Shadow Minister of Finance and Free National Movement (FNM) Deputy Leader Peter Turnquest yesterday forecast that the actual total revenue earned from value-added tax (VAT) in the first half of fiscal year 2015/2016 will actually be less than the $317 million the government is touting now, because that figure likely includes monies that will have to be refunded as part of the VAT scheme.
Turnquest also insisted that despite assertions by Prime Minister Perry Christie and Minister of State for Finance Michael Halkitis that there was confusion about how the value-added tax revenue was to be spent, the government gave "a clear indication" while promoting the tax that it would be used "to pay down the national debt".
During Halkitis' contribution to the debate on whether to approve the resolution accepting the prime minister's mid-year budget on Monday, he said, "There seems to be this thinking that you can collect revenue from a particular source, i.e. VAT, and then separate that from all other revenue, and say 'I'm going to pay down the debt with that'. VAT revenue contributes to the reduction of the debt, but not in that way."
He cited the constitutional provision for all revenues of The Bahamas to be paid into the consolidated fund.
"There is no mystery about this. That is where government revenues go," said Halkitis.
Turnquest told Guardian Business yesterday, "In terms of where the money is going, he is correct. The funds are all being deposited into the consolidated fund. However, that is a departure from what they promised when they were introducing this value-added tax," said Turnquest.
"It was a clear indication that they were going to use this money to pay down the national debt. So while they brag that they have reduced the fiscal deficit, meaning the amount of borrowing or deficit in one year, the national debt is still growing because there is still borrowing," Turnquest added.
Halkitis noted in his contribution to the debate, "It contributes to the reduction in the debt because as you collect more revenue, you reduce your deficit, you don't have to borrow as much money on an annual basis. Hopefully we'll get to the point where we don't have to borrow any money, and then the debt begins to do down."
Turnquest noted, "He is correct in that respect because you do not have to borrow more, but again that is not the point. The point is that the value-added tax was promoted as a revenue measure that will allow us to cease borrowing and to pay down the national debt," said Turnquest.
"I was trying to make the best out of a bad situation. The reality is that despite the fact that they have collected $317 million of value-added tax money, included in that would be funds that have to be refunded that they have not taken into account. So, the actual net collection is going to be less than $317 million," said Turnquest.
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