Govt must not 'overburden' business

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September 04, 2013

The government must "get out of the way" of private business if there is to be any hope of stimulating additional employment in the economy, and should ensure that it is being as "strategic" as possible in its new taxation measures to avoid strangling private enterprise, a former minister has warned.

Zhivargo Laing, former minister of state for finance in the Ingraham administration, was commenting in the wake of newly-released National Insurance Board (NIB) data which indicates the approved claims for unemployment benefits were 14 percent higher in the first quarter of 2013 than in 2012, standing at 1,117 approved claims.

While this does not necessarily indicate higher unemployment overall, it certainly suggests that - at least in the early part of the year - there has not been a diminution of joblessness in the country going into 2013.

In total, the government paid out $12 million in unemployment benefits over a 15-month period up to the end of March.

Recently, several commentators told Guardian Business that they do not predict any reduction in unemployment when upcoming unemployment statistics are released. The last Labour Force Survey, conducted in November 2012, found an unemployment rate of 14 percent overall.

Laing said that while he believes it is "fictitious" for the government to claim responsibility for employment numbers - good or bad - the key to stimulating a reduction in this figure is for the government to ensure businesses find it as easy as possible to start up and grow.

"Jobs get created when people see an opportunity to make profit and in the process hire people to help them pursue that interest. That happens when existing businesses see expansion opportunities and pursue those and need additional workers to do that, when individuals see an opportunity for themselves to provide goods or services. This is where the bulk, as much as 80 percent of employment comes from," said Laing.

"The government's principle job in seeking to spur job creation is to stay out of the way of business. People should seek to make it as easy to do business in the country as can be done. That was among the things we (the Ingraham administration) were seeking to work on.

"With the Business License Act we made it such that if you didn't get an answer in seven days after putting in your application you were deemed licensed to do business. We wanted to make it as easy as possible for people to do business."

Also critical is effective promotion of The Bahamas as a place to do business internationally, and the strategic targeting of taxation measures to avoid burdening businesses in a down economy.

Laing said he understands the government is in a "dire" financial situation which demands tax increases to increase governmental cash flow, but added that he is not yet convinced that the right "balance has been struck" between implementing these tax increases and creating positive conditions for business activity.

A plethora of business operators have complained in recent months about the possibility that newly-imposed, or planned, tax increases will cause them to either lose significant profitability, cut back on expansion plans, or go out of business - the most recent being Jimmy Sands, owner of the Bahamian Brewery and Beverage Company.

Sands cancelled a planned contract to expand his Freeport storage facility after the government announced an increase in the duty applied to his beer product.

Laing said: "I would only question whether what is being done is strategic in balancing the need for revenue with the need to not encumber business with costs that keep them from doing what they do best - hire people in pursuit of profits they seek.

The former minister acknowledged, however, that this is a "difficult balance to strike". The government has come under pressure from international financial institutions such as the International Monetary Fund (IMF) and credit rating agencies, who have the power to downgrade the country, increasing its borrowing costs significantly.

However, Laing suggested that there may yet be a case to be made for applying some additional government stimulus to the economy.

"The national debt, as much as people would like to cry about it and scream about it, is not the priority in The Bahamas right now. If we have to incur deficits as a means to facilitate and promote job creation, then so be it."

Dionisio D'Aguilar, former president of the Bahamas Chamber of Commerce and CEO of Superwash, told Guardian Business that he sees little likelihood that unemployment will decrease given the government's emphasis on deficit and debt reduction.

"I think the government's focus is not on unemployment right now, it's on reducing its debt. The fact that they are being forced to basically increase taxes is not endearing themselves to the business community or motivating the business community to hire people, so the very high level of unemployment will persist.

"All you hear is 'we need to deal with debt, get finances under control, and increase taxes', and while that is wise, because they do need to address the debt issue, the offshoot is that unemployment will remain stubbornly high," said D'Aguilar.

Click here to read more at The Nassau Guardian

News date : 09/04/2013    Category : Business, Nassau Guardian Stories

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