Sun | Jan 19, 2020

Editorial | Haughton’s GCT repudiation problem for Phillips

Published:Wednesday | December 11, 2019 | 12:42 AM

Whether it is that the People’s National Party (PNP) first feigns before it decides on policy or André Haughton was marking out his independence, Peter Phillips has a problem.

For, if it is the former, it’s a matter of whether the public can trust the party about what it promises to do in Government. In the event of the latter, it is a question of Dr Phillips’ authority over the PNP and its formulation of policy. In the event, there are echoes of the party’s leadership contest in September, in which Dr Phillips narrowly prevailed over Peter Bunting.

The issue at hand is Dr Haughton’s broadside against what we thought was settled policy by the PNP to cut the general consumption tax (GCT) by at least two percentage points if it wins the next general election and that the matter would be central to its campaign ahead of the vote.

GCT – essentially, a value-added tax – is charged on most goods and services sold in Jamaica at a rate of 16.5 per cent. For the current fiscal year, ending next March 31, the Government expects to collect around J$200 billion from the tax, or around six per cent more than the previous fiscal year. Based on the Government’s projection, the take will account for 35 per cent of overall tax revenue. Not only is GCT the Government’s largest single source of tax, but its projected inflow will be approximately J$42 billion, or 26 per cent more than all taxes on income and profits combined.

Earlier this year when Nigel Clarke, the finance minister, announced a Budget with J$14 billion worth of reduced rates and stamp duties on a raft of transactions and services, the PNP argued that the givebacks were regressive – geared primarily towards the rich and the well-to-do. The party’s shadow finance minister, Mark Golding, suggested that Dr Clarke could have added another J$15 billion, or more, to the package, with some of it coming from a cut in the GCT rate, although he did not say by how much.

Dr Phillips reprised the idea a fortnight ago, this time laying out the two-percentage-point reduction, which, based on the Government’s projected GCT inflow, would cost an estimated J$24 billion. It was this idea that Dr Haughton, a University of the West Indies, Mona, lecturer in economics, who Dr Phillips appointed to the Senate earlier this year and, in October, named to shadow planning and development, shot down during a debate in the Upper House last week.

Highlighting the fiscal gap that the GCT cut was likely to cause, as well as the relatively small amount that was likely to flow to the average consumer, Dr Haughton said that the giveback was not “significant enough to ask Jamaicans to sacrifice J$26 billion” (his estimate of what the rate cut would cost).

“We have to think more carefully about what our objectives are,” he said. “I have never been an advocate of fiddling of the numbers. I believe that whatever the cost we incur as a nation, it must be to the full benefit of the country.”

‘TOSSED OUT A BAIT’

There could hardly be a clearer repudiation of Dr Phillips, which wasn’t softened, if that was his intention, by Dr Haughton’s suggestion that his party leader had “tossed out a bait”, which members of the Government had said the Holness administration was willing to consider.

This newspaper has argued that Dr Phillips’ proposal ought to be subject to robust debate about its likely fiscal cost, relative to the potential contribution to broader economic activity from high-velocity money reaching the hands of poorer consumers. We didn’t expect, however, that the contrarian position would evolve from within the PNP.

This is a significant blow for the Opposition party, given Dr Haughton’s seat on the Senate’s front benches and his seat in the Shadow Cabinet, where he would have been expected to make his views known prior to the unveiling of the policy, or soon thereafter, if he did not know of it.

In different circumstances, this might be considered a direct challenge to Dr Phillips’ authority and the Westminster concept of collective responsibility. Either way, Dr Phillips should make clear whether he has a grip on his party and whether voters should take its policy pronouncements seriously.