Tue | Jul 17, 2018

Ian Boyne | Prosperity or ‘taxperity’ Budget?

Published:Sunday | March 12, 2017 | 12:00 AM
Ian Boyne

Nobody likes taxes. It's reflexive to howl and wail over any new taxes and, especially if you are a commentator, it's hard to resist being apocalyptic. The sky must be falling with this $13-billion-plus tax package of Finance Minister Audley Shaw.

The gas tax will send inflation through the roof; transportation costs will severely punish the poor; that tax on group health insurance will be passed on to consumers; increased electricity costs will somehow trickle down to the poor, though more than 60 per cent won't be directly affected. More 'pressure and slide' for the poor. This is the narrative, and Opposition Spokesman on Finance Peter Phillips will go to town on Tuesday in attacking this 'taxperity' Budget, recklessly designed to suit political imperatives and to save face after promising a 1.5 but giving the people a six for a nine.

Robbing Peter to pay Paul. But this Peter won't be robbed of the opportunity to call out the Government on its reneging on its promise to finance its 1.5 plan without taxation. And worse, the Government will be attacked for its 'hypocrisy' in attacking the People's National Party's 'raid' on the National Housing Trust - only to end up doing the exact thing to help finance this Budget.




I guess it is a fantasy to expect a real debate during this Budget Debate exercise. Points-scoring usually trumps genuine, intellectually rigorous debate. In a serious debate, real, live options have to be weighed. The Government seems committed to moving away from direct to indirect taxation. In my view, that is not an unqualified good. Indirect taxation is generally regressive.

I have raised serious concerns about the effects on the poor of moving to more consumption taxes. I believe those at the top should pay more. But I have to say that this Government has managed to carry out its indirect taxation strategy while sparing the poor the most devastating effects. The Government could have raised the general consumption tax. This would have a punishing effect on the poor.

Government has imposed sin taxes. Very good. Driver's licences and other fees have been hiked, as well as electricity used by people like me who waste it. People who can afford to buy overseas insurance have been taxed.

The PNP also, under Dr Phillips, was equally careful and prudent in choosing what to tax. The Portia Simpson Miller administration, with Phillips as finance minister, resisted pressures on them to raise GCT. That PNP regime, even while following a neo-liberal International Monetary Fund programme, stood with the poor in designing its tax package. The Holness administration has done the same. We have to analyse these matters dispassionately and objectively.




We must stop demonising our politicians and they must stop demonising one another! When Phillips applied taxes to gas, many predicted catastrophe. It didn't happen. Last year, the same catastrophe, or worse, was predicted when Shaw raised taxes on fuel. It didn't happen. We were told how inflation would rise, busting up the IMF programme.

Instead, we ended up with the consumer price index being at a level not seen since 1964! Things are bad enough as they are without our Jeremiads. They might bring political 'forwards' and make for exciting column writing, but they are just populist nonsense. We need a balanced, rational approach to these issues.

What would be the political and social cost of the JLP's not following through with its election promise in this already disastrously low-trust society? There would be further alienation, cynicism, anger and disaffection with the political project affecting not just JLP, but the PNP. We should be happy that the Holness administration has found a way to keep its election promise without presenting a budget with likely punitive consequences.

I predict that the naysayers will again be proven wrong at the end of this fiscal year - just as they were at the end of the first year of this administration. Remember all that was said about the catastrophe that would overtake us after Shaw presented his Budget last year? What have we found instead? As Cliff Hughes put out it on 'Nationwide at Five' last Thursday, finance ministers used to spend a lot of time talking about targets missed.

Instead, even before Shaw spoke, the EPOC chair was telling us in his briefings about targets exceeded - some by wide margins.

Let the empirical facts speak. Resist alternative facts. While some in the PNP were saying that this Government would crash the IMF programme with its tax package, the IMF itself, in its March 3 review, said: "The SBA (standby agreement) is off to a strong start - programme conditions through December were met, with tax revenues and international reserves exceeding expectations and structural reforms are taking hold."

The IMF continues: "Growth is projected to continue improving to 2.1% in fiscal year 2017-18, bolstered by construction, increased room capacity in the tourism sector, business process outsourcing, and a recovery in mining. The current account deficit is down to about three per cent of GDP, supporting robust growth in non-borrowed reserves which reached almost US$1.8 billion by end of February". This is not the kind of bullish assessment at the end of the first year of the Holness administration that Comrades were predicting.

Likewise, the gloom-and-doom prophets will again be confounded. This is no Pollyanna-ish outlook on my part. The facts and trends speak clearly - and those trends started under the prudent management of the Simpson Miller administration. They must be commended for shifting us from our profligate ways and for their political courage in taking bold decisions that proved politically costly. But history will be kind to them for having taken decisions in the interest of the future of this country, rather than political expediency.

Peter must resist the temptation on Tuesday (pardon my foolish faith) to play to the gallery. But is it really asking too much to suggest that Peter Phillips not try to dumb us down by trying to convince us that the economy is being wrecked, that the macroeconomic fundamentals are in the wrong direction, and that apocalypse awaits us?

Is it make-believe that unemployment has declined under Holness, that employment has increased and that private-sector credit shot up by 14.8% in 2016, compared to 9.6% in 2015? Is it make-believe that our tax revenues are $12 billion above the targeted figure, the most impressive performance since the 2002-2003 fiscal year?

We have to be fair. The Government has continued on the same path Peter Phillips was treading, and, like him, the administration has not neglected social investment. Interest rates will be lowered from 9.5% to 6.0% on pay-as-you-study loans. Postgraduate loans will go down from 13% to 9.5%. An additional $3.68 billion is being pumped into PATH, an increase of some 47% over last year's provision. The PATH School Feeding Programme will provide lunch now for five days, instead of three. A total of $4.75 billion has been allocated to the Ministry of Education for this - 58% above last year's Budget.

And an additional $1.9 billion, a 40% increase, has been provided for PATH conditional cash grants to protect the most vulnerable, as Portia would say. We must be fair and balanced. I have absolutely no problem with Government's taking money from the National Housing Trust rather than heaping more taxes on the backs of the poor, when the NHT has surpluses of $150 billion now, and it is projected to move to $169 billion by the end of this fiscal year. Come on, man.

I supported the PNP's 'raid' then, and I am supporting Andrew's raid now. Raid those reserves in the interest of poor people, rather than raise flour and sugar or GCT, generally.

Audley Shaw ended brilliantly by calling for improved values and attitudes and for a prosperity mindset. He linked prosperity with personal responsibility. Good going, Audley!

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