In his 2014-2015 [Budget Communication](http://www.bahamas.gov.bs/finance) to Parliament today, the Rt. Hon. Perry G. Christie, M.P., Prime Minister and Minister of Finance, reiterated the Government’s steadfast commitment to the Multi-Year Fiscal Consolidation Plan, introduced as part of the 2013-2014 Budget last year. *“To secure the future for all Bahamians”,* he said, is the ultimate objective of this Plan – with an overarching objective of *“securing durable structural reform of the principal components of the public finance”*. To this end, *“We will stay the course with the implementation of the various policy initiatives in respect of Recurrent Expenditure, Recurrent Revenue and Capital Expenditure that comprise the core elements of this plan.*”.
Also reaffirming his abiding optimism for the growth of entrepreneurial and employment prospects for the citizens of The Bahamas, the Prime Minister highlighted positive developments on the investment front – part of diligent efforts to strengthen the foundations of the economy to secure steady growth and private sector employment creation. He stressed that the strong emphasis being placed on new foreign direct investments is directly in tune with the initiatives being taken on the fiscal and tax reform front and, more specifically, the introduction of a Value Added Tax (VAT).
*“Foreign investments will provide a much-needed boost to our economy at the same time that tax reform is being implemented.”*
On the occasion of the Mid-Year Budget Statement earlier in the year, the Prime Minister had reported on a number of policy initiatives that the Government is pursuing to enhance the business environment and promote stronger economic growth – i.e., to implement its stated Plan. These include initiatives to:
* strengthen the key tourism industry;
* promote additional foreign direct investment across the country, and particularly in Grand Bahama and the Family Islands;
* explore avenues for further diversifying of the economy, especially in the agricultural area through science and technology to improve our competitiveness in food production;
* further diversify the financial services sector;
* further develop and expand the yachting, shipping and aircraft registries;
* expand investments in education; and
* strengthen national training through the National Training Agency.
*“In a nutshell”*, he said, *“our plan consists of four key parts: growing the economy; restraining expenditure; enhancing revenue administration; and securing new sources of revenue.”*
**Implementing a New Source of Revenue**
Announced in the budget communication was the January 1, 2015 implementation of a Value Added Tax (VAT). Reportedly, various studies have provided the Government with invaluable input on the most appropriate approach to fiscal consolidation in general and, more specifically, on the parameters of a VAT policy framework suitable in the Bahamian context – i.e. a modern, service-based economy. *“There will be one single VAT rate across the board (other than the zero rate for exports) that is being substantially reduced to 7.5 per cent from the originally proposed 15 per cent.”* The delayed implementation date will allow time for the more in-depth public education campaign and private sector preparation.
The policy framework for VAT is set out in the VAT Bill that will be presented to the House of Assembly in short order. *“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,”* assured the Prime Minister.
*“Mr. Speaker, through my Government’s dedicated and responsible approach to governance, the future looks very bright indeed.”*
Expectations are that the ongoing recovery in the domestic economy will remain fragile over the near-term, due to the persistent softness in global growth, particularly in the main stopover visitor markets. These developments, however, should be offset by steady foreign investment activity in the construction sector, as several major developments gain impetus and are completed. Inflation is forecasted to remain relatively benign, reflecting the stability in global oil prices, with only modest upward price pressure expected to be exerted during the implementation of Government’s Value Added Tax (VAT).
*“To buttress my optimism for the future, I would note that the IMF staff mission that visited our country last November for the annual Article IV consultations, concluded that growth is expected to pick up over the medium term, reaching 2.8 per cent in both 2015 and 2016, following real growth on the order of 2.3 per cent in 2014.”*