Transfer-pricing regime beneficial to Jamaica
I refer to a December 16, 2015 article in the press, titled: 'Transfer-pricing regime illegal and unconstitutional'. I reckon the cowardly, anonymous writer to be ghastly ignorant and politically sentimental. The article was fundamentally devoid of information. It was, instead, a tirade. Here are the facts and implications of the matter of transfer pricing.
The seemingly notorious transfer-pricing regime is but one of a myriad of instances in which Finance and Planning Minister Dr Peter Phillips implicitly demonstrates his diligence to microscopic details in arriving at colossal success. Identifying the sophistication of enacting the transfer-pricing regime legislation does not belong to any novice of economics, let alone the ordinary mind. Ignorance, though, is no excuse of the law. It's for the shrewd to discern it, and is by no means unattainable. Yet, there are at least three of a host of exquisite factors why the enactment per se is extremely advantageous for an economy such as Jamaica's. One is the veritable role of institutions in any economy. The other addresses the prohibitively high levels of interest rates and inflation.
Then, there's the obvious - a small country CANNOT survive without the world economy.
Transfer pricing is the major tool for corporate tax avoidance, also referred to as base erosion and profit shifting. Needless to say then, it is for the protection of desperately needed revenue for the nation's business and welfare why the minister ingeniously, I reckon, conceived of this piece of legislation and its implementation.
That the minister and his Government, though, are characterised as "ignorant, reckless, dictatorial and inhumane" is a ghastly ignorant, and perhaps malevolent political position.
Institutions are the laws, regulations, and unwritten codes of conduct which govern economic activity. Institutional efficiency is a universal index of determining a nation's economic growth. According to the empirical dynamics of macroeconomics, and as Harford, a renowned authority on the subject, posits: "Governments in RICH countries usually perform basic bureaucratic tasks QUICKLY, whereas governments in POOR countries DRAW OUT the process." Now, there's no denying that the Constitution is sacrosanct.
However, the brutal reality of it is that it characteristically lacks agility to respond to certain situations urgently. Nevertheless, there are other sources of law pursuant to the Constitution that complement it in this regard.
The minister's brilliance in enacting this bit of legislation transcends, exceedingly, the common thinking of just momentary economic benefit for a few at the sacrifice of our promising economy, by and large. He's acutely aware that economic growth is predicated on the tenet of productivity, and productivity, in turn, on capital, technology and institutional framework. There's absolutely nothing reprehensible about Dr Phillips duly exercising his ministerial powers in this instance. This swiftness, therefore, with which he pursues the measure, makes the difference between the nation's economy, either going in the direction of prosperity or that of poverty.
Then there's the clamour for tax concessions as an alternative to this measure. However, tax concessions do have their places, and Jamaica has had its fair share of them. We need to become abreast of neoclassical economics and financial best practices. Prolonged concessionary tax measures can have far-reaching, negative implications for any economy. Especially when a developing nation indulges in the practice of tax concessions, the revenue forgone from this activity has to be recovered.
- E. L. Johann Walker, BSc economics student, UWI.