments, that is, commitments like rent, light and water. (They) just failed to budget for them, again accumulating a massive arrears of liabilities for the government, because there was no money budgeted to pay them. By doing this, they were able to present a much rosier picture of the nation’s finances than actually existed. Of course, all will understand where that leads to.

“As I said in the budget, we now find ourselves with a mountain of such bills, to the tune of some $360 million, that is left over, still to pay. It should be noted that when we came into office, we made the call for all liabilities of the government, and we were presented with bills of $400 million or thereabouts. We borrowed, in our borrowing plan, to pay those $400 million. When July came around, we found that there were people approaching us, for bills that we knew nothing about, that were not disclosed, in our budget calls, somewhere around $200 million. We managed to pay those bills through the current budget that was allocated and then we had some calls on us, as a result of the downgrade, where some of our creditors, made a margin call, meaning that we had to put money in, to secure the loans, unexpectedly.

“We then get to September/October and make a third call for any liabilities and we found more bills. When we went to do the budget call for this year. Another $360 million shows up, and so all of the cash management and operations that we did, leading up to last year’s budget, we got sidetracked in some ways, with these bills that came up.

“Such flagrant misuse and mismanagement of our nation’s finances should obviously never happen again,” informed the Minister of Finance.

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