business@tribunemedia.net
FRIDAY, DECEMBER 22, 2023
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Hitting Gov’t deficit target ‘increasingly complicated’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Government will find it “increasingly complicated” to hit this year’s 75 percent deficit-slash target, a major global bank has warned, while predicting this will “shift the debate back to tax reform”. Santander, in a November 28, 2023, update for institutional investors on The Bahamas’ fiscal status, hailed the “important progress” made by the Davis administration in achieving a 2022-2023 fiscal deficit that came in below the original $564m target to give this nation some “near-term breathing room”. However, its note warned that “the good news now might be behind us” with the Bahamian and world economy’s post-COVID reflation largely complete and this nation’s Budget lacking sufficient flexibility to make expenditure adjustments following the end to pandemic spending on subsidies and other relief. Pointing out that debt servicing costs have increased significantly postCOVID, due to the debt blow-out that it and Hurricane Dorian produced, to now stand at 4.2 percent of gross
* Santander: ‘No clear plan’ for $390m slash * But hails Gov’t on ‘near-term breathing room’ * Says unlikely to go for ‘necessary tax reform’ domestic product (GDP) as opposed to 2.6 percent pre-pandemic, Santander asserted that “no clear plan” has been articulated as to how The Bahamas will achieve the magnitude of the correction it is targeting. Openly stating that “the next phase for fiscal consolidation is much more challenging”, its report said: “The fiscal targets are now increasingly complicated on shifting a nominal -4 percent of GDP deficit to near balance this fiscal year and, still more important, consolidation to a 1.5-2 percent of GDP nominal surplus in fiscal years 2024-2025 and 2025-2026.” That amounts to a $389.5m correction, or reduction. While agreeing that the Government’s “more ambitious trajectory” would be more beneficial to The Bahamas, in terms of easing the high interest and financing burden on Bahamian taxpayers, Santander reiterated it was “not clear” how the 2023-2024 targets will be realised given the absence of tax/revenue
reform and “budget rigidity” given that most spending covers fixed costs such as salaries and rents. “The more ambitious trajectory on fiscal consolidation would provide some welcome relief not only on the high plus-80 percent of GDP debt ratios but also the high 22 percent of gross financing needs and the high interest at 23 percent of government revenues in 2022-2023,” it added. “The first preview to 2023-2024 shows the seasonal shift back to surplus in July 2023 but a lower surplus compared to July 2022 ($18.2m versus $41.3m). It’s not clear how the gradual consolidation will shift a 4 percent of GDP deficit to near nominal balance in fiscal year 2023-2024 at -0.9 percent of GDP. “The official fiscal year 2023-2024 projection includes equal adjustment for a 1.7 percent of GDP increase in revenues and a 1.7 percent of GDP cutback in spending. There was no improvement on revenues/GDP this SEE PAGE B04
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URCA’S BPL FUEL TARIFF REVIEW ‘SOUNDS BIT ODD’ * Regulator to evaluate charges it already approved * Opposition chief asserts: ‘They are doing this late’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Opposition’s leader yesterday asserted “it sounds a bid odd” that regulators now plan to examine the lawfulness of Bahamas Power & Light’s (BPL) fuel charges having previously approved them. Michael Pintard said the Utilities Regulation and Competition Authority (URCA), based on its 2024 annual plan, is preparing to “audit” the very same BPL fuel charge ‘glide path’ strategy that it approved in late 2022 and which subsequently resulted in “sky rocketing” electricity bills for Bahamian households and businesses. “My first reaction, if my recollection is correct, URCA approved
OPPOSITION leader Michael Pintard. the rate increases for BPL. If I’m correct, the approved the ‘glide path’,” the Free National Movement (FNM) leader told this newspaper. “It sounds a bit odd to me that they are now going to review the very thing they’ve approved.... They are doing this late. This ought to have been done prior to them giving BPL approval to proceed. “I would like to see what the data says, but we are of the view that they justified SEE PAGE B04
SMALL BUSINESS ACT: PROVE SERVICES EXPORTS DESERVE VAT-FREE RATING ‘LET’S CLOSE THE DEAL’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net A SMALL business advocate is pledging to “close the deal” on legislation to advance the sector’s interests in 2024, adding: “This is my last year in pushing for this Act.” Mark A Turnquest, the 242 Small Business Association and Resource Centre’s (SBARC) founder, told Tribune Business that his personal 14-year quest for a Bahamas Micro, Small and Medium Size Development Act (MSME Act) will be handed over to the organisation’s “new management team” to pursue if it does not happen next year. “This is it. This is my last year in pushing for this Act,” he said. “It’s been too long now; time for them [SBARC’s management] to take it over. This is it. This is my last year. I tell you now this is it. We’re going to close on this this year and
MARK A Turnquest bring everybody on board. “We now have to close the deal. I will never go away from advocacy, but I will not be doing it all myself. I first developed the framework 14 years ago, and this has to be where I reach the end of my journey. I gave it all for small businesses in this country. My whole life, since God gave me strength in my eyesight, has been to focus on the Small Business SEE PAGE B08
DON’T LEAVE FISCAL CHANGE UNTIL ‘THINGS GETTING DICEY’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas must not leave the need for any fiscal adjustments to the stage where “things get a bit dicey”, a governance reformer advocated yesterday in backing the IDB. Hubert Edwards, head of the Organisation for Responsible Governance’s (ORG) economic development committee, told Tribune Business that the Inter-American Development Bank’s (IDB) call for the Government to make any necessary Budget and medium-term Fiscal Strategy alterations in response to changing conditions and circumstances was “sound”. With the Davis administration forecasting a 75 percent or $389m yearover-year decline in the 2023-2024 fiscal deficit, as part of its strategy for producing a Budget surplus the following fiscal year, he agreed that it should not unduly delay any changes
that become necessary but added that moving in the “general” direction of the consolidation path laid out will be sufficient. “Anything that threatens that on a fundamental level, where it is recognised there is going to be a shortfall in revenue or over-spending and a need for additional spending, the Government must make early adjustments,” Mr Edwards told this newspaper. “Despite maybe not making the 0.9 percent of GDP deficit target, which is what the IMF has promulgated, I think the general trend of moving the deficit downwards vis a vis two to three years ago and making progress towards a surplus is very important at this time. “It’s not necessary in the grand scheme of things that we need a balanced Budget at this time, but having regard to the creditworthiness of the country and the debt circumstances and the SEE PAGE B07
BAHAMIAN accountants must prove audit and other services they provide to financial services entities are “for purposes outside” the jurisdiction to obtain VAT-free treatment, the tax authorities have ruled. The Department of Inland Revenue’s acting VAT comptroller, in an “advance ruling” dated October 31 this year, responding to a request for clarification from an unnamed accounting said the VAT treatment
depends on whether “the benefit or advantage” from receiving their services occurs outside or within The Bahamas. Should accounting services be supplied for “purposes outside The Bahamas, the tax authority warned that firms must obtain records from their client to prove this and make them available for inspection to obtain a VAT-free or ‘zero rating’ designation. This will enable their client to avoid the standard 10 percent levy. Pretino P. Albury, the Bahamas Institute of
Chartered Accountants (BICA) president, could not be reached for comment before press time last night but sources told Tribune Business that the ruling and its implications have prompted discussions in accounting circles. At least one source, speaking on condition of anonymity, questioned whether applying VAT on services charged to Bahamas-domiciled corporate vehicles - such as International Business Companies (IBCs), trusts and investment funds - typically used by international clients was the right way to
boost financial services competitiveness. Another suggested the supply of such services had been VAT ‘zero rated’ until the law was changed to address the ‘ring fencing’ concerns of the European Union (EU) and Organisation for Economic Co-Operation and Development (OECD). One accountant said some were discussing whether to absorb the VAT rather than pass it on to their clients. Referring to the accounting firm’s request, the acting VAT comptroller SEE PAGE B06