Fri | Sep 22, 2017

Christian Stokes | Princes, taxes and ethical leadership

Published:Friday | May 20, 2016 | 5:00 AM
N. Christian Stokes
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Niccolo Machiavelli is considered the founder of political science. His seminal work, The Prince, was first published in 1532. It is an elegant didactic on politics which focused on how new princes may acquire and hold on to power.

Machiavelli's fundamental argument was that a new prince may best achieve stability, security and prosperity through moral corruption, which is not only acceptable but advisable.

Interestingly, Machiavelli parsed public and private morality, proposing that one may be privately moral, but be able to rationalise and practise immoral acts in the pursuit of political ends.

Modern leadership theorists would not readily accept that it is possible to effectively lead through immoral acts. Today, ethical behaviour is firmly tied to authentic leadership. There are, however, contending views.

In Ethics and Effective Leadership, Joanne B. Ciulla points out that: "We do not always find ethics and effectiveness in the same leader. Some leaders are highly ethical but not very effective. Others are very effective at serving the needs of their constituents or organisations, but not very ethical."

She goes on to advise caution in being too judgemental of our leaders, noting: "On the flip side of the ethics effectiveness continuum are situations where it is difficult to tell whether a leader is unethical, incompetent, or stupid."

Money and votes

I have been very impressed by two things on the part of the Jamaica Labour Party: first, that it presented a 10-point plan to the nation; and second, having come into power, however tenuously, seems to be purposefully seeking to implement that plan. Narrowing the gap between what you say and what you do is central to leadership integrity, trust and, ultimately, persons' willingness to follow you.

The plan reflected a deep understanding of two things - first, who you need money from; and second, who is likely to vote. Restoring benefits to the junior stock market is one example of a wink to the capitalist class and potential funders. Raising the income tax threshold to $1.5 million spoke directly to the working (or not) class and a chunk of those who would actually turn out to vote.

The People's National Party, on the other hand, once again showed the fatal flaw in liberal democracies for financially stressed economies - that responsible fiscal management is among the surest routes to electoral defeat.

The real test of leadership in relation to these election promises surrounds the actual implementation of raising the income tax threshold from $592,800 to $1.5 million.

Let us take, as given, that the prime minister and his financial advisers are privately moral, as I believe they are, and let us set aside wide-ranging discussions in serious and slanderous corners as to whether or not the Government is Machiavellian, or that in its actions, it is either 'unethical, incompetent, or stupid', and focus on the leadership issue.

Good leadership demanded two, seemingly mutually exclusive, outcomes. One was that the Government needed to deliver on its election promise or undermine its integrity; and second, do so without doing violence to the International Monetary Fund targets, primarily the primary surplus percentage. It would be folly to let slip the hard-earned progress led by Dr Peter Phillips.

The art of the impossible

Synsepalum ducificum is a plant which produces a berry. When eaten, the berry can change the tastes of sour or bitter food to sweet. What the nation got was a Synsepalum ducificum tax plan. The PAYE threshold is to be extended to all persons subject to PAYE, and the first $1 million will be exempt starting July 1, 2016, and moved to $1.5 million on April 1, 2017.

Seems sweet. A promise kept. Which is an imperative. But wait. Revenue lost from this measure is to be replaced by increased taxes on petrol, liquefied natural gas and other consumables ordinary Jamaicans use every day. This is actually sour but nevertheless palatable. As Dr Damien King has tweeted: "The $1.5m plan, as financed, is not after all a tax cut. It's a shift to other taxes of equal value. That's precisely why it's good. No debt".

These tax contortions also have the added benefit of shifting the tax burden away from the formally employed to a much wider base of consumers. Not what was expected from the sweet stage, but one can live with it.

Where the bitterness may be yet to come is in the planned move from the $1m threshold to the $1.5m threshold in an environment fraught with challenge. What, for example, is to be done when the $11-billion support from the NHT is no longer available? Can we be sure that oil prices will remain where they are? Add to this the tendency of the Government to pursue policies seemingly to the left of even the prescient Michael Manley.

The Government has done its best not to be blatantly, morally corrupt and has made a sincere effort to meet its campaign promises. The solution may not have been as advertised, but it has its benefits, though pitfalls remain.

Whether it should have been attempted at all will be debated for years to come; but this is clear, the election tactic worked, and a new prince is in power.

N. Christian Stokes is founder and CEO of NCS Enterprises.

ncstokes@ncsenterprises.com