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FNM Government lacks basic understanding of economics, has failed to put forward a plan to end the crisis

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Hon. Philip ‘Brave’ Davis, Q.C., M.P.
Cat Island, Rum Cay & San Salvador
Party Leader

The Progressive Liberal Party is grateful for the enthusiastic public response that has greeted the release of our Economic Plan.  Bahamians understand that the economy is in terrible shape, and that a comprehensive plan is needed for the way forward. The government had an opportunity in their mid-year budget to put forward a plan to help ordinary Bahamians and to grow the economy, but they utterly failed to do so.
 
We have set out a wide-ranging set of proposals to Recover, Rebuild and Revolutionize the economy, and we encourage Bahamians to learn more at https://plpbahamas.org/economicplan/.
 
Taken together, these innovative and achievable proposals offer the country a path to growth and shared prosperity.
 
It is extraordinary that the government does not recognize the urgency of providing immediate relief to Bahamians.  People are hurting. Our middle class is disappearing. That the FNM defends the status quo is evidence of how disconnected they are from the realities on the ground.
 
The public finances are in a dire state. In order to offer Immediate Relief to hurting families and struggling businesses, but at the same time restore fiscal sanity, we also need to increase revenues to the public treasury and adopt new strategies to kick-start the economy.
 
It is revealing that the Minister of State for Finance, Kwasi Thompson, has chosen to focus solely on the issue of VAT, ignoring the dozens of other proposals in the Economic Plan. What’s more, he appears not to understand the basic economics underlying consumption taxes on which VAT is based.
 
Consumption taxes rely on consumer spending in order to generate tax revenue. When the government imposed the shock increase in VAT by 60% in 2018, consumers cut back on their spending. Since then, the government has failed to meet a single one of its revenue projections. This is what happens when you don’t understand basic economics. If you set consumption taxes too high, the economy slows down. These are the facts. This is the economic reality.
 
Our proposal to cut VAT to 10% represents a modest decrease which will bring some relief to thousands of Bahamian families and help inject cash into an economy that desperately needs it.
 
Once again, this reduction in VAT was not offered as a stand-alone proposal. Bahamians will see that we also propose a significant number of revenue-enhancing measures. VAT is not the only tax-raising mechanism available to the government – but it is one that disproportionately affects ordinary Bahamians.
 
The Junior Minister argues that this modest decrease in VAT will lead to a reduction in revenue for the government. He is wrong. In fact, there will be an overall increase in revenue. Again, back to basic economic principles: the lower the price, the higher the demand. Lowering prices drive an increase in economic activity. Further, against the advice of the IMF as well as government consultants, they have bastardized the VAT model left in place by the former administration.
 
But even taking the Junior Minister on his own argument highlights the government’s difficulties.
 
He projects that a decrease in VAT to 10% would lead to a shortfall in revenue of $100 million in the year. This equates to a little more than $8 million per month.
 
Does the Minister of Finance really lack the ability to find an additional $8 million per month to alleviate the tax burden on ordinary Bahamians, at a time when so many are out of work through no fault of their own?
 
Bear in mind that this is a government that chose to spend almost $200 million on a run-down hotel in Grand Bahama.
 
This is also the same government that at the height of the pandemic chose to spend $20 million on sidewalks.
 
And the same government that refuses to report, as required by law, how they have spent hundreds of millions under the Emergency Orders.
 
We have some sympathy with the Minister for his failure to be able to recognize a good plan.
 
This government specializes in political attacks, not credible plans. They move from crisis to crisis, with no vision and no confidence in the Bahamian people. Their inability to plan deliberately has increased the damage caused by Hurricane Dorian and the pandemic.
We believe continuing on the present path would be catastrophic. It’s time for change.
The PLP has a comprehensive Economic Plan to RECOVER, REBUILD AND REVOLUTIONIZEthe Bahamian economy.
We look forward to continuing to engage with the Bahamian people around its merits.