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With 21 cents out of every dollar in revenue going to debt servicing this year, the prime minister has announced the creation of a debt management committee while making some of his most extensive comments to date about the government's commitment to reducing spending relative to GDP as a component of fiscal reform. Presenting the mid-year budget in Parliament yesterday, Christie's comments could easily have been seen as a response to those who have suggested that the government has yet to state as clearly and specifically as it could about exactly what role expenditure reduction will play in stemming the rising deficit and debt - a major complaint of those concerned about the impact and effectiveness of value-added tax (VAT). In his address, Christie said that "fiscal reform is at the heart of the government's plan for national economic and social development", with tax reform a part of this process. Arguing that the government is committed to "smart spending" that will see revenues utilised in the most efficient and effective manner based on a prioritization of needs, he said that the ultimate goal is to eliminate the need for deficit financing altogether."That has to be our objective; that is our objective," he said. Christie said that it is not until the government "gets its fiscal house in order" that it can do many of the things that it had promised in its campaign for government."We are fundamentally and in a balanced way reforming the structure of both recurrent and capital expenditure and the structure of government revenue. This will allow us to eliminate the untenable imbalance between recurrent expenditure and revenue, and it will allow us to eliminate the GFS deficit and reduce the government debt burden," he said. Among a "variety of measures" Christie said would be used to reduce recurrent spending as a proportion of GDP - but not in absolute dollar terms - are the implementation of "strict discipline and accountability across all government ministries and departments and public corporations", something he said "sometimes causing great anxiety and vexation on the part of ministers." "It's a work in progress and we've got to make sure we continue to not slow down the sort of things we want to see and not for example reach a position where we have wonderful work in urban renewal and home repairs, and then it stops. We've got to ensure the continuity in funding remains in place going forward," he said. Christie said that "control mechanisms" are being implemented, along with "best practices wherever feasible."In order to "more effectively monitor" the operations and spending of ministries, departments and public corporations, Christie said the Ministry of Finance is "being strengthened." "We are vigorously striding for higher levels of accountability and transparency," he said. With respect to public corporations, a perennial drain on the government's finances, Christie said that the Ministry of Finance is now "exerting more direct oversight of their financial affairs to ensure that they strive for greater levels of efficiency and effectiveness and that they are subject to greater accountability to the government."This will allow our budgeting process to be more comprehensively informed," he added. In the area of government purchasing of goods and services, Christie said that the government is set to introduce new public sector procurement procedures which impose greater controls and greater efficiency on public spending for goods and services for all public entities including public corporations - a recommendation of the Inter-American Development Bank and others. The cost of debt itself to the government will be better addressed, he suggested, with the creation of a debt management committee which has been formed with technical assistance from international agencies. Comprising representatives from finance, the treasury, and the Central Bank, the committee has developed a new debt management policy framework with the goal of minimizing the financing cost of government debt while also minimizing risk, said Christie. The prime minister said that through these actions recurrent expenditure will be allowed to grow in dollars terms in the medium term to "allow the financing of new and emerging priorities such as the hiring of doctors and other staff for the new mini hospitals", while falling relative to the size of the economy.
"This will require the setting of clear spending priorities going forward that will begin the longer term process of getting recurrent expenditure back to its level relative to GDP that prevailed during our last term in office," said Christie. Capital spending levels over the medium term are intended to fall to their "traditional level" of around three percent of GDP, with "strict prioritization and timely profiling" of perceived needs necessary. While his comments suggested an increased focus on the issue of spending, they are likely to have fallen short of the hopes of some who would have preferred the prime minister to provide more hard and fast figures regarding levels of expenditure cutback, specifics on which areas may see reduced allocations, or timelines for the privatization of public corporations, among other potential means of shrinking the deficit and debt. Christie said the national debt is projected to hit $5.1 billion at end-June 2014, around 59.7 percent of GDP.
MINISTER of Financial Services Ryan Pinder told participants in the recent Bahamas Bureau of Standards' First National Standardisation Forum and Formation of Technical Committees Workshop that the benefits of the standards bureau are critical to the Bahamas' national development.
A former Bahamas Financial Services Board (BFSB) chairman yesterday said that while the re-emergence of Senator Carl Levin's Stop Tax Haven Abuse Bill was likely to have minimal impact on this nation, "substantial costs" involved in complying with other US legislation could pose a threat to the sector.
Bahamas Striping's legacy of giving includes education, public safety and donating necessities to its community.
In November 2013, Bahamas Striping launched its first annual 'The Dollar That Could Project' which sought to raise $60,000 through a dollar drive campaign for one month in aid of The Bahamas Red Cross, Special Olympics Bahamas, BAARK, and The Bahamas Humane Society.
Managing Director Allen Albury said, "The Dollar That Could Project is another example of the company's continued commitment to giving back to the community.
"The campaign chose charities that had the ability to reach persons over the length and breadth of The Bahamas."
Bahamas Striping President Atario Mitchell believes that the passion, vision and love he has for his community and the country is all a part of the process of building a better Bahamas and providing shared economic opportunities for Bahamians.
"As business persons, we take for granted and overlook so many situations in our country," Mitchell said.
"Working with these four charities was an eye opener.
"Working with The Bahamas Red Cross gave me the opportunity to see firsthand the level of suffering in various communities when I went out on The Meals on Wheels Program.
"Working with BAARK and The Bahamas Humane Society showed the extensive work they do to control the animal population as well as providing homes.
"The athletes at Special Olympics showed me that there is hope and after coaching a basketball game and teaching them to shoot a free throw, provided me with so much satisfaction."
Mitchell said although they did not meet the goal of $60,000, the $16,000 which will be distributed to the four charities will go a long way, and it could not have happened without the assistance and support of Abaco Markets Limited, Hi-Lite Global, Jewels by the Sea, Sammie's Chicken and the Bahamas Telecommunications Company.
He also challenged business people if they have not already done so to adopt a charity of their choice, and donate $1,000 per year to help the unsung heroes of The Bahamas.
"Entrepreneurs set the example for the future and growth of The Bahamas," Minister of Financial Services Ryan Pinder.
"Being a committed member of the civic society, and having the interest of people is commendable. With Bahamas Striping's success through hard work, they are able to give back to the community. Recognizing charities that give back nationally was an exceptional idea, and even though the goal was not met, Bahamas Striping has achieved greatness.
"This tangible contribution will help to further the initiatives of all of the recipient charities."
The Bahamas Red Cross was on hand to receive its donation and its officials expressed gratitude.
They were not able to send out all of their food parcels to people who were waiting before Christmas because they did not have funds.
This donation will be now used to purchase the items.
Laura Kimble, board member for The Bahamas Humane Society, said, "Money is always an issue. BHS is trying to improve and the funds will go towards building the Jill Ganza Puppy House.
"They can be held for 72 hours so they can be observed before they can join the rest of the population."
She added, "For BAARK the funding will go towards building kennels to assist the government with the adoption and finding homes for dogs."
Amanda Moncur, vice president of Special Olympics Bahamas, thanked Bahamas Striping and encouraged company officials not be disappointed by the small financial return, because the bigger return was the fact that they were able to come out and bond with the athletes.
The country's most significant push to date into the Chinese market will be spearheaded later this year by representatives from the country's financial services sector, a move which seeks to capitalize on a view that the "timing and the market are right" for The Bahamas to tap into Chinese demand for asset diversification.
Minister of Financial Services Ryan Pinder suggested that the decision by the Bahamas Financial Services Board (BFSB) and the Ministry of Financial Services to attend and participate in the China Offshore Summit as 'platinum' sponsors will generate critical exposure for the country.
"The event will be held in October in Beijing, and there will also be country-specific events in Hong Kong and Shanghai. It will allow us to be able to, in a very meaningful way, enter and develop the Chinese financial services sector for The Bahamas, leveraging cooperation from the private sector here," said the minister.
"Certainly the opening of Baha Mar in December is key timing with respect to our investment in China, to be able to leverage the opening and marketing of Baha Mar and work with some of our key partners here who have significant Asian business, and we have the full cooperation of the Chinese embassy here."
Pinder said that while The Bahamas has engaged in the sponsorship of such conferences in the past in China,
the timing of the conference and the level at which the country will participate as a sponsor are expected to be more instrumental in generating business for this nation.
"We think the timing is right; the market is maturing over there in terms of the demand for the international diversification of assets. Coming to office there had been some investment the BFSB had been doing in China; they'd sponsored in the past but not as a platinum sponsor, they'd done light marketing. I have a belief that you either go or don't go, and spreading yourself wide with limited resources doesn't work well.
"We'd made a concerted effort to go to Brazil to market ourselves there and that proved to be a successful strategy. Now we believe the timing is right now with all the activity going on between the Chinese and The Bahamas to focus our resources there," said Pinder.
"We're certainly looking to attract clients to our institutions, to attract high-net-worth individuals who would like to use The Bahamas to access the markets in this hemisphere. We've also had a long-term goal of attracting Chinese investment to use The Bahamas as a hub for trade financing, and so we'll look to advance that too,"he added.
Financial Services Minister Ryan Pinder said he is confident that The Bahamas will see an increase in Latin America-based business within the next year after a recent meeting with a top banking institution.
While he would not confirm the name of the banking institution, Pinder told Guardian Business that Friday morning's meeting with executives represents a "huge opportunity" for the country's financial services sector, as his ministry continues to market The Bahamas to the Latin American market...
Executive Chairman of the Bahamas Electricity Corporation (BEC) Leslie Miller said it would be "unfair" to levy value-added tax (VAT) on electricity bills.
Miller said many BEC consumers are already "overburdened" with the cost of power, and questioned if a tax should be applied to this bill.
"To me, that's a double edged sword," he said.
"You're taxing me twice, as an individual then as a user of electricity and that's something that the Ministry of Finance has got to decide on."
He added: "Personally I don't think it's fair, but that's not my decision. The decision is whether the government can accrue sufficient revenue to enable it to cover expenses by bringing in VAT."
Miller said the impact of VAT on BEC bills would depend on the rate the government sets and the minimum consumption threshold that would determine who is exempt.
Deputy Prime Minister Philip Brave Davis said recently the government has yet to decide whether electricity will be taxed.
Davis, who has ministerial responsibility for BEC, said a final decision on whether to place VAT on BEC bills will be made based on public opinion on the issue.
"No decision or discussion -- not at our level -- has taken place yet on that issue, save to say it has been put in the public domain," Davis told The Nassau Guardian.
The government has proposed to apply a 15 percent VAT to a broad range of goods and services come July 1.
In the VAT bill released in November, the tax on electricity would kick in for residential consumers once they consume over a certain amount of power a month.
Ishmael Lightbourne, VAT consultant to the government, has said the amount "in consideration" was 200 kilowatt-hours per month.
The proposed legislation and regulations left the space blank where the exact amount that would constitute this threshold would have appeared.
The justification for the tax on electricity is that the government stands to lose about $30 million in annual revenue if electricity bills are not subject to VAT.
Recently, Financial Secretary John Rolle said the Ministry of Finance was considering a higher threshold, which would allow more consumers to benefit from a VAT exemption on their bill.
By NEIL HARTNELL
Tribune Business Editor
The Bahamas has become "a victim of its own success" in financial services, a senior attorney warned yesterday, having become "somewhat complacent" - a factor that caused successive governments to invest less than they should have done in the industry's continuing development.
Brian Moree QC, senior partner at McKinney, Bancroft & Hughes, in an exclusive interview told Tribune Business that the Bahamas "simply must do a better job" of responding to changing client needs and trends in a dynamic financial services market, especially given that it was facing ever-increasing competition.
While acknowledging that governmen ...
The government this;
the government that;
the government looking bad on VAT;
but consider this: The government's full faith and credit remains intact.
The Bahamas government has never defaulted on any of its financial obligations to local or international agencies and institutions: Not to the Inter-American Development Bank; the World Bank; the International Monetary Fund; the United Nations, or CARICOM. No Bahamian government has compromised the full faith and credit of the Commonwealth of The Bahamas. I dare anybody to show otherwise. On that score, the government of The Bahamas has not failed its people.
The government floated $200 million in bonds back in 2003 and just recently the government floated another $300 million of public debt on the international market and both times the securities were oversubscribed. This is tangible evidence of the level of confidence international investors have in the full faith and credit of The Bahamas. I know for a fact that on the 2003 issue, investors were paid their premiums of $7 million in May and November of each year; the government has not defaulted on those payments to this day.
I will go further: Prime Minister Perry G. Christie has said publicly on numerous occasions that upon coming to office in May 2002, he was faced with a $125 million bill that the government had to pay - and it did. Ten years later upon his return to office, as an encore the prime minister claimed that his government was faced with a $550 million obligation to various creditors that his government had to make good on - and his government did.
But can the Bahamian people say the same regarding our tax obligations to our government?
It was recently reported in the media that Bahamians owe the government over $550 million in real property taxes ($557 million to be exact). The government offered them an amnesty period laden with incentives, but collected only $20 million of the $550 million bill. Of that $550 million tax bill, commercial properties accounted for some $341 million. I sincerely hope that nobody associated with the Coalition for Responsible Taxation is in that delinquent grouping. They cannot be in arrears if they and their anti-VAT campaign are to have any credibility with the public.
Further, arguably one of the greatest collective acts of tax fraud against the government takes place in the customs clearance facility at LPIA where literally thousands of Bahamians routinely under-report the value of taxable goods and services purchased abroad, mostly in South Florida. Bahamians do this with impunity, without remorse and are cavalier about this irresponsible, harmful and unethical practice. The narrative on NIB payment compliance is eerily similar. Too many Bahamians do not believe that they should be held accountable and they have no intention of abandoning this practice.
These are precisely the practices that helped to get us into this fiscal quandary today, yet Bahamians bark and balk at the idea of VAT as a viable instrument of tax reform. This is beyond irony or hypocrisy; this is madness.
This is akin to stabbing somebody then blaming them for bleeding. This is akin to the patients at Sandilands lecturing the doctors and nurses on how to run the facility and on how to administer the medication protocol.
Bahamian thespian Ronnie Butler said it best when he sang: "I know them long time - them people is mine" and "we gat bad ways and we bad pay".
When it comes to paying taxes too many Bahamians have bad ways and are bad pay.
But in the end, the government of The Bahamas must do what it has to do because at the end of the day and despite the deafening din of dissent, the government must protect the full faith and credit of the Commonwealth of The Bahamas because only the government will be held accountable.
- Elcott Coleby
The proposed "white paper" focusing on finding an alternative tax system for The Bahamas has not yet reached Cabinet, Guardian Business can reveal.
"I am settling the basis of the paper to bring to my colleagues in Cabinet. The core of that has been finished, so I am hoping that in the not too distant future, I will be able to present it for consideration to my colleagues," Prime Minister Perry Christie shared with reporters following a Cabinet meeting yesterday.
Christie's comments come after he recently confirmed that he had the "white paper in hand", and was ready to move forward with the recommendations.
Last month, the prime minister spoke on the subject during the 2012/2013 Fiscal Position Symposium held at the Sheraton Nassau Beach Resort and Casino. It was there that he admitted that some areas of revenue generation may have reached their peak.
"The position is that I told the country that The Bahamas is one of the few countries that doesn't have some form of value added tax (VAT), and that when we look at the revenue of our country we realize that we are running out of sources for additional revenue," Christie said. "We are to the maximum now I think from what we can get from the customs duties."
The prime minister said that his current position will enable his government to make progress on taxation, and he wants everybody to be on the same wavelength on the subject.
Christie said the "white paper" has been designed for open public discussion, as it represents a paradigm shift in how the government administers and collects the country's taxes.
"After Cabinet, the 'white paper' will go to the House of Assembly and then the country for discussion. It represents a paradigm shift in how we administer and collect the taxes of our country," he explained.
Financial Services Minister Ryan Pinder also believes there needs to be a fundamental shift and some type of alternative system has to be implemented.
"It has become increasingly apparent over the past few years that government revenues are not keeping pace with expenditures," Pinder said. "I am advised that the introduction of an alternative tax regime with broad coverage could likely compensate for revenue losses stemming from tariff reductions and create necessary government revenues. It would, if properly implemented, also serve to level out some of the 'peaks and valleys' in duties that currently exist and make goods generally more affordable to Bahamian consumers."