People across the country look forward to the annual budget communication in the House of Assembly. On this day the minister of finance informs the nation of the government's fiscal plan for the upcoming year. The great focus, of course, is on taxes. We all wonder will they go up? Will they go down? Will they stay the same?
Yesterday we sat down to watch at 10 a.m. That's when the House is supposed to start. But when this version of the Progressive Liberal Party (PLP), led by Perry Christie, is in power, it never does. So, we waited until nearly 11 a.m. for things to get going.
Then, when Christie, the prime minister and minister of finance, finally got up to speak, he said he was up until the early hours of the morning making decisions on the budget. Well, it showed in what he presented and how it was presented.
The communication in recent years has been printed in a bound version. What came yesterday were copied pages clipped together.
The main issue we all wanted to hear about was the government's tax reform proposal. Christie finally got to it in hour two or thereabouts of his near three-hour, 127-page communication.
Value-added tax (VAT) is now coming on January 1, 2015 at a rate of 7.5 percent with few exemptions. Additionally, there will be no customs duty reductions in year one of VAT. Throughout this debate on the proposed tax we have all been led by the government to believe that there would be duty reductions with VAT. Now we know that will not be the case.
What we still don't know is what will be VAT-exempt and if utilities will be taxed. These things must not have been covered in the early morning meeting the PM had on the budget.
So, come 2015, The Bahamas can expect quite the across-the-board tax increase. This at a time when we have a mortgage crisis, when unemployment is at 15.4 percent and when real GDP only grew by 0.7 percent in 2013. Where will hardworking Bahamians find the money to pay these taxes?
We are here, however, because there is a real problem. Years of deficit spending to pay for a bloated state have caused our debt level to rise. The 2012/13 deficit, for example, was a staggering $647 million.
Our debt-to-GDP level in 2013 was 66 percent. As recently as 2007, that level was 37 percent.
Despite the large debt rise and the declaration by the PLP administration that we all need to pay more, the government's spending level will go up next fiscal year. It is projected that expenditure for the 2013/14 fiscal year will be $2.015 billion. For 2014/15, that figure is $2.154 billion.
Serious spending cuts are not a concern of the PLP. Its fiscal plan is one thing, it seems: tax increases.
We hope the government has taken into consideration in its revenue models the increased level of unemployment and reduced spending that will result due to VAT. With customers already struggling to buy their goods, retailers will try to keep their prices down. They will do this, in part, by letting staff go. Savvy business people will cut to the bone to ensure their operations are as lean as possible. Consumers will also likely spend less, as the expensive goods they already struggle to buy will cost more due to VAT.
The truth of the matter is that our state needs total reform and the biggest expenditure is on compensation to public servants. No government has had the stomach to deal with that. Keeping public servants we don't need at excessive salaries will keep us having to find new revenue sources.
The prime minister was quite proud of his budget communication. He enjoyed the applause from his colleagues. He is a wealthy man now, so the pain of what his administration is about to do may be lost on him. Regular Bahamians will feel it though. And those people may not be so friendly to the PLP come 2015 once the party's "solution" is implemented.

The Coalition for Responsible Taxation has hailed the government's new VAT proposal as "progress", but said there is still much to do, calling the announcement that the tax will be implemented at 7.5 percent next year as just "the first leg of the relay".
Speaking with Guardian Business after the prime minister laid out the government's updated plans for tax reform, which include a lower rate than initially proposed, with "much fewer exemptions", Gowon Bowe, the coalition's co-chair, said: "Some people have asked, "Is it congratulations?"
"It would be immature to make it seem like there was a win or lose situation.
"The most important thing is the only winners in this will be the Bahamian society if we can protect the economy, employment and progression.
"Have we made progress from seven months ago? Yes. Have we achieved all we want to achieve? No. Is there a lot more to do? Yes. I don't see it as a victory, it's the first leg of the relay. Everyone who watches sports sees that pace picks up in the second leg. It's important to continue the momentum."
Bowe said that if the government is committed to debt reduction, implicit in the announcement of a 7.5 percent VAT rate would have to be a commitment to cutting expenditure by up to 10 percent over the next 10 years.
"It should mean a significant program of expenditure reduction in order to achieve the level of deficit reduction, so that's a positive," he said.
The coalition co-chair called the January 1, 2015 deadline announced by the prime minister in Parliament yesterday "still a tight timeline" that will require "considerable dedication" to achieve.
According to Bowe, recommendations the Coalition had made to the prime minister late last week, following the completion of the study on VAT and possible tax alternatives by their consultants, Oxford Economics, had not included a "hard and fast rate" for VAT.
"In short what we'd suggested were the key elements we thought need to be accompanied by tax reform. We highlighted the VAT scenarios and said there are trade offs. We told them that if the government is prepared to make commitments in terms of expenditure cuts, you could get as low as five percent, but that may not be feasible."

Exemptions
Bowe said he hopes that the government will move forward with virtually no exemptions, as recommended by New Zealand.
"We are pleased he has taken on board the element of reducing the exemptions. We would hope his term far fewer really means very limited exemptions because we want to see it play out as the least amount as possible, so that the compliance costs go way down."
With regard to the government's indication that it would not implement "wide scale" duty reductions when it brings in the tax, but may do so later on, Bowe said he views this as a "trade off".
"I can't say what financial analysis they've done for that but I think the intent of the government is that they want to see how the 7.5 percent will stack up in terms of the revenue it can generate before they immediately start reducing duties," he said.
"I think that (maintaining the current rates of duty) may be the trade off for a delayed implementation at a reduced rate, and we know the WTO obligations will by necessity reduce those eventually. In terms of our direct conversations with him what he said was that there'd be no reduction at this point and at the time that implementation was prepared to go live they'd see where they stood on WTO and VAT projected revenues. I would be surprised if he closed the door to say there'd be no duty reductions."
On the subject of duty rates, Christie said: "Being able to streamline exemptions and position the VAT rate much lower than in the White Paper, the government is not announcing any wide-scale reduction in import duties and excise taxes at this time.
"Based on the revenue performance of VAT early next year, the government may be in a position to consider tariff and excise reductions at the time of the 2015/16 Budget. More general tariff rebalancing, however, is still a requirement that will need to be implemented once the Bahamas concludes the ongoing WTO negotiations."

Cost of living to 'rise 7.5 percent'
On the impact of the newly-proposed VAT model, Super Value President Rupert Roberts said: "That means the cost of living will go up 7.5 percent."
The grocery retailer said that finding out exactly what will be exempted under the proposed model will be critical. In his address, Christie said the list will be released shortly.
"If it's not going to be like the New Zealand model, we will strongly object," said Roberts.
"We were hoping no exemptions exempts things like banking and rent, so we could have clean math, no dirty math."
Under the previously proposed form of VAT, the government suggested a wide ranging list of exemptions on breadbasket food items. Retailers were to be blocked from recouping VAT on expenses related to the sale of these items, increasing costs for grocery retailers and making VAT administration more complicated.
Roberts added: "It better [mean no exemptions on breadbasket items] or we have to pay $5-6 million and that's out of the question. That would be about a $12 or $15 million tax to me, with real property, business license and VAT and then if government is going to expropriate my profits, they may as well take my keys."
Referring to Christie's comments regarding duty reductions being delayed, Roberts said he was "afraid" of duty reductions all along, suggesting that given some level of proficiency in collecting this tax, to suddenly remove it to replace it with a new one would result in a major drop in revenue collections.
"They have learned how to collect some revenue through duty and I'm afraid if they take it off, The Bahamas will become 700 desolate islands off the Florida coast."

Lack of duty reduction a 'betrayal'
Meanwhile, another retail source, who spoke on condition of anonymity with Guardian Business, took a less positive view.
He said that a failure to reduce duty simultaneously with the implementation of VAT would be "a complete betrayal of any negotiation in good faith".
"The Coalition made it clear that duty reduction must be simultaneous and that fiscal reform must be part of the grand bargain," said the major retailer.
"The private sector will not accept VAT without a reduction in duty. The government is in for a serious fight now."
Rick Lowe, operations manager with Nassau Motor Company, and a major critic of the government's VAT plan, said it appeared the new proposal with fewer exemptions would make the tax easier to administer, however he was still largely against the tax.
He said that there were many outstanding questions, such as whether VAT will be charged to the car dealers "at the port" as well as by car dealers "to our clients".
Meanwhile, he said he was disappointed to not hear the prime minister make mention of any changes in price control, which force vendors to absorb any cost rises that would occur under VAT, or business license fees, which have risen significantly in the last year.
"They didn't mention price control, which is important, particularly for our industry. If you can add one percent [extra in profit margin] to your parts and cars you may be able to recover something, if not we're kinda nailed," said Lowe.
The car dealer said that under the new VAT proposal, initial calculations suggest that a car with a list price of $34,830 would increase in cost by $2,600, versus $1,600 under the previous proposal.
Laying out the path to yesterday's announcement on the government's chosen tax reform, Christie said that the government has deliberated on VAT for over a year and had extensive consultations with the private sector, as well as received advice and support from international organizations and experts from the U.S., New Zealand and the U.K.
"I therefore believe that we are now in a position to set out the policy framework for VAT that we believe will be successful from both a fiscal and economic growth and stability point of view," he added.
"That framework, which I believe addresses many of the concerns voiced by the public and the private sector, is set out in the VAT Bill that I will very soon be laying before the House of Assembly.
"We will work closely with the private sector going forward in elaborating and finalizing the various rules and guidelines that will be critical for successful VAT implementation."
Christie said that the government intends for the ministry of finance to be "at full administrative capacity and readiness" by October 1, 2014, several months ahead of VAT implementation.

Thirty-two former employees of the Hard Rock Cafe in downtown Nassau have now been rehired as the retail store and restaurant reopens under new management which promises to be more "hands on" than the previous franchise holders.
Gene Capello, director of operations for Sharkeez Bar and Grill, the Harley-Davidson store, Turtle Bay and now Hard Rock Cafe, told Guardian Business that the retail store is now open and the restaurant will relaunch this weekend, following just under two months in which it was closed.
Capello and his team have signed a management contract with businessman and former Cabinet minister Marvin Pinder, the new franchise holder for the brand in The Bahamas. Pinder is the landlord at the site, where former franchise holders Kevin Doyle, Keith Doyle and Robert Frankel exited in early April following a financial and legal dispute that saw their franchise agreement terminated by the parent company in January of this year.
Speaking of how he intends to ensure the business remains a profitable one going forward, Capello said: "I think one of the main issues is that they really didn't have anyone who was hands -on, they weren't there on a daily basis; they were here a couple of times a year.
"It's hard to manage and run a company and say 'just stay within a budget' when you are not hands-on; things won't run the way they should. I'll be here and watching the day-to-day operations. We hope to run it in a way that is a little more meticulous," said Capello.
Among those rehired to work at the Charlotte Street establishment are kitchen staff, , cleaners and waitresses.
"We've dealt very closely with the government to make sure we are doing things in the right way," added Capello.
In April, staff expressed concern after the business shut its doors without making provisions for the payment of severance monies to the employees. The former franchise holder's business is currently in liquidation, with a shortfall of over half a million dollars facing creditors, of whom a major one is Pinder, the new franchise holder.
Capello said that the restaurant will be better than before.
"We're bringing in better food, we're upgrading the facility; it should be a nice atmosphere and decor."
The group which Capello works for now employees 300 people in the downtown area, he said, "from management level, right down the line".
It is currently looking at expansion into Freeport, where due diligence is being done on the possibility of opening Sharkeez and Harley-Davidson stores or restaurants in the port area.

I bet some of my readers are scratching their heads right now, perhaps mumbling under their breath, what gifts is Reilly talking about here today, after all it's not Christmas or Easter or any other day on which people exchange gifts. So D. Paul when you state in today's title "Have You Found Your Gifts?" what exactly are you referring to, can you explain? I sure will.
Whether you're aware of it or not, your creator, God, gave you some wonderful gifts at birth in the form of unique, special talents with which to succeed in life, beyond your wildest dreams. Now, have you discovered your gifts yet? Well, have you? The tragedy is that many I believe have not yet discovered the special gifts which God gave them, and more's the pity. So D. Paul can you tell me exactly how I can discover my divine gifts? Once again I'd be delighted to.
Firstly, this process may be assisted greatly by using a professional counselor or life coach who can guide you through the process of unveiling, so to speak, your very special talents, which when employed will take you to wherever you want to go, will take you to the highest peak, the summit of success.
I would also like to suggest, that you spend some time each and every day in quiet meditation and reflection as you place your complete trust in your maker, God, to reveal to you in due course your special gifts so that you can polish and refine them and then give them away to the world. This is the way to success city. Yes it is.
In Dr. Deepak Chopra's book "The Seven Spiritual Laws of Success", in chapter seven dealing with the law of dharma or purpose in life he writes as follows, "According to this law you have a unique talent and a unique way of expressing it. There is something that you can do better than anyone else in the whole world -- and for every unique talent and unique expression of that talent, there are also unique needs. When those needs are matched with the creative expression of your talent, that is the spark that creates affluence. Expressing your talents to fulfill needs creates unlimited wealth and abundance." How very well put there by Dr. Chopra and of course it is the absolute truth. So my friend, I want you to commence the process of finding your gifts today!
o Think about it!
Visit my website at: www.dpaulreilly.com. Listen to "Time to Think" the radio program on STAR 106.5 FM at 8:55 a.m. & 6:20 p.m.