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Fiscal Reform ‘A Joke’ If No $500m Energy Savings

 

The Bahamas could save up to $500 million per annum with the right energy sector reforms, a Tax Coalition co-chair yesterday saying it was “a joke” to believe this nation’s fiscal and economic woes could be fixed without it.

 

Robert Myers told Tribune Business that the Coalition for Responsible Taxation’s final fiscal reform position paper, set to be presented to the Government by the middle of next week, would include an entire section on energy reform as it believes the two issues are inextricably linked.

 

“We have to do a number of things that are good for the economy, from revenue collection right down to energy reform,” Mr Myers said. “Energy reform will be in our report.

 

“To think you can fix the woes of this country without energy reform is a joke. You’re going to see in the position paper that there will be a section on energy because it’s a big deal.

 

“That’s a significant number if we can get energy prices down to a reasonable level. It could be in excess of $500 million a year in savings to the private sector and the public. Instead of being spent on oil, that could be returned to the private sector and public.”

 

 

Tribune Business reported yesterday that the Government’s proposed Bahamas Electricity Corporation (BEC) and wider energy sector reforms, if it got it right, could offset the negative impact of Value-Added Tax (VAT) and other proposed fiscal austerity measures.

 

Gowon Bowe, the Tax Coalition’s fellow co-chair, said the energy reform initiative could have the “most revolutionary” impact on the Bahamian economy, reducing costs for both businesses and households, and boosting their respective profits and disposable incomes.

 

Mr Myers, meanwhile, told Tribune Business that the Coalition’s final fiscal reform recommendations – which it hopes to present to the Government in time for Wednesday’s Budget – would feature a “laundry list” of proposals besides new or increased taxes.

 

Rather than give the Government ‘a blank cheque’ to just extract more money from taxpayers and the private sector, Mr Myers said a range of accountability, transparency and spending control measures will also be featured.

 

Apart from enforcing the rule of law, greater compliance with existing taxes and spending cuts/restraint, he indicated the Coalition will also push for a Freedom of Information Act and something similar to New Zealand’s Fiscal Responsibilities Act.

 

“That’s how we’re going to get out of this mess,” Mr Myers told Tribune Business. “If they [the Government] want our weight and opinion behind it, we’re going to give them a balanced and responsible position.

 

“Isn’t that the responsible thing to do? Any citizen of this country should be saying the same thing. Stop the madness. It’s gone on too long, and it ain’t working. It’s complex, but it’s not hugely difficult if we all pull together.”

 

While the Coalition, and wider Bahamian private sector, had accepted in principle the need for tax reform and to pay more to the Government, Mr Myers warned this would not happen if the Christie administration was fiscally irresponsible.

 

“You see a willingness on the private sector’s part to do that; we’re willing to pay more in taxes, but we’re not going to do that if there’s no responsibility on the other side,” he revealed.

 

“I can’t tell you how heated people become, but the language in the room becomes pretty strong. There are certain areas of the economy where it becomes a strong, emotive subject. It behooves all of us to do the right thing.”

 

The Coalition is aiming to release its dynamic economic modelling study on the various tax reform options, produced by Oxford Economics, as early as today.

 

It will then meet with the Prime Minister’s Office by early next week, and is hoping to get member and private sector feedback on the empirical data in the Oxford Economics report by the weekend.

 

Finally, the Coalition will submit its position paper and recommendations, based on that study, by the middle of next week. It may be too late, though, to impact the Budget for 2014-2015, an occasion when Prime Minister Perry Christie may set out a defined timetable and schedule for fiscal and tax reform implementation.

 

Mr Myers, meanwhile, explained that the Oxford Economics study and its results would not provide “definitive answers”, explaining that it was “paramount” Bahamians adopted a “holistic” approach” in analysing it.

 

The data will provide an empirical, statistical base for the Coalition’s conclusions, and Mr Myers told Tribune Business: “Between all the data, the right answer exists.”

 

The study has run various tax reform scenarios, including VAT at rates of 7.5 per cent; 10 per cent; and 15 per cent. Two payroll tax options were also included, along with a scenario that combined several tax reforms.

 

Various scenarios also assessed what would happen if no VAT ‘exemptions were permitted; if compliance levels with existing taxes improved; if rates were lowered; and if government spending controls were/were not implemented.

 

Mr Myers implied that the Coalition’s final recommendations will feature a mix of several reform scenarios, and he said: “We know we need a bit of everything. I said months ago that it’s not like we can take a magic pill and our woes go away.”

 

With time of the essence, he added: “We need to move to set the country back in the right direction.

 

“We need to get consumer and business confidence back up. This whole process has hit business confidence, people have retrenched and they’re not spending. As soon as we can get to a conclusion, the better. It doesn’t behoove any of us to wait.”

 

Source: http://www.tribune242.com/news/2014/may/21/fiscal-reform-a-joke-if-no-500m-energy-savings/



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