Sat | Sep 23, 2017

Ian Boyne: The 1.5 dilemma

Published:Sunday | April 3, 2016 | 4:00 AM
Audley Shaw, seen here in Parliament last Tuesday, is grappling with the prospect of finding the money to fulfil the JLP's $1.5m tax-relief pre-election promise.
Prime Minister Andrew Holness (right) and Audley Shaw, his finance minister, engage in a tete-a-tete during the swearing in of members of parliament at Gordon House on March 10. Cabinet emerged on Friday from a three-day retreat and is expected to lay out the mechanics of its $1.5m income-tax relief.
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The number 1.5 continues to transfix the nation. It was the same before the election and it is even more so now that we have passed the April 1 threshold. This is one promise that Jamaicans are not prepared to be taken for a fool on.

No pair knows this more than Prime Minister Andrew Holness and Finance Minister Audley Shaw. As the prime minister said in his swearing-in speech, he has no margin for error. And if even the barest margin exists, it is nowhere near this $1.5-million tax break commitment his party made during the election campaign and which is largely responsible for it forming the Government today.

The president of the Private Sector Organisation of Jamaica (PSOJ), the likable William Mahfood, has suggested that the Government stagger the implementation of this plan, and The Gleaner has shown its anxiety over what this plan could do with the fiscal programme, indicating it would have no problem at all if the plan is abandoned totally.

In editorials on two successive days (Wednesday and Thursday), The Gleaner has made it clear it is in no cheering section for this tax-relief plan, which it dismisses in that Thursday editorial as "policy development on the fly". The Gleaner has expressed delight that "Audley Shaw may have begun to appreciate what tax experts have explained since the Jamaica Labour Party (JLP) unveiled its income-tax plan ahead of last month's general election: that, as framed, it would endanger the country's fiscal stability and its economic reform programme with the International Monetary Fund."

There is one major area of consensus that has emerged in Jamaica for the national good: There has been a rejection of fiscal recklessness in principle. Both the People's National Party (PNP) and the Jamaica Labour Party are committed to fiscal discipline, macroeconomic stability and structural reforms. The private sector and civil society, including the major organs of the media, also share that consensus. This is good, for it means we agree that empty populism ends up retarding the interests of the poor.

But this does not mean that policies become automatically class-neutral and that there is no such thing as sectional interests. It means that in this matter of deciding where the funds are going to come from to support the election promise of tax relief, it cannot be left to one class of persons. It can't just be the private sector whose views are taken into account. What is tragic in Jamaica today is that there is no strong lobby group for the working masses and the poor.

The labour movement has been emasculated and feckless, and progressive voices are stilled. So there is no informed, articulate lobby group ensuring that Miss Mattie, who is unemployed; Brother John, the handcart man; or Miss Joan, who is working minimum wage, doesn't have their general consumption tax exemption on basic foods removed under "broader tax reform".

 

Gov't open to dialogue

 

The private sector is not the repository of all wisdom on tax and economic matters. Civil-society groups, including churches, should be able to hire expertise to assess policy positions and get a seat at the table in discussing tax reform. This administration is clearly open to dialogue with various groups, but if there is no organised force to defend the interests of the marginalised, then the more powerful voices will prevail. Mr Mahfood has said, "We have heard a number of other associations come out and say that they are in favour of possibly looking at delaying the implementation."

The Gleaner rejoices in its Thursday editorial: "Audley Shaw and, by extension, the Government, have done what this newspaper suggested they do all along: Ask the private sector for help in sorting out an obviously muddle tax policy."

While the PSOJ is getting ready to reconstitute its working group on tax reform, is there any group representing a broader set of interests coming together to present expert views on tax in the interest of people outside of formal associations? It is important that all views contend. Tragically, there has been a hollowing out of progressive representation and progressive thought in Jamaica. There is not the competition of ideas that is healthy for a democracy.

So we have this $1.5-million tax break issue. The finance minister has been most emphatic that this solemn commitment will be kept. It might not be tied to April or made retroactive to April, but it will be done, Mr Shaw is assuring us.

The Observer, in an editorial, 'The fickleness of election promises', says the Government "should not try to fulfil all its promises immediately if it found that the sate of the economy could not afford it at this time, but to do so in a timely manner". But it concedes "an exception for the $1.5-million income tax break because not to come good on that would cause great disappointment, to put it mildly, and a feeling of having been deceived among the more than 100,000 people who stand to benefit".

I would never accuse this Government of political naivety. Hence Mr Shaw's definitive, unequivocal reiteration of the promise to implement this plan. I get the sense that Andrew Holness understands, in a very deep way, the hope, promise and faith that has been reposed in him personally and in his administration. He knows the people are fed up with 'politricks'. He knows the cynicism, especially of the post-Independence generation. He knows the high level of mistrust for politicians. The last thing he will want to do is to feed that cynicism and alienation.

The Machiavellians say that at the start of an administration's life, it can take daredevil risks with popularity. After all, it has some years to recoup lost favour. When people begin to see the results of good policies, they will forgive broken promises. The Machiavellians say that all the finance minister has to do is to blame the former Government, say they are the ones who deceived the country about the state of the economy; they are the ones who caused this missing money and they caused us the Government not to be able to fulfil our promise.

 

Private sector support

Besides, powerful private-sector groups and important sections of the media are prepared to applaud any radical reworking of that 1.5 promise or its delay, so it's not that the Government would be standing on its own. It has strong goodwill in media, private sector and civil society, a very weak union movement and non-existent lobbying force for the unemployed and marginalised.

I suspect this administration does not want to go along with mere expediency. It sees that the fallout in terms of trust might not be worth the risk. The Government would be wise to take the people into its trust, level with them; use communication skilfully to get its message across and show why endangering the fiscal programme is in the interest of no one, least of all the marginalised.

But it must resist pressures to put GCT on all items and burden hundreds of thousands of people who will not benefit from the $1.5 million tax break. If you talk about equity, it is not fair for domestic workers, casual workers, the unemployed, the aged, and children of the poor to be saddled with increased taxes to fuel the lifestyles of people earning up to $1.8 million (which is where Mr Shaw has promised to take the concessions).

Fulfil the promise, yes, but not at the expense of the voiceless and unrepresented. Mr Shaw was, commendably, bold in Opposition in standing up to unreasonable demands of the IMF. He must continue to do so and squeeze out concessions in the interest of the masses. The poor and marginalised must not be sacrificed. And be wary of conditional cash-transfer programmes supposedly targeted to the poor and most vulnerable. It is that which might be an administrative nightmare. What is euphemistically called a "comprehensive tax-reform programme" might end up hurting the poor and dispossessed.

- Ian Boyne is a veteran journalist working with the Jamaica Information Service. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.