Sat | Aug 19, 2017

Letter of the Day | Low production = low GDP growth

Published:Friday | July 15, 2016 | 7:00 AM


There are several reasons for Jamaica's anaemic economic growth:

1. Unions

The presence of unions that divert management energy from production to non-productive protracted negotiations. When a worker finds wages unacceptably low, his options are:

i) Leave the work

ii) Find other employment

iii) Retrain and educate himself

It is pointless extracting high wages for unskilled, low-producing workers. This weakens the employer, financially, and places the jobs of the employed workers at the risk of closure. The Goodyear Factory closure in St Thomas, proudly done by Lambert Brown, is a classic example of this. Goodyear moved the production to another facility and hundreds of workers lost their jobs.

2. Excessive regulation:

This is slowing the velocity in business and, hence, the economy. Examples are many:

a) The time it takes to open a bank account

b) The time it takes to incorporate a company

c) The filing of forms, attending tax offices, making payments online, sending bearers to pay taxes.

d) The numerous taxes, many of which require personal attendance and which take away time from business production:

• Motor-vehicle licences - yearly

• Motor-vehicle licensing - yearly

• Motor-vehicle valuation - yearly

• Motor-vehicle fitness certification

• Land taxes - annual

• Trade licence - annual

• Sign licence for each sign on a business place. This was $5,000 per location, but is now up to $75,000 per location, annually.

• Minimum business tax - annually.

• Asset tax - annually.

• Personal tax returns - annually.

• Corporate tax returns - annually and quarterly

• General consumption tax - monthly returns

• PAYE returns - monthly and annually.

• PAYE taxes to be paid.

• Education tax to be returned and paid.

• NHT contribution to be returned and paid - monthly.

• HEART tax to be returned and paid - monthly and annually.

• Customs duty at wharf.

• GCT at wharf.

• User fee at wharf.

• Environment levy at wharf.

• Customs duty at airports.

3. Unwise legislation:

Two examples come to mind:

a) Land Acquisition Act - enables Government to take over or acquire land which in the opinion of a government bureaucrat is not in full production. It should be repealed.

b) Termination (Redundancy Payments) Act

This act imposes on business a debt burden to pay employees, who have been fully compensated, additional wages when going out of business or when it is being sold. It is anti-business. It also applies when terminating an employee who is not needed in the workforce.

4. Government too large a part of the economy:

Government is unproductive.

It drains resources.

It is holding too many assets that are non-productive.

It is holding companies that cost money and do not contribute to production.

It is littered with boards that take scarce resources.

5. Government ministers are incompetent administrators.

The civil service must be revamped with competent people, well paid but removable for non-performance, on the basis of three-year contracts.