It's fair to say there is an increased level of angst in the business community since the government announced it's new budget on May 29, 2013.
Higher import taxes, increased business license taxes and a myriad of other fee/tax increases.
A few points for consideration:
- Realising the government is "desperate" for revenue they've worsened the tax and spend policies of successive governments.
- The cost of goods and services are bound to increase, impacting everyone.
- The negative unintended consequences of high tax policies on investment and private sector job growth are not a mirage. History is replete with examples.
- Have taxes reached the point of diminishing returns? (The Laffer Curve is where government will receive less revenue even though taxes are higher.)
- It's not clear why the Chamber of Commerce seems to be doing very little canvassing of its membership to represent the business community in a more formal way on these issues.
- Times are tough for the government and for most of the business community, but continuing to implement more and more negative policies seems to be the opposite position they should be taking.
A study by William McBride of the Tax Foundation in the US, released December 2012 finds that, "Nearly every empirical study of taxes and economic growth published in a peer reviewed academic journal finds that tax increases harm economic growth."
According to McBride; "… a series of OECD working papers, [14] summarized by Arnold et al.,[15] OECD affiliated economists have determined a ranking of the most harmful taxes for economic growth. They find that corporate taxes are the most harmful, followed by personal income taxes, consumption taxes, and, finally, property taxes…"
In other words, higher taxes mean lower economic growth, caused by discouraged entrepreneurship, and business that impacts employment prospects.
For three successive budgets now there have been major increases in taxes and changes to the tax code that create confusion not only in the private sector, but the government as well. In addition, taxpayer subsidies continue to increase further impacting government revenue.
To top off the confusion, the government is proposing adding a Value Added Tax on July 1, 2014. A VAt of 15% will dramatically increase the cost of living and discourage investment even more.
Each budget gets more discouraging as government keeps rolling the dice that more of the same will improve the economy.
More betting against the odds will continue to push us toward slower economic growth.
Further reading
Doug Bandow; Raise Taxes to Clinton-Era Levels? How about Spend at Clinton-Era Levels?
William McBride; What Is the Evidence on Taxes and Growth?
Most Bahamians who consider themselves to be rational and prudent are still in a state of shock after reviewing the Christie Administration Budget released last May.. In sum it is a blueprint to our country’s self-destruction and a statement of just how terrible our financial condition has become since Independence.. There is no place left to hide as every Bahamian citizen, resident and visitor will be impacted by a failing cost/benefit balance, where costs will skyrocket and goods and services will be in shorter supply..
Business budgets at the micro level of economic activity are tools of executive control where projective revenues are matched against anticipated expenditures.. It is a tool of financial prudence that safeguards the future solvency of the firm.. At the nation or macro level of economic activity, the national budget estimates government revenues and forecasts anticipated government spending.. It tell us in theory how much government should spend given the specific level of expected revenues.. Prudent governments will adjust and balance its spending policies based on projected revenues..
In our Bahamas, government completely ignores the fundamentals of prudence and recklessly pursues spending policies based on self-serving, political interests and not the National Interest.. Tax increases of every kind imaginable and greater borrowing are forced on the country in order to feed this increased and wasteful, out-of-control spending.. Our budget now is nothing more that a road map to our nation’s self-destruction.. We have no one to blame but ourselves and the government we are forced to elect..
One would think people that are trying to Improve the economy would learn from these studies instead of being stuck in a time zone doing the high tax thing that never works.I personally feel the the elected officials seem to think that all business are out to gouge everyone so lets just tax them to death,all the while its the government that’s doing all the damage.
Had Enough, try looking at what is going on from another perspective.. Governments always prefer to increase revenues from the private sector as there is little political consequences in raising taxes on corporations.. Corporations, in turn, will attempt to pass on these imposed costs to their customer base.. Customers have no meaningful recourse and just have to accept higher (government imposed)inflated prices.. As corporations don’t vote, government couldn’t really care less as the greater National Interest again gives way or is subordinated to political and individual self-interests.. It is not that the elitist political class doesn’t care about business, it simply recognizes that there is no real political benefit to siding with the private sector..
This is of course is just blind, short-run thinking which results in a destructive intensity on the long-term growth of the economy and the future prosperity of the nation.. Higher imposed government costs force businesses to raise prices and to cut back on labor costs.. Prices soon become more fixed as competition wanes and inventory levels decline.. With imposed higher prices, black markets are likely to form to sell goods outside the legal market structure.. Many once profitable businesses are forced to close their doors as profitability disappears forcing aggregate unemployment to rise.. In the long-run the laws of diminishing returns on investment destroy public confidence and personal saving rates.. Again we realized that the National Interest, the long-run interest of the Bahamian economy and people, have been ignored and sacrificed for the corrupt interests of ruling political party and their political elite.. Regretfully this will continue until the majority of us Bahamians begin to think only as to what is the best interest of our country as a whole..
They all seem to me to be either very dumb or they just don’t care,take your pick Tradewinds.If one of them should take up the mantle of dropping some taxes & it turns the economy around along with a stop on this outrageous spending then they would be king for life around here.Right now it takes a month or more just to try & get a huge hole filled in the middle of the street that our very high fuel tax is supposed to take care of.What we need in parliament are business people,not lawyers & doctors but I guess no business person in their right mind wants to be amongst the idiots.