Back in 2007 the government of Grenada presented a White Paper to re-introduce VAT on February 1, 2010.
It was billed as the "saviour" of a faltering economy where government spending and borrowing had run amok.
Government Debt to GDP was rising dramatically as a result of budgetary excesses. In 2008 debt was 72.6% of GDP. By 2010 it was 86.9%. In 2012 (two years after VAT implementation) it was expected to be 88.5%. Read more here…
The verbiage from their PR programme sounds eerily familiar:
"…The implementation of VAT will assist in restructuring the tax system to make it more responsive to economic development, and be simple to administer. More importantly, VAT will be used to create a new culture of voluntary compliance."
"…Under the VAT, the tax base will be broader (more goods and services will be included)…"
In 2009 the government of Grenada gave assurances "that the proposed Value Added Tax (VAT) will not increase the tax burden on Grenadians when it’s implemented."
The Grenadian government indicated that "The proposed VAT is intended to be the gateway to Grenadas tax reform programme. It is hoped that it will bring higher levels of efficiency in the tax system, thereby encouraging voluntary compliance amongst tax payers. We solicit your support and ideas to realize the smooth and effective implementation of VAT."
Pay close attention to the language. There's nothing there about the government being more efficient and guaranteeing a reduction with its spending and borrowing.
Of course, since the VAT implementation in 2010, the picture tells a different story. Lets look at the budget speech for 2013.
"3.1 Economic Performance and Prospects
"Mr. Speaker, there is absolutely no doubt that the Grenadian economy has suffered tremendously over the last four and a half years.
"Since 2009, the Grenadian economy has declined on average by 2.0% per year.
"With the exception of the Agriculture and Education sectors, most of our major sectors including Tourism and Construction have suffered significant decline.
"Construction, whose contribution to GDP has fallen sharply in recent times, has had several years of decline.
"The Hotels & Restaurants Sector, a proxy for Tourism has declined on average by 4.7% during 2009 to 2012.
"The Transportation, Storage and Communications Sector, which accounts for approximately 14% of GDP, declined on average by 4.5% during the same period.
"2013 Budget Statement 5
"The Wholesale and Retail Sector has also performed badly since 2009 declining on average by 4.4%.
"Mr. Speaker, the unemployment rate appears to have doubled between 2008 and 2012. And poverty, which was already high at 37%, is estimated to have significantly worsened.
"The deficit on the current account has widened as the growth of Grenada’s
"Imports increased but the growth of Exports has been sluggish.
"Inflation as measured by changes in the Consumer Price Index (CPI) however has been relatively low, with average inflation of 1.8% in 2012 compared to 3.5% in 2011. However, food inflation has increased more rapidly at around 3.0 percent.
"Mr. Speaker, notwithstanding the difficult global economic environment, it is clear that the Grenadian economy, like the previous Government, was in “freefall” with no signs of turnaround."
Download a copy of the 2013 Budget Speech here (pdf)…
It appears the Grenadian economy is still in "freefall".
It is obvious from Grenada's experience, that is repeated throughout the region after the implementation of VAT, without fiscal restraint by the government and eventually shrinking the size of the government, and introducing policy measures to encourage investment by reducing regulations the economy gets worse.
One of the government representatives from their implementation team refers to the private sector and citizens reciting facts from other economies in the region as "scaremongering".
I wonder what makes The Bahamas or Bahamians any different that VAT – taxing people more – will be the magic formula to getting The Bahamas government's fiscal house in order? Or is he sprinkling more "faerie dust" that he picked up in the land of make believe?
We'd be delighted to see his evidence to the contrary of what we've seen, because if our fiscal reform looks anything like Grenada's I think we're on a sinking ship.
While the ship is a rusty bucket, barely afloat,
twas that large rogue wave that hit it square amidships that did her in!! (VAT)
Birds of a feather flock together,
and in this case bureaucratic vultures conspire to keep their own carrion supply handy.
Our results could well be worse, as we are not a record keeping voluntary tax paying society.
We are entitled remember?
I can not speak to the cultures in the rest of the Caribbean, but given our comfortable debt ducking check bouncing get away with not paying routines,
We are in for meltdown and massive confusion.
We must on every possible occasion ask government just one question, Can you name a single country where VAT has been an effective tax policy improved the life of the people and the financial condition of the country?? In other words, does VAT ever work?? The answer is NO..
VAT only creates expanding poverty, is a jobs killer and causes skyrocketing inflation as the prices of such basics goods as food and energy go through the roof resulting in Stagflation killing off economic growth.. Why any government, our government, would force such a Very Awful Tax on the Bahamian people is beyond logic and belief.. Just ask of the people in Grenada, Barbados, St. Kitts, St. Lucia or any other country that has been enslaved by VAT and they will tell you how destructive VAT has been to themselves and their countries.. VAT’s terrible record speaks for itself as it is a economic road map to absolute self-destruction and economic ruin..
One wonders how well A VAT proposal would do if it were subjected to a public referendum similar to the gambling issue.. Everyone, except the government, knows exactly what the outcome would be as VAT would be absolutely rejected by the people.. The people should not be made to pay for a bloated, inefficient government bureaucracy that does little to benefit the future of our country.. VAT is designed to financially support this unnecessary bureaucracy and not the basic needs of the Bahamian people..
VAT is like a life threatening disease that must be treated or it will take the life of the unfortunate victim.. VAT must be stopped before it strangles and chokes off the economy of our country.. The stakes are high with so much to lose, so little to be gained..
One major part of our dilemma,
is that politics and discussions with politicians have evolved (devolved?) into typical bar street corner discussion, making sensible discussion impossible.
no continuity of thought, rationale or serious dialog.
Messengers in the Bahamas should get danger pay!
Obstinate, ill-informed, belligerent, higher than thou is the prevailing barroom/poltical persona.
Quite frankly the only thing missing is a drink (or 4)
“Forgive them Lord, they know not what they do” is such a complete and accurate observation in this situation.
Actually it applies to the last 40 years just as well, so I suppose we are consistent!
Keep your boats fueled & ready to head north as refuges because that’s where we are headed.Ingraham & Christie have no worries,they are all set up.
Lets stop this once and for all nonsense about “they know not what they do” for this is the second time you have quoted this biblical text which is totally out of context.. The salvation of our country is at stake and forgiveness is not really in the cards..
They, the government, know exactly what they are dong and frankly as far as many Bahamians are concerned they really don’t give a damn.. In government’s misguided thinking, they believe they are doing the right thing regardless of economic outcome.. Obviously their naive and lack of economic understanding has lead them to the wrong conclusions which will have tremendous repercussions on the future our country..
Perhaps in the end, we must pay the ultimate price of failure so that we can begin all over again.. No one wants this, but as for now that is tragically our most likely destiny..
They know what they’re doing for their own agenda,
Simple self preservation.
they have no clue as to the consequences to the rest of us.
As for believing they’re doing what is best,
I do not give them credit for thinking beyond the next 15 minutes!
Remember, Government is comprised of individuals, with all their human frailties,
our lot seem to have cornered that human trait!
Yes, the consequences for the people of the Bahamas will be dire.
I agree, they do not care, they will simply be the first people to quietly steal way in the night, having already secured pilfered funds on Brickel Ave.
I personally believe we will suffer the consequences, and maybe do deserve same.
We elected these successive idiots.
We have forgotten our principals and gone for the gold.
Harsh?
Not as harsh as reality might become.
Right on partner.. We must focus ALL of our energies to stopping VAT.. We cannot sit by idly and watch the country go down the tubes.. There are now petitions going around online but what is really needed is organizational structure and knowledge people to share their experience at anti-VAT forms.. I have done all I can do to share knowledge and encourage opposition to this horrible proposal.. I would only do this if I didn’t believe that VAT would be the ruination of our country.. I have no cards on the table other than truth and so far there has been little challenge my words.. If the people in the TCI can do it, I can only hope the Bahamian people can do the same.. Anybody got any bumper stickers that say, “NO TO VAT”??
So, somehow sheep should become wolves overnight?
I’m with you on the VAT being wrong and unworkable for a number of rational economic reasons,
but let’s face it:
We have been “dumbed down” voluntarily for the most part, and stood back while this sort of foolishness has been given a pass for decades!
The window for Vocal criticism being effective has passed, and certainly if less than 1% of the population stands and speaks with intelligence and reasoned, educated positions.
Generally people do not want to think for themselves,
and they are out of practice!
The educational curve is straight up vertical for most with respect of WTO, trade agreements, even of our own outdated legislation, albeit with same being heavily modified in bits and pieces as of late. (again, WTO/IMF compliance driven, enacted by both FNM and PLP)
The stage has been set on this “progress” since FTAA, CSME, and even before that!
Waking Bahamians up from their Nap have proven nigh impossible,
but that 20+% cost of living increase will I guarantee.