The Hon. K. Peter Turnquest, Deputy Prime Minister & Minister of Finance at Accountant's Week 2020

Tue, Nov 10th 2020, 03:12 PM

I would like to begin by thanking the Bahamas Institute of Chartered Accountants for once again extending the invitation for me to offer remarks at the annual Accountant’s Week event. Accountants Week continues to be an extremely important event on the calendar each year for networking, training, and knowledge sharing which benefits the entire Accounting Profession in The Bahamas.

As you would all be aware, I am addressing you today in the midst of challenging global economic times due to the COVID-19 pandemic. Undoubtedly, tourism-based economies have been the hardest hit.

A July 2020 study by Oxford Economics and McKinsey Global Institute showed that the arts, entertainment and recreation sector, and the accommodations and food services sector would likely take the longest time to recover to pre-COVID-19 levels. With The Bahamas ranking thin the world on the Tourism Dependency Index we should all be aware that the domestic impact of COVID-19 will be felt well into the medium-term horizon.

During these trying times, the government has done its best to budget, plan and prepare to ensure fiscal resilience, and to also remain vigilant and nimble to adapt and respond as best as possible.

Our approach to resilience for this fiscal year is rooted in five critical areas: enhancing public health and safety; expanding social safety; employment retention; strengthening domestic output and public sector reform, and it is the latter two areas I want to focus on today.

Over the past few months, with the protracted lockdowns and the slow reopening of the tourism sector, the demand for investment in these Resilient Bahamas priorities has become more important even as our ability to invest has become more strained. The second COVID-19 wave forced the government to reimpose restrictions on the movement of persons and business operations, and the numbers from the recently released 2020/2021 Q1 Fiscal Report tell the tale of the impact of these COVID restrictions.

In Q1, government revenues were down across the board in key areas: VAT, import duties, departure taxes and business license fees which collectively contracted by approximately 45%. Despite the revenue losses, the government took the necessary steps to protect the most vulnerable in society by increasing expenditures to PHA and essential social assistance programs – unemployment assistance, food assistance, and meal voucher benefits. In particular, resources were directed towards the households most adversely affected by the crisis.. And to retain jobs, the Government’s tax credit and tax deferral programs provided more than $40 million in tax incentives. This initiative has successfully protected more than 14,000jobs since the onset of this pandemic.

In this environment, the need to finance these critical expenditures led to expected increases in borrowings as the government tapped into both the foreign and domestic markets – taking advantage of the most favorable rates and terms offered by multilateral and other international financial partners given the current global financial realities.

At the end of the day, the government has a clear mission to not only address the ongoing crisis but to approach its response in a way that positions the country better for the future. In other words, allocating resources in ways that would both mitigate the potential damage to income and employment in the country while ensuring we are able to recover stronger, more resilient and more resistant to future large-scale economic shocks.

The small business community and the domestic economy are pivotal to building the country’s resilience, which is why the government has invested significantly in targeted programs through the Access Accelerator Small Business Development Center (SBDC).

This week the SBDC launched a standalone small business grant programme to provide grants of up to $5,000 to Bahamian entrepreneurs to start a business or to expand their small business.

To date the SBDC has gotten over 400 applications toward the $500,000 that had been budgeted for the programme. To respond to the demand, the SBDC shifted its budget around to add an additional $500,000 to the programme to bring the total programme allocation to $1 million. Through this programme, individual entrepreneurs and micro-businesses will get equipment, supplies and materials to allow them to start a business, or to give their enterprise a boost.

Further, there is a dedicated program, with a $1.5 million allocation, targeted at young entrepreneurs, ages 18-30, to provide grants, loans, training and business support. And, a program with $25 million allocated to increase the participation of Bahamian women in entrepreneurship throughout the country.

Although we have programs carved out to ensure that marginalized and under-represented groups receive specific attention, our $250 million commitment over five years will provide support to all Bahamians. Building the small business sector and therefore strengthening the domestic economy is critical to building a more resilient Bahamas.

The current crisis also underscores the need for a resilient and responsive public sector that is able to effectively partner with the private sector to further advance the financial stability of The Bahamas. The Government has already begun work on transitioning from the modified cash basis of accounting it currently employs to an accruals based accounting system in compliance with the International Public Sector Accounting Standards (IPSAS) and have dedicated significant resources to making this transition a reality.

The public will hear more of the details on this process in the upcoming weeks; however, I am pleased to announce today that a roadmap has been developed for the transition to full IPSAS reporting by the end of the 2022/2023 fiscal year. At various stages throughout the IPSAS transition, the government will need to partner closely with BICA members; tapping into your advanced knowledge of accruals-based financial reporting as it is currently being applied to the private sector in The Bahamas. This uniformity as it relates to financial reporting will only further strengthen The Bahamas’ ongoing commitment to transparency and accountability in both the public and private sectors - and will require the combined efforts of our entire accounting profession in order to be successful.

Thus far, progress had been made to move from cheques to electronic payments, the reductions in the number of bank accounts and in automating the capture of receipt information. Work must be done on the modernizing of internal controls and the production of manuals and instructions.

Additionally, the implementation of the new Integrated Financial Management Information System (IFMIS) will modernize and organize public financial information under the new Chart of Accounts, to provide timely, coordinated and comprehensive data on the fiscal position of the country. This system is a key component of the Public Financial Management (PFM) loan taken up with the Inter-American Development Bank (IDB). This implementation process is a measured and meticulous process that has taken some countries five to ten years to fully implement. We are making steady progress towards this necessary tool for prudent fiscal management. Additionally, the requirement for the engagement of independent auditors to provide assurance on the government’s compliance with international financing agreements continues to grow.

In this regard, the role of the auditing profession in The Bahamas will continue to increase in importance and relevance in keeping the government accountable to its mandate to use public debt funds responsibly for the benefit of all Bahamians. This necessary partnership between the

government and the accounting and auditing profession in The Bahamas must therefore continue to be strengthened.

In terms of the way forward from a revenue standpoint, the government is undertaking several activities to firm revenues. As you would be aware, the report from the government appointed Economic Recovery Committee was released to the public outlining numerous revenue enhancing paths. The Cabinet continues to deliberate on these activities and have already taken action on some of these recommendations. One example is the BEATS program allowing extended stay of non-residents for up to one year as these visitors work remotely from Bahamian shores. I am advised that Ministry of Tourism officials have received significant expressions of interest in this program which will supplement foreign receipts until the tourism sector rebounds. Additionally, I am pleased to announce that work continues to modernize and introduce electronic payments across government at a rapid pace. The public will soon see the launch of electronic payment solutions at the Department of Road Traffic, Registrar General Office, fisheries, for port and marina fees just to name a few.

These efforts will allow us to reduce revenue leakage and jealously guard every single dollar collected. As we adapt to the “new norm” in a post COVID environment, these new revenue collection measures that reduce person to person contact will become increasingly more important.

In closing, although the global COVID-19 pandemic has led to marked declines in revenue with corresponding increases in expenditures, The Bahamas has maintained its commitment to only the most efficient allocation and use of budgetary resources.

In the most recent quarter, investments continued to be made to not only contain the crisis but to ensure our business community emerges in a much stronger position – in keeping with the spirit of resilience which is the theme of this week’s talks.

To reinforce this position of strength and stability going forward, we must continue to build on the synergies being developed between accounting professionals and practices in the both the public and private sectors – and exploit the benefits of an integrated and cohesive accounting profession in The Bahamas.

Thank you.

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