The Bahamas needs Fiscal Reform not just Tax Reform - PowerPoint PPT Presentation

The Bahamas needs Fiscal Reform not just Tax Reform www.wakeupbahamas.com

• A Division of the Chamber of Commerce representing 20+ Industry Associations, 700+ Businesses, 60,000+ employees • We have earned the Government’s attention and have a seat at the table to discuss the issues facing our country • The Government listened to our first requests: • Demand the Facts, Demand a Delay, Demand Alternatives • Delayed VAT implementation, Reduced the rate & simplify the tax • Now we must demand Fiscal and Energy Reform. • We need YOUR support! YOU can help us make a difference! The Bahamas needs FISCAL REFORM not just Tax Reform! www.wakeupbahamas.com

Our fiscal health is in poor condition! www.wakeupbahamas.com

The Symptoms Real GDP Growth % year 14 12.96 12 10 8 6.94 6 4 3.71 3.39 2.70 2.63 2.52 2 1.83 1.72 1.66 1.45 0.99 0.88 0 -1.26 -2 -2.32 -4 -4.18 -6 1998 2000 2002 2004 2006 2008 2010 2012 Source: IMF. IMF 2014 mid year projections lowered to 1.2% www.wakeupbahamas.com

The Symptoms Fiscal Status 9000 8000 7000 6000 5000 4000 3000 2000 Government Debt 1000 GDP 0 1993 1998 2003 2008 2013 Source: Data from Central Bank www.wakeupbahamas.com

The Problems Fiscal Status 1900 Recurent Revenue 1821 1800 Recurrent Expenditure 1737 1700 1642 1632 1600 1550 1529 1500 1503 1499 1452 1445 1432 1421 1400 1331 1300 1292 1200 1100 2008 2009 2010 2011 2012 2013 2014 Source: Data from Central Bank

The Problems Capital Expenditure Share of GDP 6% 5.0% 5% 4.3% 3.8% 4% 3.3% 3.3% 3.2% 3.2% 3.0% 3.0% 2.8% 3% 2.7% 2.6% 2.6% 2.5% 2.4% 2.3% 2.1% 2.1% 1.8% 2% 1.7% Suggested 2% Threshold 1% 0% Source: Data from Ministry of Finance

The Problems Capital Expenditure $350,000,000 $300,000,000 3.6% 3.1% Capital Expenditure $250,000,000 Suggested 2% Rate $200,000,000 $150,000,000 2.5% 1.7% $100,000,000 2.2% $50,000,000 $- 1993 1998 2003 2008 2013 Source: Data from Ministry of Finance

The Problems Debt Burden Debt interest payments as a share of GDP 3.0% 2.6% Over 1 Billion Dollars in the last 5 years $205m 2.2% 2.5% 2.1% $172m $173m 1.8% 2.0% 1.6% $150m 1.6% 1.5% $128m $113m $116m 1.5% 1.0% 0.5% 0.0% 2005 2006 2007 2008 2009 2010 2011 Source: Data from Ministry of Finance www.wakeupbahamas.com

The Problems The fiscal status quo is unsustainable and mounting debt, continued deficits, unchecked capital & recurrent spending, inefficiencies, corruption, lack of accountability, adherence to the rule of law and poor policies are making the Bahamas regionally and globally uncompetitive. We will continue to see negative fiscal results and further downgrades by rating agencies until the leadership and government of the Bahamas implement FISCAL REFORM not just tax reform. www.wakeupbahamas.com

The Symptoms Unemployment Bahamas Unemployment Rate 18 16.2 16 15 14 14 12 10.2 10 9 8.6 8 8 6 4 2 0 2002 2004 2006 2008 2010 2012 2014 2013 Comparisons: New Zealand 6.4%, U.K 7.5%, U.S.A 7.3%, Barbados 11.7%, D.R 13% Turks & Caicos 5.4% (2007)

The Symptoms Tourism Market Share Share of Caribbean Overnight arrivals total Total inbound travel spending 11% 10% 9% 8% 7% 6% 5% 4% 2003 2005 2007 2009 2011 2013 Source : Oxford Economics/UNWTO www.wakeupbahamas.com

What We Know • The Bahamian dollar is pegged to the US dollar meaning global competitiveness is key for our economy’s return to equilibrium. • Tourism together with tourism-driven construction and manufacturing accounts for approximately 60% of GDP and employs over half the country’s labour force. The Bahamas must be globally and regionally competitive by • creating an economic climate which attracts business and tourism. • Existing tax compliance is well below international standards. • The Rule of Law is not enforced evenly or fairly. • Electricity costs are twice what they should be and thus causing a huge drain on foreign reserves and businesses to be uncompetitive. • The cost of debt from banks is too high and is choking growth.

“We must address the PROBLEMS not the SYMPTOMS” www.wakeupbahamas.com

What happens if we do nothing? Cayman Islands - Debt to GDP 23% , Aa3 rating, stable Dominican Republic – Debt to GDP 46% , B rating, negative Bahamas – Debt to GDP 66% , Baa1 rating, negative Barbados – Debt to GDP 80%, B3 rating, negative St Kitz – Debt to GDP 83%, rating, negative Antigua – Debt to GDP 89%, rating, negative Cyprus – Debt to GDP 121.5.7%, rating Caa3, positive Jamaica – Debt to GDP 133.7%, rating Caa3, positive Greece – Debt to GDP 174.7%, rating Caa3, stable www.wakeupbahamas.com

What happens if we do nothing? • Our credit rating will continue to decline • Our debt will cost us more to service (interest payments on debt alone are currently above $210,000,000 / year) • Greater pressure to maintain foreign reserves • Risk of dollar devaluation against US dollar • As taxes rise to meet larger debt businesses will become less competitive regionally and globally www.wakeupbahamas.com

Demand Enforcement of the Rule of Law • Improve Private Sector Legal Enforcement – The informal economy must be shut down immediately. • Legislate Government Watchdog/Ombudsman • Enact the Freedom of Information Act • Apply the rule of law evenly and fairly to all citizens including Politicians and Civil Servants. www.wakeupbahamas.com

Demand Accountability • Government employees are not accountable for revenue collection & shrinkage • Termination of Civil Servants’ employment is made almost impossible by “General Orders” • Financial reporting structure does not comply with International Financial Reporting Standards (IFRS) • No Transparency or Freedom of Information Act • Routine overspend on Government budgets According to the 2014 mid-year budget the Government is running a monthly deficits averaging almost $40 million. That’s $1.3 million dollars per day! www.wakeupbahamas.com

Demand Efficiency • “Too much spending, too much taxing and too much government” (Maurice McTigue MP & Cabinet Minister N.Z. and one of the architects to the “New Zealand Miracle”) • The Government’s inability to collect existing taxes means they need to raise taxes to make up for what they don’t collect! This increases costs to the formal economy further incentivizing the informal. • What is the Public getting for it’s dollars from it’s Government? In 20 years recurrent expenditures have nearly tripled. Government services have not improved by the same amount? MOF data reports that civil service wages account for 34.4% of all Government • spending. General Orders have burdened the civil service and created massive inefficiencies. • Public ownership of utilities leads to high prices and inbuilt inefficiency. “We sold public companies and productivity went up and cost of services went down translating into major gains to the economy” (Maurice McTigue) The result – A $5.5 billion National Debt www.wakeupbahamas.com

Demand Energy Reform

Demand Fiscal Reform • Fixed Budget Caps or debt to GDP caps • Financial Reporting systems complying with International Financial Reporting Standards (IFRS) A Transparent Capital Expenditure Program • • Demand Government productivity & accountability • Review all operations and reform the Civil Service • Review of monetary policy • Lower interest rates • Freedom of Information Act & Whistleblowers Act www.wakeupbahamas.com

Address the PROBLEMS Not the SYMPTOMS www.wakeupbahamas.com

The Way Forward Experience in countries such as New Zealand shows us that this process can be reversed dependent on the introduction of high levels of fiscal reform, transparency and effective enforcement of the rule of law . www.wakeupbahamas.com

Take Action! I f your not part of the solution, then you are part of the problem . Join the Bahamas Chamber of Commerce • • Donate to our cause so we can keep Bahamians informed • Sign the new petition at WakeUpBahamas.com The Bahamas needs Fiscal Reform not just Tax Reform www.wakeupbahamas.com