Mon | Sep 25, 2017

Ian Boyne | The magical 1.5

Published:Sunday | May 15, 2016 | 5:00 AM
Minister of Finance and Public Service Audley Shaw (right), State Minister Fayval Williams (centre) and adviser Aubyn Hill during a post-Budget press conference at Heroes Circle last Friday.

The figure 1.5 was the magical equation in the last election that catapulted the Jamaica Labour Party (JLP) to power. It was the buzz of the February election. It was simply magical - in the sense that it became the elixir that eclipsed the People's National Party, sending Comrades into shock.

Now the 1.5 has become magical in another sense: It can't be found, having cast a disappearing act; only to be seen by Finance Minister Audley Shaw: "We promised a threshold benefit of up to $1.5 million and we have delivered on that commitment," the finance minister said near the end of his Budget presentation in Parliament on Thursday. Say what? This was after announcing that the income tax threshold will move to $1 million in July and will not reach $1.5 million until April 2017.

The election promise was very explicit and unequivocal: No income tax for those earning up to $1.5 million by April 2016. Not a month or year later. The Jamaica Labour Party clearly has egg all over its face, and the PNP has the exquisite pleasure of shouting, "I told you so!" Lambert Brown and Ralston Hyman will have a ball!

Words such as 'deception', 'fraud', 'Yu tief the election!' are being used, and even among non-partisans there is some disquiet and disappointment. Remember we have a major trust deficit when it comes to taking politicians at their word.

Some would say I was prophetic in my column of February 14, just before the election. I wrote: "The very thing which characterises the uncommitted and undecided is their cynicism and mistrust. They don't believe politicians ... . What is to say that Andrew, despite his solemn pledge, will not tell us some weeks after coming to office that he didn't realise, in Opposition, that Peter Phillips had run the economy to such a wreck and that there is no way under heaven that his (Andrew's) well-intentioned proposals could be implemented for he just did not know how bad things were? Who to say that will not be said?"

The PNP and its apologists had been saying all along that this 1.5 plan was unworkable, unimplementable and would be fiscally disastrous. The Government has now essentially agreed with them. They have crowing rights and they will use that to the hilt. But the PNP has a problem: It will not get as much traction with its howls of treachery, broken trust, deception, etc. The fact of the matter is that critical sectors in the society agree with them that the plan was impracticable and unworkable with our limited fiscal space. The PNP won't be able to convince them that the JLP should have implemented it nonetheless just to keep an election promise.

This newspaper, still a powerful force in the society despite new media, is strongly supportive of the Government's rethinking of the 1.5 proposal. Significantly, too, the private sector, on whom the PNP is just as dependent as the JLP, is solidly, unmistakably behind the Government's rethinking.

And to make it worse for the PNP, the head of the Jamaica Confederation of Trade Unions, Helene Davis-Whyte, not known to be a Labourite, has come out in support of the Government's rethink. The influential economists, financial analysts and commentators are behind the Government's recast of its tax proposal. These groups set the agenda. The RJR Communications Group and Nationwide, which strongly influence social media discourse, will certainly not be opposing what Shaw announced on Thursday. The PNP won't win this propaganda war.

Look out for the Gleaner and Observer editorials hailing the Government's sidestepping its 1.5 proposal as originally cast. Talk-show hosts will join that chorus. Yes, they might all point out that a promise has been broken, but the issue, put squarely, is this: If, as the PNP insists vehemently, the original 1.5 proposal could not work, should the JLP have implemented it just to say it kept its election promise? Should the Government have put the interests of the JLP ahead of the national interest by saving the JLP's image and face while wrecking Jamaica and sending the IMF packing?

 

The national interest

 

Critical sectors in this society, including civil society, care less about political gamesmanship and more about national interest. Yes, you might raise the issue of integrity in leadership, charging that the JLP deceived the country when it knew 1.5 was a three-card con. But whether the JLP knew then there was no oil money to finance its plan, the fact is, we all know now there is no money sitting down waiting to finance the 1.5 this year. Do we just ignore what we know now and implement what all agree will be disastrous under the circumstances, just to say a promise has not been broken? Should we break the IMF agreement not to break an election promise?

If you want to raise issues of the integrity of our leaders, then debate that and score some political points, but no citizen with an interest in Jamaica has any stake in our adopting an unworkable policy.

Objectively, what Audley Shaw announced is eminently defensible. How much more disastrous will the $7-per-litre special consumption tax on fuel be now than when Peter Phillips imposed that same tax last year? Yet that year ended with just a three per cent inflation rate. Oil prices are likely to remain low. Some 251,000 persons, compared to 118,000 persons under the 1.5 proposal, will now benefit from this tax threshold.

Pensioners now will benefit from the threshold. Self-employed persons not on PAYE will now benefit from the threshold increase. These groups would not have benefited under the 1.5 proposal. The Government has joined the majority of countries in the world - nearly 75 per cent of countries - that have a progressive taxation system where higher-earning categories of persons pay more. That promotes equity, which is very important in a country with one of the highest rates of inequality in the Latin American region. And the Government has so designed this system that it doesn't act as an incentive to young professionals to migrate.

 

Simplicity and fairness

 

An objective look at the Shaw Plan will show that it achieves simplicity, equity and fairness. The poor were spared onerous tax measures such as the removal of GCT exemption on basic foods and goods, on which they spend the majority of their income. And the GCT rate was not raised, as some feared. The departure tax is not going to derail tourism growth, no matter what narrow sectional interests might say. That's just vested interests speaking. Better to put on that departure tax than taxes that hurt poor people.

More Jamaicans will have more money in their pockets in July and, more critically, their sacrifices over the last four years under Peter Phillips' prudent management won't go in vain, as they would under 1.5. It is crucial to maintain the IMF programme and this Government has shown commendable regard for being compliant with the IMF while fighting for fiscal space to help the poor. I had always said that Audley Shaw is a less doctrinaire capitalist than Peter Phillips. This Budget proves it. It is fiscally prudent and IMF-compliant, but nearly 252,000 Jamaicans will get tax concessions while poor people's children won't be embarrassed about auxiliary fees.

The PNP can't afford to earn the wrath of the moneyed classes and their media organs. They need their financing and public backing. If they are planning to politically exploit this tax package, they would have to think again. The broad support is just not there.

The private sector will not jeopardise this IMF programme, the trade unions are not militant, and civil society won't be rising up in anger against Shaw. The PNP is largely on its own on this one. It might try to fan the flames of discontent in some quarters, but it will be strongly rebuffed by powerful interests which it can't afford to ignore, and which Portia Simpson Miller, Peter Phillips and Peter Bunting can't do without.

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