by Rick Lowe
Gowon Bowe, Chairman of the Bahamas Chamber of Commerce, has reportedly stated that the government's new tax compliance initiative would "assist in increasing annual revenue, decreasing annual deficits and generating annual surpluses."
Cast your mind back to 2014 and very similar, if not the same arguments were put forward about VAT when the Bahamas Chamber and other groups went along with the implementation of a Value Added Tax at 7.5% (instead of the proposed 15%).
A year and a half in, VAT has hampered economic growth and many believe it has exacerbated the wasteful spending by a government that now appears even more cash strapped than before VAT was introduced.
This points to the core issue with the country's fiscal problems: Spending, waste, "leakage" (read theft of tax dollars) and an ever growing monolith of power and regulations.
No obvious steps have been taken by the government to hold the line on spending since VAT was introduced. Instead they argue that controlling their inflated budgets (note this is not even suggesting a 5% decrease in spending) to compensate for slower economic growth would be detrimental. Presumably they think the burgeoning deficits and debt are not harmful.
It is cause for concern when the Bahamas Chamber of Commerce gives up on sound fiscal principles in order to go along to get a long with the party in power.
The argument that the result of taxing people more will "assist in increasing annual revenue, decreasing annual deficits and generating annual surpluses" is specious based on the governments fiscal track record. The trend line of the debt and deficits over 40 years - which includes many tax increases along the way - casts a long shadow of doubt on this reasoning.
There is also no guarantee that increasing taxes will increase revenue in a declining economy. Higher taxes might slow economic growth even more.
Yes, we've seen this movie before and the outcome is not very pleasant so far.
