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Taxation or transformation

Published:Sunday | January 3, 2010 | 12:00 AM


We might say that the past year has been very taxing - three packages of nearly $50 billion. The new year of 2009 started optimistically for the Government with a stimulus package. The new year of 2010 starts pessimistically with an extraordinary tax package. The former failed, and the latter is an act of desperation.

The two had four things in common. They were not announced and/or debated in Parliament in order to have the benefit of the Opposition and the people. They did not follow consultations with the public to prepare the people for the opportunities of the stimulus or the hardship of the taxes. They were not equitable. The stimulus package did not offer as much to the less-advantaged as it did to the richer members of corporate Jamaica, while the tax package will burden those less advantaged immensely more.

They and the middle class will have to pay some 75 per cent ($15 billion) of the new taxes, according to the People's National Party's Women's Movement.

These policy failings are typical of much of what has gone wrong with the Government over the past year. It all might have eventually fallen on Audley Shaw to take the licks. Both the People's National Party (PNP) and a Gleaner editorial (December 28) have called for his removal. Fair enough. Government must take responsibility and be held accountable. An earlier Gleaner editorial (November 25) had said Bruce Golding was the de facto finance minister. It seems, therefore, that he should take licks, too. The truth is that these failings do typify the style of the administration as a whole. Government needs a philosophy - such as equity - and a method - such as consultation. These must be practised within the framework of democracy - such as parliamentary democracy. Yet, its major economic plans, the stimulus and different tax plans have been most stridently criticised for failing on precisely these grounds.

another failure

The year's performance has demonstrated a another failure of government. Governments must have a mission. Many had hoped that the mission of this government would have been transformational so that we could get past the old structures that have been holding us back.

Others had predicted that the Government would have been clientelist, that is, satisfying the interests of the most powerful groups - or clients within those old structures - responsible for its election funding. Most had not quite expected the actual outcome: bungling. Many are beginning to use this word more and more. It cannot be transformational and bungling at the same time. It cannot be effectively clientelist while it is bungling, because even if the interests it serves are limited, those interests will be badly served. This seems to be reflected more and more not just in what is being said about this government, but who is saying it.

We must find a way to get back to a transformational mission, but with an effective government. Businessman Keith Duncan told a PNP conference last July that Jamaica's bureaucracy was not designed for production. He was right. You can't quite blame the bureaucracy, though, because our bureaucracy was designed for administration. This is part of the Westminster-Whitehall model. In contrast, other states, like those of Asia, are designed for production because they may not even be democratic states at all, but deve-lopmental states. Jamaica has a crisis of development because it is not a developmental state. We should transform our state and society into being developmental. But it should be democratic at the same time. This is why we should ensure that our mission includes the philosophy of equity, the method of consultation, and the forum of Parliament.

Ian Boyne wrote positively of the stimulus package in 2008, but also pointed out that in East Asian societies, capitalists would not just be granted concessions; they would have to meet and account for targets. He was also right. But Jamaican capitalism was not designed for production either. It was designed for class status and family profit. If imports and conspicuous consumption served these purposes, then there was no need to export, like East Asian capitalists are mandated to. Once again, though, our economy must be transformed so that it is democratic. In other words, taxation, bank rates, profit sharing, (employer share) ownerships, and management (and industrial) relations must meet the tests of equity, consultation and parliamentary debate. It must be developmental and democratic.

Gleaner columnist Garth Rattray (December 28) confirmed that we don't have a plan and we need one. He said: "We cannot tax our way out of debt ... . We need a plan to reduce the foreign exchange leaving our shores to pay investors in foreign-owned organisations operating on our soil. Offer some sort of incentive for keeping it here as a long-term investment. We need a plan to produce for export or to assemble products for overseas markets. Our few offshore teleservices can't fulfill our needs. And, perhaps most important, we need a plan to import far less than we are doing now - too many 'entrepreneurs' are simply importing and retailing items."

If we are to be a developmental state and society, we also need a plan for building human resources. Mr Golding is avoiding taxing the rich on the grounds that this would lead to capital flight. But by burdening the young, upwardly mobile Jamaican disproportionately, Golding's taxes are accelerating human-capital flight.

A Gleaner report of December 20 showed that 291,000 university-trained Jamaicans over 25 years of age had migrated between 1999 and 2009, while only 89,000 remained here. The Planning Institute of Jamaica reports that for every tertiary-educated Jamaican living here, three lived abroad. What about the incentives for young professionals to stay here and be employed in productive ways rather than being driven away by taxes and living costs?

We need inter-generational equity, national consultation and parliamentary dialogue to make our democracy developmental and our development democratic for young professionals, too.

Our state and society were not built for a disciplined democracy and society either. It was built for freedom without responsibility. The result is that over 1,600 were murdered this past year; we only pay 40 per cent of our property taxes; there is woefully low tax compliance overall; and, there are too many idle hands despite our idle resources. The developmental states and societies of Asia long recognised that crime, corruption and idleness undermined strong, cohesive and disciplined societies. Such societies need not be built by authoritarian methods. But at the same time, democracy cannot be of the other extreme.

be willing to sacrifice

A disciplined democracy is the only kind of democracy that can produce development. We have to be prepared to give up the freedoms we misuse for idleness, crime, corruption and indiscipline.

Each year, we should commit anew to transformation. Transformation is about removing the impediments of the old order that hold back governance and productivity through unproductive class and value structures. But we seem to be going backward instead of forward. Jamaica slipped badly on confidence in and popularity of government, the index of corruption, credit ratings, economic growth, employment, crime, and business and consumer confidence in 2009. If the past year has confirmed one thing, it should be that transformation is now no longer just a vision. It is an emergency.

Robert Buddan lectures in the Department of Government, University of the West Indies, Mona campus. Email: or