Sat | Jul 22, 2017

Garth Rattray | We can’t tax ourselves into prosperity

Published:Monday | March 20, 2017 | 3:00 AM

I always wonder who advises politicians when they come up with ideas to enhance their chances of winning elections. Not too long ago, this ruling political party made election promises to provide no-user-fee health services. They assumed that since a minority of patients who accessed the public health services paid their bills, making it user-fee free would not result in the loss of significant revenue and would endear them to the hearts of the electorate.

Turns out that the relative few who paid their bills were contributing about $2 billion to government coffers. We lost irreplaceable revenue because of that ill-conceived move and patients have been suffering and dying as a direct result of this administration's dogged adherence to this lethal system purely for political purposes.

Before the last general election, Audley Shaw announced that his Government would commit to removing income tax from those earning between $1.5 million and $5 million annually. They were expected to take home $18,000 more. The name of this scheme changed from 'tax break' to 'tax relief' to 'tax give-back'.

To quote Pierre Dos Utt, "There ain't no such thing as a free lunch." So, Mr Shaw planned to fund this campaign promise by reallocating revenue from the fuel tax, improving collection from tax arrears and from additional general consumption tax expected from increased spending (Gleaner, March 11, 2016). Even I knew that there was no fuel tax to reallocate, but Mr Shaw did not.

Consequently, there was no getting around imposing new taxes, and, to make matters even worse, they raided the National Housing Trust (NHT) to help finance this tax shuffle. This NHT raid is by the same person who screamed that a previous administration had 'raped' the Trust.

 

HUGE MISTAKE

 

The poorly conceived, freeness bait, a campaign promise to give back taxes to some people without any new taxes, helped swing voters, but it was a huge mistake. When reality hit home, several measures were boldly deployed to force the entire country to pay for a vote-getting promise made on a political campaign trail. No one had the courage or decency to just come out and admit that it was an egregious error and that the promise could never be fulfilled.

Ironically, additional taxes on several items were needed to fund the promised 'tax relief'. This was done in two waves. Among other things, the second wave of new taxes has motorists paying compounded-quadruple taxes on petrol - none of that goes to the original plan to repair our roads. Motorists also pay more for licences, and so on. Public transport operators will suffer significant losses. Additionally, more people have to pay more for electricity as part of the tax (break, relief, give-back) measures.

Incredibly, the Government also slapped general consumption tax on group health insurance, further straining both employees and employers. Businesses will have to help absorb this extra expense or pass it on to the consumers. Otherwise, the health insurance companies will probably henceforth offer less coverage for the same premium.

In an effort to allay fears that heavily taxed petrol prices will spiral upwards, Mr Shaw opined, "The price of oil on the world market is not expected to escalate; in fact, it may go down." However, two things must be kept in mind. The oil cartels are looking into cutting back production in order to get an increase in oil prices, and second, this is the same person who confidently stated that the international financial crisis of eight years ago would not affect Jamaica and that we would benefit from the situation.

If the new taxes were part of an austerity measure, we could understand, but what truly bothers me is the general acceptance of this baseless, purely political promise that has led to increased hardships. This 'prosperity' promise is souring at warp speed.

Sir Winston Churchill said it best: "I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." The real tragedy is that politics is very polarising and it blinds people to the truth, so the citizens continue to suffer the consequences of bad decisions.

- Garth A. Rattray is a medical doctor with a family practice. Email feedback to columns@gleanerjm.com and garthrattray@gmail.com.