THE DETERIORATION of the country's fiscal accounts is cause for discomfort. The deficit is twice the Government's projections for the first nine months of the fiscal year.
By all indications, this trend will lead Dr. Omar Davies, the Finance Minister, significantly to miss his laudable target of a balanced budget for the current fiscal year. The trend, of course, can be mollified by government policy, but we would immediately advise Dr. Davies not to take that route.
An easy and tempting remedy is for increased taxation. We urge Dr. Davies to consider that the country is already heavily taxed. Corporate and personal motivation must not be blunted by higher demands on already capped salaries and low profit margins.
We would also advise Dr. Davies against removing from workers who are paid by the state, any of the incentives that have been given in recent years to compensate for remuneration that often cannot compete with that paid in the private sector. This will further demotivate thousands of workers who have tolerated the Government's salary freeze through its agreement with the trade unions. Productivity will suffer.
We note with concern the statement from an official of the Finance Ministry that the tax compliance rate is 58 per cent. We feel it a disgrace to the efficiency of public administration that the Government is unable to collect almost one half of what it should.
Rather than short-term measures that will punish Jamaicans already paying a variety of taxes, we proposed the following to Dr. Davies.
First, if the target of a balanced budget cannot be achieved for the year ending March, restate it as a target for the next financial year. Given the recent history of the economy, a balanced budget is a commendable goal that should not be abandoned.
Second, eschew all pressures and temptations to increase taxes, impose new ones or remove incentives that have motivated and relieved the financial pressures on workers.
Third, put resources into the tax collection system. Control of government spending has been commendable, but the low level of collection cannot be tolerated. It encourages lazy remedies such as higher tax rates and more taxes, and is economically damaging.
Dr. Davies should set as a policy for the next fiscal year not only the rejection of any attempted solution based on new or higher taxes, but also a significant improvement in the collecting taxes. This is the more efficient and creative path towards a balanced budget.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
