The Bahamas is expected to experience a resurgence of interest in tourism facilities within the coming months, Minister of State for Finance, Senator James Smith has predicted.
In a national address Tuesday night on the State of the Economy, he said that the combination of increased tourism expenditure and renewed inflows of productive capital investment, will enhance employment opportunities, personal income and government revenues.
Meantime, the slowdown of the U.S. economy prior to the Iraq war, has had an adverse effect on the Bahamian economy, especially in the area of government revenue.
Senator Smith told the nation that the Government expects at least a $69 million shortfall below projected revenue, at the end of fiscal year 2002/2003.
That, together with the impact of expenditure restraints should bring about the overall GFS deficit within the projected range, he said.
The performance of the tourism sector has always been closely linked with the performance of the North American economies, particularly the US’. Throughout the 1990s, it was the US economy, which acted as the dynamo of growth in the international economy.
On Wednesday, US Federal Reserve Chairman Alan Greenspan said that he remained hopeful the end of the Iraq war will result in stronger economic growth, repeating his opposition to substantial tax cuts that would run up a larger deficit.
On the current US economy, Mr Greenspan said he still held to the view he expressed in February that the so-far lackluster recovery from the 2001 recession would accelerate to faster growth once the uncertainties associated with the Iraq war are removed.
But, according to Senator Smith, a favourable outlook predicted for the US economy over the next 18 months, is likely to have a positive impact on local tourism.
It would appear, he said, that international terrorism is being successfully dealt with, and the geopolitical uncertainties arising from the Iraq crisis have diminished.
In this more stabilised environment, the major economies, particularly the US, will now be concerned with restoring the global economy on a positive growth path, he added.
“It is reasonable to believe that the US administration, in consultation with other major economies, will take whatever measures are necessary to re-ignite rapid and sustainable growth,” he said.
In this regard, he advised, the Ministry of Finance implemented legislative and administrative programmes to bring about improvements to the administrative procedures of revenue collection while at the same time, providing the stimulus for economic growth in the country.
Such measures include the amendment to the Stamp Act, (effective Jan. 1) so as provide exemption from stamp tax on instruments relating to the acquisition and mortgage of real property valued at $250,000 or less to be used exclusively by the owner as a first-time dwelling.
This move was designed not only to encourage persons to become homeowners, but to increase economic activity in the construction and related industries.
At the end of March, 74 applications were approved with properties valued between $60,000 and $250,000 and with a combined value of $10.06 million, the senator revealed.
Amendments were also made to the Real Property Tax Act to provide encouragement to the second-home market and at the same time, giving relief to middle and low-income homeowners. The law was further amended to provide that the maximum annual tax on any home did not exceed $35,000. Provision was also made to increase the owner-occupied exemption from real property tax from $100,000 to $250,000.
Additionally, the tax rate on owner-occupied homes with market values in excess of $250,000 and less than $500,000, was reduced to three quarter per cent from one per cent, and the tax rate on the market values, which exceeds $500,000 was reduced to one per cent from one and a half per cent.
In the area of tourism taxes, Senator Smith said that the Passenger Tax Act was amended to provide for improved efficiency in the collection of departure tax.
The law provides for the departure tax to be included in the cost of the ticket. This of course, removes the need for collecting cash at the airport.
“Although it is still at an early stage, and some transitional arrangements are being accommodated, there is reason to believe that the changes will bring about a reduction in the leakage of government’s revenue from that source,” Senator Smith said.
In recognizing the role ground transportation plays in the tourism industry, the government, through the Ministry of Finance took steps to ensure that owners of vehicles used in the transportation of the public, including residents, are given the opportunity to replace older vehicles with later models, he noted.
Additionally, the Tariff Act was amended to give concessions, once every five years, to franchise holders, who would wish to replace their vehicles. Holders of franchises for taxis, omnibuses, livery and tour cars may import a new vehicle duty- free, or a used vehicle, not older than three years at a 50 per cent duty discount.
By Lindsay Thompson, The Nassau Guardian
