Rick Lowe

Tribune Business reporter, Alison Lowe ran this article yesterday about the IMF's suggestion that The Bahamas implement a Value Added Tax in an effort to get its fiscal house in order and the president of the Bahamas Chamber of Commerce, Khaillis Rolle supports the idea.

She quotes Mr. Rolle as:

"Agreeing that VAT may be preferable as a means to bolster the Government's revenue base, Mr Rolle said: "People may see (VAT) as drastic but I see it as necessary. I think if you look at the alternative, if you are headed for imminent demise with the current alternative, you either delay your pain and eventually you will die, or you do it now and hurt for a while but emerge with life at the end of the day. Not taking the steps now will not assist us in getting the economy back on track."

She then quotes your not so humble blogger, saying:

"he does not necessarily concur with the IMF's recommendations, he does agree that the Government's present fiscal position is "certainly worth concern".

"In his view, the primary route the Government should take to achieve its fiscal targets is one of spending cutbacks – including to the extent that it may mean shedding public sector jobs, which the Government has sought to maintain throughout the economic crisis.

"I don't see (VAT) as an advantage – to simply change one tax for another. Politicians look at it from the point of view they need more revenue. I look at it from the perspective that they need to spend less money. Spending is a crucial problem, and the size of government.

"They are looking at VAT as way to get more money rather than getting their fiscal house in order," said Mr Lowe. "Reducing the overall tax burden should be a fundamental objective."

I had also suggested the government review the policies of the countries that are doing well in the annual Economic Freedom of the World Report by the Fraser and Cato Institutes, but I guess space did not permit including it.

To paraphrase Poverty Cure: "What if we've been asking the wrong questions about tax policy and economic growth? For too long the focus has been on increasing taxation and government spending. The real question is: How do we create wealth to help the economy grow?"

While I realise that it will take time for any sensible policy changes to take effect it's better to start when our economy is at or near the bottom as it is now.