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Bahamas Outlines Fiscal Action Plan

by Phillip Morton, Investors

02 October 2012

The Bahamas government has outlined measures to address issues raised in a recent report from Standard and Poor's which revises the agency's outlook in respect of the territory's credit rating from stable to negative because of fiscal concerns.

The S&P report says the territory is experiencing a "deteriorating fiscal situation", with deficit targets being overshot by a significant margin. The agency noted that the sale of government assets had only temporarily closed the gap between expenditure and revenue in previous years, and the deficit is substantially higher than the 4% level reported by the previous government.

Needless to say,the Progressive Liberal Party, which assumed office in May 2011, lays the blame for the fiscal situation at the door of the outgoing government, which it said had racked up a deficit of more than USD1bn over the previous five years, and had failed to implement a credible plan to cut the deficit and national debt.

"The government recognizes the severity of the situation which has been inherited and has begun the process of fiscal consolidation, without ignoring the fragile social and economic state of the country," the Ministry of Finance said in a statement. "As a result a number of initiatives have been or will be implemented within this fiscal year."

According to the Ministry, these initiatives include:

  • The introduction of a White Paper on Tax Reform which would lead to the first major public discourse on the topic and to significant changes in the tax system;
  • The introduction of a 'fiscally-responsible' Mortgage Relief Programme, which is a part of a broader initiative to restart the housing sector;
  • New measures to revitalize foreign investment in the Bahamas; and,
  • Concrete steps to improve revenue administration and expenditure control.

These measures, combined with those announced in the budget, will establish a stable fiscal outlook and support economic recovery, the Finance Ministry claims.

TAGS: tax | investment | Bahamas | fiscal policy | law | banking | international financial centres (IFC) | budget | offshore | tax reform

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