More Thoughts from Tradewinds..
The introduction of VAT will force thousands of Bahamians that truly believe they at last have finally "made it" to fall from the ranks of the lower middle classes back into the depths of economic poverty.. VAT's forced "excessive burden" and its dreaded "deadweight loss" on both the public and local business will move the economy rapidly into recession as the private sector will be forced to cut back on needed investment and will necessitate reductions in operational overhead by cutting employment levels.. Businesses will also be forced to increase consumer prices and significantly reduce inventories to cover the increased tax burden that is passed down the product supply chain.. Consumers will be forced to cut back on personal costs or pay more to get less for their money.. This was the experience with VAT in New Zealand that the Kiwi advisers inadvertently forgot to tell the Bahamian people..
As was the painful experience of Japan in the 1990's, the economic curse of stagflation set in as prices of goods and services continued to rise while economic growth needed to offset these inflationary costs remained stagnate.. With some of the highest tax rates in the world, this once powerful economy has been stuck in ongoing stagflation for well over two decades with any hopes of economic recovery being marginal at best.. Nevertheless, within the past year, the Japanese government began to significantly lower corporate tax rates leaving the United States with the world's highest effect corporate tax rate.. Just like many of its most productive citizens, US corporations are fleeing overseas to more hospitable tax and business environments.. The advantages of economic expatriation are numerous permitting greater capital investment for growth, higher dividend payouts and equity buy-backs benefiting equity shareholders not to mention the lower tax burden paid to the host jurisdiction..
We must now ask ourselves how could the government of the Bahamas force on our country a VAT that is the impetus and driving force leading to increased poverty and economic recession which has the potential to destroy the very foundation of our economy and social structure?? There are many possible answers to this perplexing question, but all are highly critical and most uncomplimentary.. Perhaps, it is the influence to perpetuate government power and control which will benefit only the established the ruling political elite and its bloated bureaucracy at the expense of the Bahamian masses who are so gullible as to believe anything government decides to tell them.. Only this time, however, it may be different as the suffering, pain and cruelty that the people will experience from the harsh realities of VAT may force political change to save the country from itself.. Let us hope and pray that our government finally comes to its senses and begins to undertake prudent and proven fiscal policies not only to save the economy but to save the Bahamian people as well..
