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LETTER OF THE DAY - 50 years down the wrong road

Published:Wednesday | May 23, 2012 | 12:00 AM

THE EDITOR, Sir:

Nothing has changed. In good times and in bad times, we have not been able to be better off, after 50 years of Independence, because we keep on doing the same things over and over, with relatively little to show for it.

This time around, we are hung up on:

1. The debt-to-GDP ratio.

2. Public-sector wages to GDP.

3. Public-sector pensions to GDP.

4. Tax reform.

The first thing that jumps out at you is that something has to be terribly wrong with the GDP. It is far too low. What is GDP? It is the gross domestic product of a country, but it is also supposed to be the general development of people. You cannot have one without the other.

When you consider the recent television reports on how people are coping with these hard times, it is just incredible how people are living, after 50 years of Independence. It is clear that GDP is extremely low on both counts. These are by no means isolated cases.

In the 1990s, when we experienced high interest rates over a protracted period, we virtually parked production, and we became a nation of traders. We began to consume without producing the means of paying for it, so the national debt began to grow, to the point where we had to borrow more to service what we had already borrowed.

Also arising from this, we began to expand an informal economy that has long since been estimated be more than twice the size of the formal economy. The good thing about it is that it has left us with a lot of room to restore GDP and put the people in a better position to cope with harsh economic times.

Finding a solution

The trick is to get back as many as possible on the tax roll. To do this, we must lower taxes to encourage voluntary compliance. It is better to collect less money from more people than to try to collect more from fewer people, as what that does is to encourage corruption. People will always make a career out of beating the system. Any gains will be at the expense of something else.

Again, the trouble with this is that once people have paid their electricity bills, hardly anything is left to pay taxes, or anything else, so that situation must be addressed urgently for everything else to work. There is a lot of money out there to be collected, without pressuring the same people all the time.

VICTOR NUGENT

PO Box 206

St Ann's Bay