0

Govt ‘Taking From Peter To Pay Paul’

Deputy Prime Minister Peter Turnquest.

Deputy Prime Minister Peter Turnquest.

* Juggling liabilities as revenue dries up

* DPM: 'An uncomfortable position to be in'

* Chamber urges VAT quarterly filing 'deferral'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government is performing a high-wire juggling act with its finances by “robbing Peter to pay Paul” to meet critical liabilities as they become due, the deputy prime minister revealed yesterday.

K Peter Turnquest told Tribune Business that the Minnis administration is being forced to switch scarce resources around to meet key spending priorities and commitments as a result of COVID-19 having reduced revenue flows to a trickle.

Acknowledging that it was “an uncomfortable position to be in”, Mr Turnquest said the government is also deferring obligations where it can as it seeks to ride out the remainder of the 2019-2020 fiscal year ahead of the May budget.

Questioned by this newspaper about the pandemic’s impact on the government’s own income, he replied: “I have to ask you: What revenue? It doesn’t take much to figure out that we’ve had a significant deterioration in tax collections at this point, which is why it’s important that those who are able to make their payments do so.

“Again, we have to continue to rob Peter to pay Paul. It’s just the reality of where we are, and whenever you’re in those circumstances it’s uncomfortable but that does not mean the liability goes away. It means you defer it, and that’s always an uncomfortable position to be in.”

Mr Turnquest said he could not provide figures for the revenue decline, but it comes as little surprise given the tourism shutdown and subsequent economic lockdown produced by COVID-19. The Government’s income is derived from economic activity, primarily consumption, via VAT and border taxes; tourism; real estate; and Business Licences, most of which has come to a complete halt.

He added that the Government was preparing for “a very low revenue year” in 2020-2021 due to COVID-19’s lingering economic fall-out, with the Ministry of Finance asking all ministries and public sector agencies to scour their budgets for spending cuts and savings during both the remainder of this fiscal year and next.

“We have asked the ministries and agencies to review their budgets and look for non-discretionary expenditure that we might be able to once again defer or reprioritise, particularly this coming year given what we anticipate will be a low revenue year,” Mr Turnquest added.

“The same applies to the remainder of this fiscal year. We’re asking the agencies to be as conservative as possible as we make our way through this period.” Yet while The Bahamas may be facing further fiscal austerity, the deputy prime minister blasted the Opposition’s leader for causing unwarranted “anxiety” by alleging that the Government was planning to cut civil service salaries.’

Philip Davis, in a late night statement on Wednesday, said: “I have learned today that the Government is proposing matters which, in fact, might severely reduce domestic spending and demand. There is a proposal to force cuts in all ministries, including possibly the salaries of public servants.”

But Mr Turnquest, vehemently rejecting the claim, said: “The Government of The Bahamas has not put forth any proposal or recommendation for a reduction in the public service payroll. It is unfortunate that the leader of the Opposition has sought to add additional anxiety to a country that is already fearful of the health crisis, and what that may mean for their families, as well as the financial crisis.

“I don’t know what leader operates off rumours, but I guess that says more about him. The Government of The Bahamas has made no such recommendation. Certainly the Ministry of Finance has not, and I don’t believe the Ministry of Public Service has made any recommendation with respect to trimming salaries at this time.”

Cutting the $700m-plus annual civil service wage bill at this time would likely be unwise given that it would likely drop consumer spending to almost-negligible levels. The public sector, and its 20,000-plus employees, remain one of the few consistent sources of aggregate demand left in The Bahamas given the mass lay-offs and struggles in the private sector.

The latter, through the Bahamas Chamber of Commerce and Employers Confederation (BCCEC), last night urged the Government to defer the upcoming April 21 VAT filing/payment for quarterly filers to provide such micro, small and medium-sized enterprises (MSMEs) with the cash flow and financial breathing room to sustain themselves until the lockdown ends.

Jeffrey Beckles, the Chamber’s chief executive, said of the private sector’s rationale for the plea: “It’s going to give them an opportunity to breathe. We want to exploit opportunities as far as we can go to give them the tools to get through this downturn. That’s what the Chamber has committed to do. We wish we had a magic potion, but until that time we have to figure out the best way to give them a fighting chance and go from there.”

The Chamber, in a statement, said Mr Turnquest had promised to give the “deferral” call for quarterly VAT filers “serious consideration” but he was unable to make any commitments. The Government, too, will be desperate for every cent of revenue it can get, with the major contributors likely to be food stores, pharmacies, gas stations, communications firms and others exempt from the lockdown.

However, many companies are likely to seek a “credit” from the Government as their VAT ‘input’ payments will be greater than those on their ‘outputs’ due to their closure and absence of any revenue streams.

“The Novel Coronavirus (COVID-19) is a health and economic crisis of epic proportions,” the Chamber said, adding that “businesses are faced with the difficult decision of having to reduce staff and manage operational costs, while the Government of The Bahamas continues to work on keeping its citizens and residents safe in the face of the spread of COVID-19.

“At the time of the initial VAT deferral [in March] no one knew how long businesses would not be allowed to operate. In the interim, businesses have continued to pay employee salaries, company utilities and rent. They also had to pay vendors for goods shipped prior to the shutdown, customs to clear shipments from the docks, additional security services to protect closed premises, along with other expenses.

“Given the fiscal state of many of these MSMEs, it is the Chamber’s strong recommendation that the Government of The Bahamas defer the payment of VAT quarterly filings. This will assist the business community with its cash flow during these challenging times and, in some cases, will prevent their permanent closure.”

The Chamber’s statement came hours after the Department of Inland Revenue issued its own release reminding the private sector that VAT filings and payments for March are due on April 21.

“Although some businesses do not have access to all their latest records at home, due to the COVID-19 related closures, they are able to file VAT returns based on an estimate of turnover for the period and submit amendments later,” the Department of Inland Revenue added.

“While there will be no penalty for businesses who submit amendments for filings during the emergency order, the penalties associated with late filings are still in place.” It said it was still continuing to process Business Licence applications and renewals; real property tax payments; and tax payment plans, as well as stamping documents for VAT and dealing with first-time home buyer exemptions.

Gaynell Rolle, the Department of Inland Revenue’s acting comptroller, suggested many companies would likely qualify for the Government’s $60m tax credit/deferral initiative geared towards supporting medium-sized firm payrolls as around 50 percent of firms owe Business Licence fees.

“We want to assist as many businesses as possible and encourage businesses to apply online,” she said. “Our records show that almost 50 percent of businesses have outstanding business licences. Not all of these are eligible for the tax credit or deferral. However, we encourage all businesses to reach out either to establish a payment plan or to apply for the tax relief programme.”

Comments

Clamshell 2 months, 3 weeks ago

If anything spreads faster in the Bahamas than a virus, it will be the belief that, “Because of this emergency, I don’t have to pay my taxes, or my electric bill, or my water bill.”

3

Well_mudda_take_sic 2 months, 3 weeks ago

Darn it !

I didn't know I don't have to pay my water bill too.

0

birdiestrachan 2 months, 3 weeks ago

There must be some Truth to what Mr: Davis has said.?? according to the reaction of Mr: Turnquest.

There are so many unemployed people looking to the Government for assistance. The Government does not have any money growing on trees.

The Bahamian people will have to face these facts.

1

moncurcool 2 months, 3 weeks ago

Truth and Davis in the same sentence. Now you done it. Please, Davis is only trying to create havoc.

0

hj 2 months, 3 weeks ago

Running low on money already. No surprises there. A population that depends so much in tourism,and expects the government to solve all their problems. A large number of civil servants that at this moment supposedly is " working from home" whatever that means.The shutdown of the economy is not a long or even medium term solution. By the time any other industries develop,IF they develop,it will be too late. Everyday that passes the government is running out of choices,so something is gotta give.

3

Clamshell 2 months, 3 weeks ago

Yup. How does a Customs inspector or a Road Traffic agent “work from home”?

2

moncurcool 2 months, 3 weeks ago

Half of them who supposedly working from home won't even respond to an email. Go figure.

0

ohdrap4 2 months, 3 weeks ago

No one is robbing Peter.

It is we getting robbed to pay these maharaja civil sevants.

1

Well_mudda_take_sic 2 months, 3 weeks ago

In one breath Turnquest says:

“Again, we have to continue to rob Peter to pay Paul. It’s just the reality of where we are, and whenever you’re in those circumstances it’s uncomfortable but that does not mean the liability goes away. It means you defer it, and that’s always an uncomfortable position to be in.”

And then in the next breath he says:

“The Government of The Bahamas has not put forth any proposal or recommendation for a reduction in the public service payroll. It is unfortunate that the leader of the Opposition has sought to add additional anxiety to a country that is already fearful of the health crisis, and what that may mean for their families, as well as the financial crisis."

Why should lowly paid private sector employers and employees (the so called "Peters") lose their businesses and jobs, and at the same time be robbed by government so that government can continue to pay the very privileged government employees (the so called "Pauls") their full pay and full benefits? Why shouldn't elected officials and all government employees be made to fairly share in the severe pain of this grave economic crisis by incurring at least a 50% pay cut? And the same goes for the management teams and employees of all taxpayer subsidized government corporations, SPVs, etc.

Both Minnis and Turnquest need to quickly put petty politics aside and accept the harsh reality, as Brave Davis already does, that now is not the time to play political games and try 'buy' voter support. Government employees (most of whom are no longer working) must be made to shoulder their fair share of the pain in this most severe economic crisis. That's just plain financial common sense.

If Minnis and Turnquest are so concerned about the resulting impact in the loss of spending power in the local economy, then let them arrange for the truly needy who have lost their jobs and have no income at all to receive the financial help they deserve by reducing the government payroll in a a big and meaningful way.

Minnis and Turnquest must accept that no financial pain for the civil work force means no gain for the country, and possibly risks triggering explosive discontentment born out of great unfairness. The sooner they begin wearing their thinking caps the better, because the clock is all too quickly down on meaningful measures that can still be taken in an orderly way.

1

moncurcool 2 months, 3 weeks ago

The government has not even cut any civil servants salary or positions and Davis already making noise. Imagine if the government does cut each by a percentage. Davis would be all over the news talking about how uncaring the government is.

The reality is while a cut may be needed, one needs to get idiot unions on board for that to happen. And which union you know is for the good of the country and not themselves?

1

Well_mudda_take_sic 2 months, 3 weeks ago

Under a declaration of emergency no one needs to be asked to get on board with anything, especially union leaders of all people. The entire civil work force simply needs to be told by the Supreme Authority that starting with the next government pay day they're all gonna get half of what they were getting before until such time that our country's economy allows for more to be paid. And all members of parliament should lead by example and have their pay, allowances and other benefits immediately cut by 50%. It's just patently wrong that only the Peters in the private sector should suffer while the public sector Pauls feel no financial pain.

0

Well_mudda_take_sic 2 months, 3 weeks ago

P.S. Healthcare professionals and workers actually treating (having direct exposure to) covid-19 patients should be exempt from the pay cuts, but only to the extent they earn less than a certain minimum amount.

0

tetelestai 2 months, 2 weeks ago

You can't cut civil service salaries (i.e. not meaning "double dippers"/ "contract workers", but true civil servants). You cut their salaries and the economy is absolutely finished. Cant believe people are still trying to justify this nonsense.

0

Porcupine 2 months, 3 weeks ago

A disorderly way of making meaningful measures has an element of appeal to some, as well. Which is a more likely scenario?

0

tetelestai 2 months, 2 weeks ago

Mudda, as someone (you) who once had - maybe still do have - political ambitions, I strongly suggest that if you want to continue in politics that you surround yourself with a good economist. What you are proposing here (reducing civil service during a pandemic) is so contrary to hundreds of years of documented academic research. It is like suggesting that the earth is flat...no hyperbole. If you cut or reduce the civil service salaries, you will plummet your country into the dark ages. Crime, devaluation of dollar, hyper inflation (if we are lucky!) would all result. It appears that you are trying to be "political" and not "economic". Don't go down that road, my friend. Now, before you retort with a smart ass, "I know everything answer", I suggest you do some quick research to see if what I am saying is accurate. Then, happy to engage in a civil discourse.

0

TalRussell 2 months, 3 weeks ago

Dangerously baffling not see a devaluation colony's dollar when a colony's comrade finance minister, steps forward publicly admit that his ministerial work days are chiefly occupied tying figure out how long he can continue be robbing from Peter to pay Paul out the little revenue stream still flowing into PopoulacesPurse...yet finance minister has sworn an oath that he has no intention of reducing government's payroll, nor benefits, nor cutting number workers, despite an epidemic of dwindling revenues.
Remember, tis the crown minister's own admissions and omissions that should be bothering to your mind, not mine, okay. Nod once for yeah it makes sense, twice for no it sure hell, doesn't?

0

Honestman 2 months, 3 weeks ago

Regardless of the Minister's protestations, government cannot avoid looking at civil wage roll as the first and most obvious big ticket expense item to be reviewed. As Mudda says, you cannot expect those in the private sector to endure all the pain when civil servants remain protected. For those civil servants who are unable to carry out their duties from home then you cannot expect the private sector to carry them for any significant period of time. Who will be carrying the straw vendors, the taxi drivers, the shop assistants on Bay Street? So like it or not, government is going to have to do something about that civil service wage roll even if the Minister doesn't want to admit it at this moment.

4

tetelestai 2 months, 2 weeks ago

There is nothing well or said about this. And, quoting Mudda on financial or economic matters is not the best strategy. You cannot "cut" civil service salaries. It will exacerbate the destruction of our economy and will, without questions, plummet us into a level that we do not want to be. This is very much basic economics 101...it really is. It is amazing that people actually think this, worse that people actually think this is a good idea.

0

moncurcool 2 months, 3 weeks ago

While I agree with you, name the unions that will stand up and support that? Already the nurses union crying about shifts and money not even touched yet.

0

hrysippus 2 months, 3 weeks ago

It was a good ride while it lasted but the country has now run out of fiscal rope. After 47 years of the government borrowing millions of dollars every year and then also using nib to purchase its own debt, time is now up and the day of reckoning is upon us, financial reckoning that is. Everything has now changed and our lives will never be as they once were. The fiscal hurricane is bearing down as a category 5 and we have no time left to build or install even one shutter.

0

SP 2 months, 3 weeks ago

After biting the bullet and paying business license fees, the automated system does not generate a printable certificate, and I have found "Reaching out" to Inland Revenue" 100% impossible because no one answers the phone!

We are dammed if we do and dammed if don't!

Additionally, as a small business owner, there is no government financial assistance available. How are we supposed to survive?

0

ThisIsOurs 2 months, 3 weeks ago

"robbing Peter to pay Paul" The new name for international transfers must be Peter

0

Sign in to comment