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2006/07
Budget Communication Honourable
House of Assembly
by
Rt. Hon. Perry G. Christie Prime Minister & Minister of
Finance
31st
May, 2006
Mr. Speaker:
I
have the honour to present the 2006/07 Budget Communication.
INTRODUCTION
Before
entering office in May, 2002, my Party worked hard to earn the trust of
the Bahamian people.
Since
May, 2002, my Government has remained true to its principles and
commitments. We have worked tirelessly to prove ourselves worthy of the
trust reposed in us by the people of our country.
Our
dedication to the interests of the Bahamian people is there for all to
see.
Our
achievements include the introduction of a tourism anchor project to
virtually every significantly inhabited Family Island;
·
we are arranging the supply of potable water to each and every
Island;
·
we are providing the telecommunications links throughout The
Bahamas which will enhance the security of The Bahamas by providing a
sound communications infrastructure in the event of national emergencies
such as hurricanes;
·
the telecommunications infrastructure will also enable every
Bahamian to benefit from e-government, from the internet, and from
distance learning;
·
we are on the threshold of transforming the tourism and
transportation sectors of New Providence;
·
we are working diligently to aid the restoration of Grand Bahama
and we have provided $8million in the 2006/07 Budget for that purpose;
·
we are placing enormous emphasis on all aspects of urban renewal
to deal especially with the problems of disadvantaged youth, the elderly, the sick and the poor;
·
we are putting in place ambitious but achievable programmes and
strategies to move aggressively to attack the problems of crime and
illegal immigration which together constitute the greatest source of
worry and anxiety for the Bahamian people;
·
we are improving our educational system with special emphasis on
vocational training and the development of the College of The Bahamas,
and the introduction of much-needed reforms and innovations in our
primary and secondary school systems;
·
as evidence of our deep commitment to providing housing for lower
income families, we have built more than 1,366 new homes in the first
four years of our administration which is already more than the previous
administration built in its entire two terms in office;
·
we are enabling our health care system to raise the standard of
delivery of essential health services;
·
and we are laying the foundations for an appropriate system of
National Health Insurance which promises to be one of the most important
instruments of social and health care reform in our nation’s history.
Make
no mistake about it, Mr. Speaker. My Government’s record is clear. It
is as unequivocal as it is undeniable. We can lay claim to an exemplary
record in managing the economy since entering office in 2002. Moreover,
we have secured the future economic prospects of The Bahamas, prospects
which are unrivalled in this Region and without precedent in the
economic history of our country.
Each
of the Ministers in my Government during the course of the Budget Debate
will be pleased to enlarge on the proud record of his or her portfolio
and to back up my words.
THE
SUCCESS OF OUR ECONOMIC AND SOCIAL PROGRAMME
The
Tables in Annex B to this
Communication show very clearly and undeniably how my Government steered
the Bahamian economy from the stagnation of 2001/02 to the present
situation where the economic prospects of The Bahamas are unprecedented.
These are similar to the Tables in Annex B of the 2005/06 Budget
Communication.
Every
single indicator in the Tables in Annex B shows positive results. And
lest we forget, it was brought about by my Government even before it has
completed its first term
Economic Growth
Looking
through the information one can see that economic growth is increasing
steadily each year and will be 5.8% in 2006 as compared with 2.3% in
2002 when we entered office, or 0.8% in the previous year, 2001.
The
recent IMF Mission projects a growth rate for the fiscal year 2005/06 of
4.7%, for the calendar year 2006 of 5.8%; and for the fiscal year
2006/07 of 6.5%. These overlapping projections strongly suggest that the
growth rate of the Bahamian economy started to accelerate in the latter
part of 2005 and will continue to accelerate through the whole of 2006.
In
fact, the IMF projections show a growth rate of 6.7% for 2007/08 so it
is clear that the IMF accept the acceleration of the economy right
through the next two fiscal years at least. These projections are given
in the IMF’s Aide-Memoire which I will elaborate upon later in this
Communication.
The
positive turnaround in the economy which has been achieved and continues
to be achieved by my Government arises from my Government’s success in
attracting productive investment in tourism projects in virtually every
major Island of The Bahamas, and from my Government’s careful
stewardship of this economic expansion the likes of which are without
precedent.
The
projected volume of inward investment is at least $8Billion over the
next few years. In relation to the size of the economy, this is a scale
of inward investment without parallel anywhere in the world. The volume
of investment is well in excess of the 2005 GDP of The Bahamas of
$5.9Billion. A special additional table is included in Annex B of the
Communication which summarises the Central Bank data on these capital
investment inflows.
The
capital inflow will further strengthen in 2006 and 2007 with the BahaMar
project and the construction of two new hotels in New Providence, and
the acceleration of the investment projects envisaged for the major
inhabited Family Islands.
I
might add that throughout The Bahamas we are upgrading airports to meet
the upsurge in international traffic arising from the major new tourism
projects coming on stream. In particular, Nassau International Airport,
soon to be Sir Lynden Pindling International Airport, is being placed
under private sector management and the whole airport complex is being
developed to the highest international standards. This will be a
self-financing project and the end-result will be an international
airport of which Bahamians can
be truly proud.
The
advance of our tourism sector is borne out by the fact that in 2004 the
number of visitors exceeded 5 million for the first time in our history.
The year 2005 saw further increase in that number, and all the
indications are that 2006 will be even better. Moreover, it is not only
the numbers but the expenditure and room rates which are being generated
which are also increasing. Indeed, since a number of the new projects
include major upmarket projects in New Providence and the Family
Islands, these projects will further boost expenditure and room rates
throughout The Bahamas.
This
Budget Communication could not be complete unless I mentioned the
planned re-location of our commercial port to the south-western end of
New Providence, and the attendant redevelopment of Bay Street into a
tourism Mecca of world class standards. This is an undertaking of
colossal proportions but with the public/private sector partnership that
we have forged is well on its way to becoming a reality.
The
scale of the projected investment in the tourism projects, and in the
infrastructure which is required to support them, is such that it calls
for major changes in the culture and performance of the public sector.
A
major challenge for the public sector, and particularly for Permanent
Secretaries and the heads of the major utilities Corporations and the
senior management in the Ministries and Corporations, is to ensure that
the required public services - utilities, security services, education,
transportation, housing and health services – are in place in a timely
manner to meet the needs in each community and in each project arising
from the investments.
The
Office of the Prime Minister is providing the strategic planning and
coordination function on this issue. The development of this function is
rightly seen as a major aspect of Public Sector Reform, and special
training seminars and workshops are planned to ensure the success of
this function.
In
order to lessen demands on the Treasury and to demonstrate good
corporate governance on the part of investors, our investment policy
requires partnership in joint provision or joint financing by the public
and private sectors of the facilities and services which each anchor
project and the community concerned may require. This policy also places
greater pressure for efficiency and effectiveness in the delivery of
public services.
This
approach is exemplified by the position in relation to Mayaguana where
Government and the I-Group are accepting joint responsibility for
providing the major new and additional public services and facilities
needed to make the resort development project a success and enable the
people of Mayaguana to enjoy the benefits of the project and to grow
into a prosperous, socially balanced community.
Again,
the implementation of the policy will make exceptional demands on the
management of the public sector. I am confident that these demands will
be adequately met.
Fiscal Deficit
Mr. Speaker:
Returning
to the indicators in Annex B to this Communication, the GFS Deficit is
firmly under control and we have placed it on a declining trajectory.
The GFS Deficit will be 1.9% in 2006/07 as compared with 3.1% in
2001/02. Thus, the deterioration in the ratio of Government debt to GDP
has been arrested and has commenced on the glide path to return towards
the 30% level within the medium-term.
The
improvement in the public finances does not arise from austerity in
expenditure but in growing the economy so that the response is revenue
buoyancy. In fact, during our four years in office we have not made any
increases in taxation. Indeed, we have accomplished the very opposite by
reducing taxation, the most significant reduction being that arising
from increasing the threshold for Real Property Tax in the 2002/03
Budget or to put it differently, extending exemption from Real Property
Tax to many more people than before. In consequence, very many families
on modest incomes have been relieved of the burden of this Tax.
We
have certainly tightened revenue administration, and we have increased
some fees by modest amounts for Government services but these are not
instances of taxation. On the contrary, these are fees for services and
the increases were intended to go towards meeting, at least in part, the
costs of providing the services.
We
have certainly closed any tax loopholes which we have detected,
primarily in relation to Stamp Duty because we see no reason why tax
evasion and avoidance should be countenanced at the expense of compliant
taxpayers. But the major impulse to the correction of the public
finances has come from the growth in the economy giving rise to
substantial revenue buoyancy.
Tourism
Again,
continuing with the review of the indicators in Annex B, the tourism
industry is already doing well and visitor arrivals and expenditure are
taking off and exceeding the levels last achieved during the
mid-1990’s. When the new
tourism anchor projects in the Family Islands come on stream over the
next few years, and the transformation of New Providence is completed,
our tourism industry will be the most formidable and successful in the
Region. In that regard I wish to again emphasise that my Government will
be doing everything possible to aid the recovery of Grand Bahama.
Unemployment
Unemployment is declining and
will decline dramatically further when the major tourism projects reach
full steam. In this regard, it is our intention to expand the Urban
Renewal Programme to ensure that our young people are given all of the
means necessary to achieve remunerative and personally satisfying
employment. To that end we intend to use a manpower survey approach,
drawing on the expertise of the Department of Statistics, to assess the
employment needs of presently unqualified young people, and then put in
motion vigorous programmes to equip them with the education, skills and
training they need to take up the employment opportunities coming on
stream.
Our
young people have so much to gain, and we as a nation have so much to
gain too, from their fullest participation in society. The Government is
doing everything possible to provide them with opportunities, and it is
up to these young people to avail of these opportunities.
The
Urban Renewal Programme has a crucial role to play in enabling the
identification of young people at risk. If they are not reached through
this Programme or through other initiatives involving the Government and
voluntary organizations, there would be the danger that they would lose
hope and become entrapped in anti-social behaviour, and perhaps
ultimately in crime. Thus, an important effect of the Programme is to
move young people away from a life which would bring them ultimately
into conflict with the forces of law and order.
Let
us not be under any illusions as to just how important our work in this
regard really is. No less a person than His Grace Archbishop Drexel
Gomez has described the Urban Renewal Programme as very possibly the
most important social programme ever undertaken by any Government since
Independence. The Programme has won enthusiastic acclaim throughout our
Region and around the world. It is transforming our communities and
rebuilding lives one by one. It is bringing hope where there was only
despair. I sincerely hope that those who were critical of the Programme,
because of their failure to understand its import, and the impact it is
having on aiding people to reconstruct their lives and neighbourhoods,
will now acknowledge their error and endorse the Bahamian and
international acclaim to which I have referred.
On
this issue, let us recall the memorable words of the late Rev. Martin
Luther King:-
“When
an individual is no longer a true participant, when he no longer feels a
sense of responsibility to his society, the content of democracy is
emptied…when the social system does not build security but induces
peril, inexorably the individual is impelled to pull away from a
soulless society. This produces alienation – perhaps the most
pervasive and insidious development in contemporary society.”
The
goal of my administration is to enable everyone to succeed, or if they
fail initially, to have more than one chance to succeed.
I know how important this is because I myself am a living
testimony to the redemptive power of the second chance.
In
the case of those who, for reasons of age or handicap or illness, must
be more fully supported in their endeavours, we are developing social
policies which address their predicament. It is imperative that we do so
because we cannot have a partitioned society where some succeed
handsomely while others simply fall behind. We must have an integrated
society where all are given the opportunity to share equitably in the
fruits of our economic development and to develop themselves to their
full potential. In particular, we simply must make every effort to
involve our young people in our society, who might otherwise be at risk,
to make them feel part of our society and to show them the way forward
and to provide them with the motivation and the skills they will need to
survive and prosper.
It
is my hope that through the Urban Renewal Programme we can identify
those in need or those who feel alienated, and bring the resources of
our society, both public and private, to bear in helping them. But, in
the final analysis, the ultimate responsibility rests with people
themselves to avail themselves of the opportunities presented for
education and skills training.
External Reserves
Mr. Speaker:
Continuing
with the review of the economic indicators, it will be noted that the
Bahamian currency is strong as never before, because the External
Reserves of the Central Bank have rebounded from $312million in 2001 to
almost $600million today. As explained in the Economic Background in
Annex A to this Communication, the strength of the External Reserves has
permitted the Central Bank to relax certain exchange controls, further
evidence of the growing strength of the economy.
Interest Rates
Annex
A to this Communication sets out the Economic Background to the
Budget. A reading of this Annex will reveal that the benefits of our
policies are apparent in the availability of employment opportunities,
the expansion of essential services without the need for additional
taxation, the improvement in pay and conditions throughout the economy,
the increase of over 16% in the amount of residential mortgages in 2005,
and the reduction of 4 basis points on interest rates.
And even with all that we are only at the take-off position in
relation to the economy.
Confirmation by International
Rating Agencies and the IMF
Any
objective observer would be bound to agree that my Government team has
brought the Bahamian economy from its low point of 2001/02, when all of
these indicators were negative,
to the present stage where the Bahamian economy has already reached
take-off point into what could be, the longest, highest and most
sustainable economic expansion of our history.
Indeed,
there are objective observers who have confirmed the evidence of our
achievements, and of the economic potential which we are releasing.
These observers are the two Rating Agencies, Moodys and Standard and
Poors, which have continued to give investment grade ratings to The
Bahamas. In the case of Moodys, the rating for The Bahamas is the
highest among the independent countries in the Hemisphere excluding the
North American giants, the United States and Canada. In the case of
Standard and Poors, the rating for The Bahamas is equaled by only one
other country in this Region, excluding the two North American giants.
In
further confirmation of the excellence of the Government’s management
of the economy I would direct the attention of Honourable Members to the
Aide-Memoire of the recent IMF Staff Visit which I am tabling along with
this Communication.
By
way of background to this Aide-Memoire, The Bahamas is on a 24 month
cycle for IMF Article IV Consultation Missions. The last such Mission
was in 2005, and the Report is available on the internet. In every other
year to the year in which the Consultation Missions occur, the IMF makes
what is termed a “Staff Visit”. This Visit provides an opportunity
for the IMF staff to obtain an update from many sources, including the
banking and financial sector, the Chamber of Commerce as well as from
the Ministry of Finance and the Central Bank, on the rapidly changing
economic and fiscal developments in The Bahamas.
Just
as importantly, the Visits are valuable for providing an opportunity for
discussion between the technicians in the Ministry of Finance and the
Central Bank and the IMF Staff on these developments. The Aide-Memoire
prepared by the IMF staff provides their views on a number of key
issues.
Needless
to say, the institutional conservatism, which is the hallmark of the IMF,
is reflected in the Aide-Memoire. Nevertheless, as I have said, even the
IMF projects growth in 2006/07 to be 6.5%, in 2007/08 to be 6.7%, in
2008/09 to be 5.6% before tapering off later as the horizon lengthens
and uncertainties can arise. Thus, even the IMF agrees with the
Government’s optimism about the expansion of the Bahamian economy.
I
might add that on most crucial issues the thinking of my Government is
very close to that of the IMF. Such
differences as there may be are not substantial and relate more to
matters of practicality and timing rather than to policy disagreements.
In this regard I am drawn to the comments of Mr. Haruhiko Kuroda,
the President of the Asian Development Bank, in his interview with the
IMF quarterly magazine, Finance and Development. Mr. Kuroda said:-
“I
think that … although economic theory may provide some insight, some
framework, good policies may require something that goes beyond just
economic theory or analysis – some practical judgment, some good
sense.”
It is this practical judgement
which my Government brings to these matters. For this reason my
Government consults widely, thereby taking into account the technical
and other advice given to Government from many sources, including
Ministries and Departments, other Government agencies, the private
sector and the international organizations such as the IMF and the
Inter-American Development Bank. No one person or organization has all
the answers, although some like to think that they do, and that is why
the broadest consultation is advisable on all key issues.
I might mention, in the
particular context of the importance which my Government attaches to
consultation, that there will be no commitment to enter into trade
agreements – regional, hemispheric or global – without the fullest
consultation within The Bahamas.
Nor will there be any major
changes in the revenue system of The Bahamas without the fullest prior
consultation. My Government is not contemplating any such changes but,
in view of the recommendation in the IMF Aide-Memoire regarding a VAT, a
perennial recommendation of the IMF, I think it is necessary to set the
record straight.
Importance
of consultation
The
hallmark of my Government is consultation, rather than impulsive
decision-making, and the record demonstrates the soundness of this
approach, in signal contrast, I might add, to the costly mistakes which
are made when there is a rush into decisions
without adequate preparation, without adequate consultation, and
without adequate care, prudence and proper planning.
A
further attribute of my Government is caution in ensuring that each step
forward is based on solid ground so as to better withstand any setback
that may occur from external economic shocks or meteorological factors.
Our economy is small and open. Therefore, we must be sensible in
recognizing the intrinsic risks which
we, in The Bahamas, face at all times. In this context one has to be
mindful of the advice of the noted American economist Richard Cooper who
said:-
“Governments typically behave as if
positive shocks are permanent, and negative shocks are temporary.”
In exercising prudence in economic matters we are simply being
sensible and responsible in our own interests.
Even major economies can be blown off course by an unexpected and
unforeseeable economic chain of events. That is why, for example, within
the European Monetary Union there is such insistence on careful
macroeconomic management. Therefore, it behooves a small open economy
such as ours to exercise the same level of care as is exercised by much
larger economies.
My
Government has not made nor will it make, promises which would undermine
the economy and put at risk the future of every Bahamian. Every promise
which we have made we have either fulfilled or we are determined to
implement with care and prudence as our economy grows and is
capable of providing the necessary financial resources.
There
can be no disputing the information in Annexes A and B. This information
is based, in the main, on published sources such as IMF reports, Central
Bank Reports, and Department of Statistics reports. Thus, it is
information which is, or will be, easily accessible to the public via
the internet. The information in the Annexes is irrefutable evidence of
my Government’s successful management of the economy and public
finances, and of our restoration of the robust growth prospects of The
Bahamas.
As
mentioned in the 2005/06 Budget Communication, the Department of
Statistics is now able to follow the internationally accepted standard
for producing estimates of national income data. The recent IMF Staff
Visit and the 2005 IMF Article IV Mission had confidence in the
Department’s work and used the data. In fact, the national accounts
data were also crucial to the work of the consultants preparing the
report on the impact of tourism in the Bahamian economy.
LOOKING
AHEAD
Mr. Speaker:
The
Speech From The Throne earlier this year set out the Government’s
considerable achievements in its current first term in office. More
importantly, however, it also maps out the policies which my Government
is committed to following now and in the period immediately ahead to
further enhance the economic and social security of the Bahamian people.
The Bahamian people know our
capabilities, and they know that our success to date places us
within closer reach of the goals set out in the Speech From The
Throne. I believe that the Bahamian people will agree that our record to
date is a record of impressive achievement in a remarkably short period
of time. We are confident that our record is such that the Bahamian
people will consider us worthy of their continued trust, support and
confidence, as we make ready to propel The Bahamas forward in our second
term in office.
FISCAL
PERFORMANCE 2005/06
Turning
to fiscal performance in 2005/06, the provisional outturn is for a GFS
Deficit of 2.4%, compared with the figure of 2.8% in the Budget. The
summary data is in Annex B, Table II to this Communication. This
projected outturn is not very different from the projection in the IMF
Aide-Memoire of 2.5%.
Revenue performance
The
most striking point about budget performance in 2005/06 is the strength
of Recurrent Revenues. These amount to $1,212million which is an
increase of $67million over the 2005/06 Budget Estimates of
$1,145million, and an increase of almost 15% over 2004/05 Outturn. The
increase is attributable to three factors. Firstly, the growing strength
of the economy which generated substantial revenue buoyancy,
particularly in Customs revenues and Stamp Duty on both imports and
property transfers; secondly, the closure of revenue loopholes
especially under the Stamp Act which gave rise to all manner of tax
avoidance schemes; and thirdly, the general tightening and overall
improvement of revenue administration. An example of the latter is the
implementation in the Customs Department of the TIMS, the Trade
Information Management System, which is a useful tool in identifying
situations where Customs revenue might be at risk.
Recurrent
Expenditure
Recurrent Expenditure projected outturn at $1,225million is very
close to the original Budget Estimates of $1,214million. It will be
recalled that the 2005/06 Budget Estimates included most of the cost of
the general Public Service pay award. The 2006/07 Recurrent Expenditure
Estimates make provision for settlement of the teachers’ award on the
same basis as that award as well as for the Public Service pay award due
on 1 July, 2006.
Capital
Expenditure
The projected outturn for Capital Expenditure is $175million,
which is an increase of $10million over the 2005/06 Budget Estimates.
The increase is mainly attributable to increased allocations for
Bahamasair, the Water & Sewerage Corporation, and the Broadcasting
Corporation of The Bahamas. A Supplementary Appropriation Bill is being
tabled in relation to these additional allocations.
2006/07 FISCAL
PROGRAMME
Expenditure Priorities
In
terms of share of Recurrent Expenditure, it is clear that the major
priorities are:-
·
firstly, the services which provide security for persons,
property and our national frontiers; more specifically, these services
encompass the Police, the Defence Force, the Immigration, and Customs
Departments, and the Judicial System; and
·
secondly, the measures which provide employment
opportunities and which seek to integrate every Bahamian more fully into
society; these measures encompass education
and training, urban renewal, disaster relief, housing and the whole
spectrum of social and health care services provided by the State.
2006/07
Recurrent Expenditure Allocations
Turning
to the 2006/07 Recurrent Expenditure Estimates; these amount to
$1,386million. This is an increase of $172million, or over 14% over the
2005/06 Recurrent Estimates. The increase of $172million comprises:-
·
An increase of $56million for debt servicing, principally an
enhanced provision for Debt Redemption.
·
A provision of $14million for the pay award for the Public
Service due on 1 July, 2006.
·
A provision of $5million for Increments due in 2006/07.
·
An amount of $40million arising from additional expenditure in
2005/06 which adds to the expenditure base in 2006/07. Examples are the additional allocations in 2005/06 of $6million to the
Public Hospitals Authority, $8million for the National Emergency
Management Agency, $4.5million for the Royal Bahamas Police Force,
$4.6million for Customs overtime, and $3.6million for the Department of
Education.
·
Major increases in
provisions for all of the security services, education and health
services.
The
major Recurrent Expenditure provisions in 2006/07 are:-
·
An increase of 15.4% for the Royal Bahamas Police Force.
·
An increase of 18.9% for the Royal Bahamas Defence Force.
·
An increase of 13% for the Immigration Department.
·
An increase of 7.1% in the provision for Prisons.
·
An increase of 13.1% for the Judicial Department, an increase of
12.6% for Magistrates Courts and an increase of 10.8% for the Court of
Appeal; following the usual practice established over many years, some
of these expenditures can be met by savings on the Heads concerned or on
other Heads of Recurrent Expenditure; however, when such savings are
unlikely to be realized, Supplementary Appropriations will be presented
to this Honourable House for approval.
·
An increase of 21.3% for the Office of the Attorney General and
Ministry of Legal Affairs.
·
An increase of 10.2% for the Department of Social Services and
Community Development.
·
An increase of 11.4% in the provision for the Public Hospitals
Authority.
·
An increase of 9.8% for the combined educational heads.
·
A provision of $8million for the National Emergency Management
Agency.
·
A provision of $2.45million for Urban Renewal.
·
An increase of 53.8% in the provision for Mail Boat Service
Contracts.
·
An increase of 15.8% in the provision for the Department and
Ministry of Public Works.
Pay policy
In
the 2005/06 Budget Communication, the importance of the orderly
evolution of public sector salaries and wages was explained. Every
responsible Government has
to be concerned about this issue. It is important for the reasonable
remuneration claims of all public servants to be recognized. About
one-half of Recurrent Revenue is required to meet Public Service
salaries and other remuneration. It is equally important that the Public
Service accepts the implementation of measures to improve productivity
so that pay increases are merited by productivity. As foreshadowed in
the 2005/06 Budget Communication, an international expert has been
engaged to provide advice on this issue.
2006/07 Capital
Expenditure Allocations
The
priorities in Recurrent Expenditure are also reflected in the 2006/07
Capital Expenditure Estimates. The major increases are as follows:-
·
An increase of 22% for the Royal Bahamas Police Force.
·
An increase of 51.1% for the Royal Bahamas Defence Force.
·
An increase of 77.4% for Prisons.
·
An increase of 7%
for Customs.
·
An increase of 24.4% for Education.
·
An increase of 4.8% for the Public Hospitals Authority.
Adequate allocations are made across
the board for every Head of Recurrent Expenditure. As I said early in
this Communication, each Minister of my Government will be pleased to
place on record the achievements of his or her portfolio and to account
for the expenditure allocations made for the Heads for which he or she
is responsible.
Recurrent Revenue 2006/07
Mr. Speaker:
Turning to Recurrent Revenue in 2006/07, I am happy to advise
that arising from the projected growth in the economy and improvements
in revenue administration, there is no increase in taxation in this
Budget. This means that my PLP Government has managed the public
finances so prudently that we are able to reduce the GFS Deficit,
improve essential public services, and improve pay and conditions in the
Public Service, and achieve these objectives without any increase
whatsoever in taxation. We have ensured that our economic growth
strategy generated the additional revenues which we needed.
Thus, the Recurrent Revenue Estimates for 2006/07 amount to
$1,345million which is an increase of 11.1% over the 2005/06 Provisional
Outturn $1,212million.
The IMF Aide-Memoire to which I referred earlier makes a number
of suggestions as to additional revenue measures but these need further
consideration before they can – or need – be implemented. They may
be implemented in a later Budget but they are not included in this
Budget.
Revenue changes
Indeed, in this Budget I am making a number of
changes in taxation, in some cases significant reductions, and in
others total elimination of the taxation. Let me repeat for all to hear:
NO NEW TAXES.
Indeed,
I am reducing the 35% Customs Duty on Hurricane Shutters to 15%. I am
also reducing the Customs Duty on stone coaled metal roofing shingles
from 35% to 10%. These reductions are aimed at facilitating Bahamians
taking precautions against storm damage or quickly repairing storm
damage.
I
am reducing various rates of duty, ranging from 25% to 40%, on items
connected with solar equipment to a uniform 19%. This is an
environmentally friendly measure.
I
am also reducing the duty on gas powered water heaters by 5% to align it
with that on electric powered heaters.
I
am reducing the duty on soy milk from 45% to 15% to align it with that
on fresh milk.
I
am correcting the anomaly whereby loose stones and pearls can be
classified under two tariff heads one of which carries a 35% duty and
the other a zero rate. All will now be zero-rated.
I
am also amending the Business Licence Act to provide that companies
which pay excises under the Spirit and Beer Manufacture Act would be
exempt from Business Licence Fee.
Revenue administration
The
Ministry of Finance is continuing with its action plan to bring about
improvements in revenue administration throughout the various revenue
agencies. In this regard progress
is well in hand in implementing a system designed to remove all manual
receipting and to replace this with a cash receipting system whereby all
receipts will be generated by computers. In addition acceptance of
credit cards so as to bring greater flexibility and convenience to the
public when paying fees and charges, has been introduced in a number of
revenue collection agencies. These efforts will continue for all
agencies.
The
Revenue Compliance Unit of the Ministry of Finance which was
foreshadowed in my previous Budget Communication is about to begin its
work. It is intended that this Unit will play a pivotal role in ensuring
compliance in the payment of fees and charges due to the government, and
thereby reducing leakages in the system. The work of this Unit will be
focused initially on the areas of hotel room tax, stamp tax, business
licence fees, road traffic fees and property tax. In addition, the
analytical work to be undertaken by the Unit will provide the Ministry
of Finance, and thereby the Government, with statistical data on which
informed policy decisions with regard to revenue matters can be taken.
The
government will move amendments to existing legislation to secure the
collection of revenue due to Government when a business ceases
operating, or when a business undertakes a change in equity ownership or
when the business is sold. This will include changes to the Business
Licence Act, Hotels Act, Passenger Tax Act and the Insurance Act, among
others.
The
reporting and collection procedures of all revenue agencies are being
reviewed so as to maximize the use of information technology. This will
bring improved collection of revenues, and generate data on revenue
performance which can be analysed to further improve revenue policy and
administration.
Business climate
The Government is committed to improving the business climate of
The Bahamas because we know that a better investment
climate pays off in good and sustainable business and employment
opportunities for Bahamians. A great deal is being accomplished in this
regard by streamlining Government administration, and through the
development of e-government. Indeed, my Government is committed to the
sensible diversification of the economy, as is evident from the
establishment of the Domestic Investment Board. I agree with the IMF
that there would appear to be a potential for the development of a
domestic food sector. The Government would welcome proposals on this
matter provided such proposals are viable and sustainable.
Of
course, while inward capital investment by its sheer magnitude is a
major engine of growth in our economy, my Government recognizes the
crucial importance of encouraging investment by Bahamian entrepreneurs
not only as a significant and increasing growth factor, but also as a
means of Bahamians exercising control over their own economic destiny.
Therefore,
concurrently with these externally financed investments, we are putting
in place the domestic investment architecture, through the Domestic
Investments Board, to encourage our own Bahamian citizens to develop
businesses linked with, or even independent of, the anchor investments
throughout The Bahamas. I believe that our own entrepreneurs are fully
capable of providing a great percentage of the goods and services
required by the anchor investments and the new communities that will be
created in consequence.
My
Government will be ensuring that the various agencies – the Domestic
Investments Board, the Bahamas Development Bank, the Bahamas
Agricultural and Industrial Corporation, and the Venture Capital Fund
– will fully support the development and enhancement of Bahamian
entrepreneurs.
BUILDING
AN EQUITABLE SOCIAL PLATFORM
Mr. Speaker:
Our
economic strategy is not an end in itself. Rather it is the means by
which we build a strong economy as the lynchpin of a just and equitable
social order.
The
vision of my Government is that a strong economy, based on an equitable
spread of employment and entrepreneurial opportunities, allied with a
sound public financial system will
secure the attainment and preservation of a just and equitable
social order in our country.
My vision is to have in place a social platform on which every
Bahamian can stand with security, and where none fall below the level of
social comfort provided by the platform. As our economy progresses and
budgetary resources become available we shall be able to raise this
social platform year after year. At every juncture, however, we
will be mindful of the intrinsic risks facing a small open economy, and
we will exercise care so that we proceed at the pace of our economic
development and never outstrip it. Other countries have had sad
experiences of moving too fast and allowing social programmes to outpace
the economic means of paying for them. This has resulted in the misery
of economic adjustment programmes and attendant social dislocation. We
must avoid this pitfall at all costs.
The platform of which I speak consists of meaningful
employment opportunities, adequate housing, security of person
and property, access to affordable health care, access to necessary
social facilities and services, and educational and training
opportunities.
In
this context, I would like to emphasise that my Government is
particularly concerned with the issue of affordable housing for lower
and middle income families. This will continue to be a major priority of
my Government. The coming months and years
will witness a vigorous continuation of the Government’s
housing programme to complement the impressive achievements already
attained in our first four years, which I have referred to
earlier in this Communication.
My
Government is also concerned with ensuring that suitable housing is
available to young Bahamian professional couples. To that end the
Government intends to obtain suitable land in New Providence and the
Family Islands to provide sites for housing for middle-income families.
CONCLUSION
Mr.
Speaker:
My Government is committed to the empowerment of the Bahamian
people in all spheres of life. Empowerment means providing the
environment, the means and opportunities, and, as far as possible, the
motivation for the Bahamian people to exercise
control over their own destiny. Empowerment is at the other end
of the spectrum from a dependency culture. In this regard, I would like
to quote the great Nineteenth Century British philosopher and
parliamentarian John Stuart Mill who provided timeless advice on the
role of government in a liberal democracy such as ours:-
“A good government will
give all its aid in such a shape, as to encourage and nurture any
rudiments it may find of a spirit of individual exertion. It will be
assiduous in removing obstacles and discouragements to voluntary
enterprise, and in giving whatever facilities and whatever direction and
guidance may be necessary: its pecuniary means will be applied, when
practicable, in aid of efforts rather than in suppression of them, and
it will call into play its machinery of rewards and honours to elicit
such efforts.”
My Government has achieved a
great deal - if I may say so, a very great deal - in four short years.
One can visualize the achievements yet to come. My vision is that the
Bahamian people will continue to face the challenges of globalisation
with confidence and ambition, and that under the leadership of a
Progressive Liberal Party Government they will continue to build a
society in which everyone has the opportunity to serve, to participate
and to fulfill his or her dreams and ambitions for a better life.
My ambition in this regard finds
its most poignant expression in the absolute imperative that we lift up
and give a second chance to all those in our society who may have fallen
through the cracks or fallen by the wayside.
We must measure our success in
terms of how well we manage to lend a helping hand to those of whom I
speak. They have the talent. They have the ambition. All they need is a
second chance and it will always be the business of my Government to see
to it that a second chance is given to all those who are in need of it.
We are well on our way, Mr.
Speaker, and with God’s continual blessings and the continued support
of the Bahamian people we will make our way forward into the future,
knowing that our best days are still ahead, and that though the present
times be bright, the future that beckons us is brighter still.
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