The government (the political class and the bureaucrats responsible for taxation) are telling us the country is going off the fiscal cliff, and the only answer is a Value Added Tax (VAT).
Well, none of us here at WeblogBahamas are tax experts, but the advice of many people who are, is, whatever you do, taxes should be simple to pay and administer, and be kept as low as possible to prevent avoidance.
Continued growth in the size and spending of government over the past 10 – 12 years is the root cause of the governments fiscal problems. Witness the daily revelations with things like BEC and the burdens of unfunded liabilities of government pensions and more. All these issues are related to irresponsible government policy over the years. Allowances made to help ensure votes when times are good have brought "devastation" now that things are bad.
Regretfully, few of the political class and bureaucrats connect the dots between a vibrant business class and their very survival; as governments do not create wealth. As we are currently witnessing, their bad policies destroy wealth and economic growth.
As this article in the U.K's Telegraph by Kamal Ahmed points out our policy makers should;
"rely on one world famous economist who agreed that you can only tax people so far before you create perverse incentives."
“Nor should the argument seem strange that taxation may be so high as to defeat its object,” the economist said."
“And that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.”
"His name? John Maynard Keynes."
Disciplining public sector growth and spending, and removing obstacles to business are good places to start with fiscal reform.
The false expectation that our fiscal problems will be fixed over night by just increasing the tax burden is folly.
If only life was that simple. As the renowned economist, Friedrich A. von Hayek pointed out in his Nobel Prize lecture, The Pretence of Knowlege;
"If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants. More…
The main points to consider are:
- Successive governments have put us in a real fix with their borrowing and spending. So getting these under control is imperative.
- Taxation should be simple to pay and administer and kept as low as possible to encourtage compliance, and
- It is impossible for the bureaucrats at the Ministry of Finance and their advisors to understand how the taxes they impose impact each business. So they might be doing more harm than good, putting the country in an even worse fiscal bind if their policies slow economic growth further.
When our politico's can get the public policy mix right, and change their habits, things will start to improve. If they continue to unsettle the business/entrepreneurial class and potential investors with their present approach, fasten your seat belts for an even bumpier ride.
I think the government knows this but still insists on going the opposite & I believe its so they could line their own pockets in one form or another.They need to learn how to work for a living like the rest of us do instead of waiting on “special appointments” of their cronies.I think we are at the point right now when enough is enough,we are not going to take it anymore.I think the whole Island needs to have a march on parliament to let them know we mean business & we are not paying any more taxes,enough is enough.Why don’t you lead by example mr.christie & start by cutting your own spending & by cutting parliament by at least half.I am sick and tired of your taxes.
Do you agree with the Keynes monetary policy?
As a rule I do not agree with Keynesian policy, but in this case – high taxes are not good – I agree with him :o)
Maybe Keynesians don’t even realise he said this :o)
In other words, when he’s correct I agree with him…
This has little if anything to do do with monetary policy, but is a recognition of the importance of supply side thinking.. You cannot have demand side government imposed policies with the recognition of supply.. Without supply, there would be no demand other than fantasies.. Try reading my two blogs on Excessive Burden to understand the folly of raising taxes and the hidden failure of VAT as policy that just doesn’t work..
Overtaxed, Marching on Parliament has proven, in the case of unions and grassroots movements, to accomplish little if anything, except another flurry of commiseration apparent.
Interestingly enough, if the top 10% of Businesses Generate 80% of the revenue, (hence high thresholds for VAT enrollment and carve outs /exemptions on many areas of economic activity)
The Economic “engine” under threat simply has to take a unified “Holiday” from work.
Take time out for an oil change.
While we are in flux with regard to this recent vacation weeks Ruling, Give staff the week off paid.
Or perhaps a great number are due vacation anyway.
Either way, you may be forced to anyway.
While it may seem self destructive, the 20% have the elbow room to do so.
The loudest hollerin’ will be elsewhere.
Or maybe they’ll just garnish your bank accounts, as per their VAT empowerment liberties.
Food for thought.
From the Guardian Today:
“The new value-added tax (VAT ) regime proposed by
the government would allow the state to impose
widespread penalties on those who fail to comply
with the new act and its regulations, including heavy
fines, shutting businesses down, publicly naming and
shaming, seizure of goods and auctioning off of
assets and even jail time.
The new regime would also allow the Central Revenue Agency (CRA), which the government is setting up
to regulate and collect VAT , to demand details of assets from banking institutions, garnish money owed to registrants by others and restrict access to travel for those who owe outstanding taxes”.
Welcome to the New Bahamian Police State.
Looks Like AD Hanna was right all along, restrict Bahamians travelling, more easily controlled that way….
Sorry but this is over the top, unacceptable.
But, alas, foreseeable.
Unfortunately, Oracle, this is the exact model used by the UK. The VATman, there, has inordinate powers of search, seizure and imprisonment. If the Inland Revenue calls to do an audit and you are shown owing, an agreed payment schedule is worked out, however if the VATman arrives and checks your books, he will demand payment then and there and if you can’t pay he WILL close you down, prior to auctioning off your business, and deliver you to prison, the argument being VAT is not yours therefore VAT collected MUST be available collection
This has to be stopped period.As someone told me yesterday,the Bahamian people are just starting to get angry. What a “legacy” for Christie, “I destroyed the Bahamas”. We will all be effected greatly by this but it is the poor people that will be effected the most by this for sure.Christie is a typical politician, do as I say, not as I do. Christie needs to lead by example and start cutting at the cabinet. What else do we do Oracle ?
H.Armbrister they will have to take us all to prison then because I think we should ALL refuse to pay.
I think this is dangerous for a great number of reasons, one of which is economic collapse.
I also fear the political Ton Ton Macoute aspect and potential, an aspect to Bahamian Politics no one in their right mind could deny has been evident to date, and has been getting worse.
These Bills and Acts passes all include Summary Conviction clauses, Ministerial power expansion and discretion,
Erosion of Property rights, erosion of the due Legal process and structure, and fly in the face of the Constitution.
This is a recipe for 3rd world depravity,especially for the lower classes, who, quite frankly have partially been forced into vigilante Justice for day to day dispute resolution as they have no access to Legitimate Justice and who have had no education on this or are even familiar with even simple record keeping, which is the worst aspect of this for the average Bahamian who will find himself at the ministers discretion bereft of assets,freedom or worse!
A bewildered Hungry population find no comfort in the spoken or written word.
The pressure on this administration must be much greater than they have ever seen, for them to abandon their usual pandering, this is exemplified in this new tact they have.
It is blunt, dismissive and in effect says Bahamians
are irrelevant, and perhaps even ignorant.
(recent Halkitis comments, Tribune)
Shades of Hitlers brown shirts, unbelievable acts to follow.Maybe that’s why a shot gun license is now $150.00,they don’t want you to have guns to defend ourselves when they come to lock us all up.
There a is significant difference between being Ignorant and being Stupid.. An ignorant person can learn and overcome his lack of understanding.. Perhaps, as been charged above, the Bahamian people are ignorant but they are learning quickly how unwise and unjust VAT can be and how it can destroy the country that we call home..
Stupidity, in contrast, is a state of being where basic ability to comprehend and understand is never at all considered.. Reason and intelligence become stagnate and basic understanding is inactive and listless.. This very well describes the absence and limited economic comprehension by the government’s VAT experts, promoters and cheerleaders.. It can only be described as fundamental stupidity or a lack of judgment to advocate and support a policy that has a track record of failure after failure..
The following questions must be answered by government or its foreign VAT advocates..
(1) Can they cite one country where the introduction VAT has enhanced the economy and the welfare of the country’s people??
(2) Can they cite one country where VAT has not caused greater poverty and increased financial hardship on the poor??
(3) Has VAT ever increased government revenues enough to reduce the national deficit??
(4) Is there a single example of a country where VAT has NOT been highly inflationary and as a result killed off real growth and employment resulting in continuing Stagflation??
(5) Finally are there any countries that have implemented VAT regimes that are better of economically and socially today than there were when VAT was first introduced??
Us, so-called, ignorant Bahamians would like the so-called know-it-all masters of stupidity to truthfully answer these five pertinent questions.. The ignorant masses of the Bahamas await answers to these pressing questions.. We are not yet like totalitarian Cuba, but expanding government power and control over the people sure looks like we are heading that way.. We must just say, “No To VAT” ..
Right on Tradewinds those questions need to be answered,problem is the government does not like the answers.We need a billboard up in front of parliament & a few other places including in the news papers asking those very same questions while demanding answers.
This is what taxes are doing to the US.I believe its pretty much the same here.
A Real Eye Opener
WHY is the USA BANKRUPT?
Do you think the war in Iraq was costing
us too much each year?
Read this:
We have been hammered with the
propaganda that it was the Iraq war and
the war on terror that is bankrupting us.
I hope the following 11reasons are
forwarded over and over again until
they are read so many times that the
reader gets sick of reading them. I also
have included the URL’s for verification
of all the following facts.
1.
$11 Billion to $22 billion is spent on welfare
to illegal aliens each year by state governments.
Verify
at: http://www.fairus.org/site/PageServer?pagename=iic_immigrationissuecenters7fd8
2.
$22 Billion dollars a year is spent on food
assistance programs such as food stamps,
WIC, and free school lunches for illegal aliens.
Verify
at: http://www.cis.org/articles/2004/fiscalexec.HTML
3.
$2.5 Billion dollars a year is spent on
Medicaid for illegal aliens.
Verify at:
http://www.cis.org/articles/2004/fiscalexec.HTML
4.
$12 Billion dollars a year is spent on
primary and secondary school education
for children here illegally and they
cannot speak a word of English!
Verify
at: http://transcripts.cnn.com/TRANscriptS/0604/01/ldt….0.HTML
5.
$17 Billion dollars a year is spent for
education for the American-born
children of illegal aliens, known as
anchor babies.
Verify
at http://transcripts.cnn.com/TRANscriptS/0604/01/ldt.01.HTML
6.
$3 Million Dollars a DAY is spent to
incarcerate illegal aliens.
Verify at:
http://transcripts.cnn.com/%20TRANscriptS/0604/01/ldt.01.HTML
7.
30% percent of all Federal Prison
inmates are illegal aliens.
Verify at:
http://transcripts.CNN..com/TRANscriptS/0604/01/ldt…01.HTML
8.
$90 Billion Dollars a year is spent on
illegal aliens for Welfare & social
services by the American taxpayers.
Verify
at: http://premium.cnn..com/TRANSCIPTS/0610/29/ldt.01..HTML
9.
$200 Billion dollars a year in suppressed
American wages are caused by the illegal
aliens.
Verify
at: http://transcripts.cnn.com/TRANSCRI
10.
In 2006, Illegal aliens sent home
$45 BILLION in remittances to their
countries of origin.
Verify
at:.<http://www /..rense.com/general75/niht.htm >
11.
The Dark Side of Illegal Immigration:
Nearly One million sex crimes committed
by Illegal Immigrants In The United States ..
Verify
at:http: // http://www.drdsk.com/articleshtml
M
The total cost is a whopping
$ 338.3 BILLION DOLLARS
A YEAR AND IF YOU’RE LIKE ME,
HAVING TROUBLE UNDERSTANDING
THIS AMOUNT OF MONEY; IT IS
$338,300,000,000.00
WHICH
WOULD BE ENOUGH TO STIMULATE
THE ECONOMY FOR THE CITIZENS OF
THIS COUNTRY.
Are we THAT Stupid?
YES,
FOR ALLOWING THOSE
IN THE U.S. CONGRESS
TO GET AWAY WITH DOING THIS YEAR AFTER
YEAR!!!!!