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WEDNESDAY, JUNE 16, 2021
$4.91 ‘Major impovements’ needed on bank fees By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net ALMOST two-thirds of Bahamian businesses say the fees charged by commercial banks need “major improvements”, according to the findings of a Central Bank survey. The result, which will come as little surprise given the constant complaints raised by both private sector and consumers, was divulged in the regulator’s just-published Business Digital Payments Survey, which showed an increasing trend of companies moving towards electronic channels to conduct transactions. The research, which focused largely on micro and small companies with annual turnover of $5m or less, said: “When asked to give their opinion on the level of changes or improvements needed in the current state of digital payments in the country, 64.3 percent of businesses said that fees charged by financial institutions required major improvements. “Some 52.7 percent said major changes were needed with respect to potential to fraud, and 51.3 percent indicated that the security of technology required major improvements. Additionally, 46.4 percent said major improvements were needed with respect to convenience and volume of customer interest, and 43.4 percent noted that readiness of point-of-sale (POS) and receipting systems needed major changes.” When it came to receiving monies, the Central Bank survey found that less than ten percent of business respondents received all their income in the form of cash. It added that there were signs that payments made via digital means increased in 2020, and there was greater interest from consumers in using such channels. “As to accepted means of payments, cash was still the most widely embraced, with the least accepted instruments being in the emergent categories of cryptocurrencies and mobile wallets. In particular, only about 13.7 percent of entities accepted no form of cash payment, while two-thirds indicated that cash represented about of ten percent or more of their receipts,” the Central Bank report found. “In the case of cheques, business-drawn instruments were more favoured than personal cheques, with some degree of acceptance by three-quarters of firms versus only 60 percent of firms that also accepted personal cheques.” “Credit and debit cards were accepted among approximately 60 percent of firms,” the Central Bank added. “However the average share of revenues from credit and debit cards was greater than for either category of cheques, and only outpaced by funds received through electronic bank/ wire transfers. “In fact, wire transfers ranked second in importance to cash for firms that received at least 20 percent or more of their intake through this medium— about half of all businesses versus approximately 55 percent of all firms that average such levels for cash. “On a weighted average basis, the revenue share represented by cash collection was estimated in the upper 20 percent to
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Inflation ‘significant’ threat to post-COVID recovery
By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
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ISING inflation poses “a very significant” threat to the speed and strength of The Bahamas’ post-COVID economic revival, a prominent economist warned yesterday, with key building material prices up by double digits. Rupert Pinder, who lectures on economics at the University of The Bahamas, told Tribune Business that the sustained and escalating price increases being experienced in key sectors especially construction and food - and over which this nation has little influence could undermine prospects for a faster rebound from the pandemic. Speaking after Rupert Roberts, Super Value’s president, warned consumers to brace for grocery and meat prices increases of eight percent and ten
A GOVERNANCE reformer says it is “mind boggling” that the government would abandon previous pledges to rein-in an oversized civil service by adding at least another 1,802 persons to its payroll. Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that the move was akin to “gouging another hole in the Titanic” by further increasing the burden on Bahamian taxpayers at a time when The Bahamas is confronted by a near-$10bn national debt and annual deficits currently running at around $1bn. Responding to the additional recruits unveiled by Brensil Rolle, minister with responsibility for national insurance and the public service, Mr Myers said that while he had
DIONISIO D’AGUILAR
Bahamasair sees • Construction, food hikes may rob revival impetus revenues fall 84% • Tax system worsens impact for many consumers • ‘Domino effect’ for purchasing, govt revenues
to 12 percent, respectively, by Christmas, he added that “the domino effect” of increased construction input costs could rob another industry of vital impetus. The government is relying heavily on construction to lead the post-COVID revival, and absorb some of The Bahamas’ record unemployment levels, but Mr Pinder said inflationary impacts imported from abroad “can dampen any sort of growth prospects” in a variety of ways. He explained that borrowers “on the margins” of qualifying for a mortgage for a new building, or existing property that requires upgrades, could be pushed over the edge and no longer be eligible to receive financing as the rise
in construction costs pushes them outside sustainable debt servicing limits. As a result, some construction projects in the pipeline may be paused and abandoned as their sponsors are no longer able to proceed, Mr Pinder added, while warning that The Bahamas’ consumptionbased tax system - with its reliance on border duties and VAT - only serves to worsen the impact inflation has on imports. While there will be no impact on the one:one exchange rate with the US dollar, he said its “real value” - on a purchasing power parity (PPP) basis - will be weakened by the sustained price increases for key products. And, if inflation results in subdued economic growth,
and civil society groups. It’s just mind boggling. They have got to stimulate the private sector, and if they’re not smart enough to do that then for God’s sake get somebody in there that can actually do that,” Mr Myers reiterated. “Don’t write a report and let it sit on top of the filing Cabinet. Get some people in who understand how to stimulate growth and increase foreign direct investment, especially if we want to maintain the US dollar exchange rate peg. We’ve given them a plan to do it, the Economic Recovery Committee has given them a plan to do it, but don’t talk - act.
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• Growth likened to ‘gouging hole in Titanic’ • Governance reformer: Govt does ‘opposite’ • Warns putting nation ‘into even deeper hole’
ROBERT MYERS nothing personal against those being hired the move did not align with the government’s previous pronouncements. “It’s just mind boggling how they believe they’re stimulating the economy and not taking the easy way out like eery successive government has done,
and are just digging us into an even deeper hole,” he told this newspaper. “I just don’t know how they can think this is OK. It’s got to be about private sector growth. “The public sector is already too big for our economy by 30-40 percent. It’s not just me saying that. Kwasi Thompson agreed with that, the IMF agreed with that, the former RBC economist [Marla Dukharan] agreed with that, and the Oxford Economics report from six to seven years ago said that. “I just don’t understand why they don’t understand that the writing’s on the wall. It’s just mind boggling how you could do the opposite of what you said, and all the advice given by experts
By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
BAHAMASAIR’S revenues for the ten months to end-April 2021 plunged by 84 percent year-over-year, a Cabinet minister revealed yesterday, with taxpayers set to underwrite its survival via a $60m-plus subsidy. Dionisio D’Aguilar, minister of tourism and aviation, disclosed in his Budget debate contribution in the House of Assembly the extent to which the Public Treasury has had to prop up the national flag carrier due to COVID-19’s devastating impact on international air travel. “To say that fiscal 20202021 was a challenging year would be an understatement,” he admitted. “There was great hope for Bahamasair as the company saw its revenues for the fiscal year 2019 climb to $92m, with revenues forecast to exceed the $100m mark for the first time ever in 2020. “During the last 15 or so months of COVID19, the airline was either completely shut down or operating at less than 35 percent capacity when compared to pre-COVID rotations. This resulted in revenue streams of only $60m for 2019-2020 and $12.8m for July 2020 to April 2021. The $60m represented a 27 percent reduction, and the $12.8 million an 84 percent reduction in revenue when compared to fiscal year 2018-2019.” As a result, Bahamasair’s need for financial subsidies had risen to an unsustainable level during the current fiscal year. “Bahamasair, as a state-owned enterprise (SEO), has proven a continual drain on the country’s finances. During the fiscal year 2020-2021, to-date Bahamasair would have received a subvention of $60m-plus. This has been to both support operations and the retention of employees. “In this upcoming budget cycle, fiscal year
Mr Pinder said the impact will also filter through to government revenue projections that many already view as overly-optimistic. While not possessing any actual inflation data or statistics, the economist said: “Just look at the magnitude of the increases in construction products and basic materials. There’s no question it’s going to have a significant impact on the cost of housing and construction generally, which is going to have a domino effect throughout. “The increase in construction costs impacts those persons on the margins, those persons the banks are kind of iffy about as to whether they qualify for a mortgage. Now, on
Civil service expansion labelled ‘mind boggling’ By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net
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‘Challenged’ to exploit govts VAT tax break By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net REAL estate buyers will be “challenged” to exploit the government’s VAT waiver/discount on deals under $250,000 due to a shortage of contractors in the Dorian-hit islands, it was argued yesterday. Ken Hutton, Abaco’s Chamber of Commerce president, and realtors both told Tribune Business that purchasers will face a host of practical and logistical difficulties when it comes to starting actual construction within the time limits prescribed by the government. The Disaster Reconstruction Authority (Special Economic Recovery Zone) (Relief) Order 2021, which gives effect to the incentive requires that purchasers - whether Bahamian or foreign - must start construction or repairs to a damaged within 75 days of acquisition to be eligible for the tax break. “Where a property was subject to the tax discount or zero rating under the order, and the purchaser has not started construction
• Contractor shortage difficulty for Abaco • 75-day deadline on real estate incentive • Bahamians fully exempt; foreign discounts
KEN HUTTON or repairs within 75 days of the closing of that sale, that tax becomes payable as if this order was not in force,” it said. Purchasers acquiring a vacant property have to produce plans showing they will “undertake material commercial or residential development of the property”. Mr Hutton applauded the government’s intent to prevent real estate buyers on Abaco and Grand Bahama
from simply pocketing the tax break and then doing nothing to develop their properties, adding that the incentive was “definitely a positive step” for stimulating the islands’ post-Dorian redevelopment. “It will certainly help incentivise people who were on the fence to make a decision sooner rather than later,” he told this newspaper. “It’s good news. I can’t fault the government for that. Hopefully people will be able to take advantage.” Informed of the 75-day deadline to begin construction, Mr Hutton added: “I’m sure people would like to do that, but there are challenges with permitting, getting materials so that construction can start. A big challenge here is finding a contractor able to do that. It’s a wonderful thing to have the capacity to take advantage of that, but what if you don’t.
“We’re in a significant housing crisis, and what we need is multi-family homes not single family. I’m hopeful that we’ll have that addressed. We’re not looking for the government to solve Abaco’s problems; we’re looking for the government to work with Abaconians to solve Abaco’s problems.” Mr Hutton was backed by Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president who, while praising the VAT savings, said of the 75-day timeline: “That’s a problem because you have to get plans drawn and a contractor, and they’re all busy. It’s just outside two months after closing.” The incentive, which applies to real estate deals valued at $250,000 and below in a bid to incentivise the rebuilding of destroyed or damaged properties, will run from July 1, 2021, to December 1, 2022. It will
provide up to a $25,000 tax break for Bahamian purchasers as the ten percent VAT is totally waived on their deals. Foreign buyers purchasing property in the Dorian hit areas valued up to $100,000 will receive a 50 percent, or maximum $1,250, VAT tax break. Deals valued at between $100,000 and $250,000 will be subject to a 35 percent discount worth up to a maximum $8,750. Meanwhile, the Ministry of Finance yesterday said it had agreed to alter the Special Economic Recovery Zone Order to enable residents and businesses who had purchased vehicles prior to May 1, 2021, to import them tax free if they are landed before August 31. “It’s about time. You don’t know how long we’ve been fighting that fight,” Mr Hutton said, although he added it would have been better if announced earlier. “We had to strike the right balance with providing the necessary assistance and
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