The politics of cowardice
Claude Clarke, Contributor
Joseph M. Matalon and his Private Sector Working Group (PSWG) are frustrated. What they thought was an objective, thorough, patriotic, good-faith effort to recommend improvements to Jamaica's tax code has been trashed.
Though framed as a mechanism that would promote fairness and equity while enhancing Government's revenue, it has been characterised as another attempt by the rich elite to shift the tax burden from the privileged few to the poor.
Perhaps Mr Matalon has been jaded by his almost three-decade campaign for tax reform.
Matalon was one of the first persons who sought to meet with me when I first entered politics in 1986. He wanted to discuss his ideas on tax reform. He was as passionate, perceptive and persuasive then as he is today. Then, as now, he put his case to both political parties. As was the case then, their response has been tepid at best. And today, he might finally be learning that private-sector leaders and politicians do not share the same objectives in developing national policy.
Notwithstanding its many shortcomings, politics provides the only workable vehicle through which the promise of democracy can be realised. Politicians, therefore, bear an almost sacred responsibility to create and secure the conditions in which the people they serve can enjoy satisfying and fulfilling lives.
Although our politicians have not always reflected these valuable ideals and often seem more concerned with their own political fortunes than with the people's welfare, they have a unique access to the hearts and minds of the ordinary people. It gives them an unmatched power to persuade people. This power is sometimes used positively, as when the public is motivated to support painful, but ultimately beneficial policies. But all too often it is applied to maintain a damaging status quo when change is seen as politically costly. They are not above taking the easy path of pandering to people's low expectations rather than make the more difficult effort to raise their hopes for a better life.
Pandering to popular sentiment has, for a long time, influenced Jamaica's policymaking process. This is what Joe Matalon seemed not to have learned during his marathon mission for tax reform. Did he think presenting the Government with a formula to correct a more than two-decade-long unjust and imprudent fiscal arrangement in which billions of taxpayer dollars are squandered paying subsidies to the well-off on their consumption of basic items would gain easy acceptance by the Government?
If this is what he expected, he would have been wrong. The methodology, which included applying GCT to previously duty-free basic items, brought good economic policy into conflict with political positioning.
The fact that the PSWG proposal would provide a direct subsidy to the people for whom the benefit is intended, and that the overall GCT rate would fall to 12.5 per cent (the technical experts with whom I consult assure me that a 10 per cent rate without loss of revenue is achievable) does not make it any less politically unpalatable. Nor does the fact that a lower GCT rate would significantly reduce the rate of inflation, decrease input costs, and improve the competitiveness of Jamaican production.
The Government's unwillingness to seriously consider this approach when, according to the PSWG, some $19.5 billion of revenue is at stake, suggests that Government is being influenced by other factors. But what other considerations could be more important than making sure that assistance goes to where it is needed? Why would garnering revenues that are now going to waste not be attractive?
And who could be against lowering GCT rates to 12.5 per cent, thereby forcing down inflation rates and improving the competitiveness of Jamaican production? Could this be another case of political pandering trumping the people's economic welfare?
Portia's political capital
The currently GCT-exempt items that would be affected include such politically sensitive things as chicken back, infant formula and sanitary napkins. The ordinary Jamaican voter would be outraged by a decision to tax them, even when the needy are given the means to pay. An even lower GCT rate of 10 per cent on all items, coupled with a lower inflation rate overall, would make their outrage no less intense. Despite the clear benefit to the overall economy and to the poor, the emotional reaction to the imposition of taxes on such sensitive items would be seismic.
Most ordinary politicians are highly risk averse and would not run the risk of appearing not to care for the poor, even if what they are doing is ultimately good for the poor. But Portia Simpson Miller is no ordinary politician. She, more than any other, has the receptive ear of the people affected. And she has sufficient political capital to risk. She also has the uncommon ability to communicate her message in a manner that ordinary people understand.
A popular leader has far less need than others to be populist. Mrs Simpson Miller is perhaps more popular than any other leader in our history. She has no need to feign populism. Her enormous genuine affection allows her the political leverage to communicate the benefits of policy, no matter how complex.
It would be difficult for anyone to deny that if implementing the proposed reforms would lead to the predicted outcomes, Jamaica's economy and the ordinary people would benefit. Why then doesn't the Government make the effort to make it work and educate the public about its benefits? This is where political popularity such as that enjoyed by our present prime minister is so valuable.
Many of the prime minister's advisers have probably calculated that the ordinary Jamaican will not understand the benefits of the proposed GCT changes and are not prepared to face the possibility of a political backlash. They would probably prefer that the prime minister not lead on this issue and instead pander to the raw emotions of the poor. After all, who wants to be tagged as the Government that 'tax' baby food and Tampax?
PSOJ set itself up
The Private Sector Organisation of Jamaica (PSOJ) and its president have, quite foolishly in my view, made themselves the perfect scapegoats for those who favour pandering over progress and who viscerally oppose any reform outside short-term social spending. Given their traditional pro-big man, anti-people image, why did the PSOJ not realise that a tax package identified with them would be instinctively seen as being against the small man's interest?
A tax package presented by the business elite to a 'people's' government was probably already dead on arrival. Couldn't they have seen that and engaged the services of an unconnected body to package and promote it? Or was their real purpose not reform but promoting their public profile?
What is most troubling is that the opposition generated to the PSWG's tax proposals could poison the well of other important reforms that Jamaica needs. The PSWG could end up emboldening those who are more comfortable with politics-as-usual than beneficial change.
The way back to economic soundness will require courage, not cowardice. Pandering to a misinformed public, as has been the practice of many politicians, will leave us stuck in an ever-deepening economic hole. Leadership is not about mirroring the public's view on issues; it is the willingness to move the people's understanding towards a better appreciation of the decisions that will improve their lives.
Claude Clarke is a businessman and former minister of trade. Email feedback to firstname.lastname@example.org.