The Budget: Jamaica has no time for a House of Jokers

The recently passed 2017/18 budget was a messy affair culminating in a walkout by the Opposition, and the passage was only by the vote of the governing party. I am unable to recall if this exact circumstance has previously been specifically directed at a budget exercise or perhaps at other contentious points of discussion. I do recall that the People’s National Party (PNP) boycotted the General Elections in 1983 leaving the Parliamentary process in the hands of the Jamaica Labour Party (JLP) and the conscience of Prime Minister Edward Seaga.

The current circumstances are by no means comparable, and going forward the responsibilities of the Government and the Opposition need to be tempered by the need to avoid placing obstacles to national growth by their inadvertence or avoidance of their respective roles. The future lies in the ability of each side to perform their roles resolutely, and to debate heartily but respectfully. Jamaica has no time for a House of Jokers; we need policies and laws that are progressive and not regressive.

The disagreements seem to be in three major areas. Firstly, the continuing post-election sentiments of loss due to the promise of a non-taxable threshold of J$ 1.5 million and the need to now enact new taxation to accommodate this provides ample ammunition.

Secondly, the raid on the National Housing Trust (NHT) and the consolidation of the Tourism Enhancement Fund are still sources of discontent with the public and players in the tourism sector. Together they bring a level of mistrust that can only be settled by debating and giving understandable arguments and explanations that satisfy the public.

Thirdly, the General Consumption Tax on health insurance is cause for concern as it is not only corporate group schemes that are affected. The self-employed tradespersons, small businesses and others who have seen the benefits of health insurance for the protection of their families are not included in the seemingly smooth explanation of write-off against taxes. So the individuals and the low or no-profit firms are now exposed and will have to access care by choking a public sector that is already under pressure.

The first scenario is purely political and therefore brooks no comment from me except for my observation that all politicians make wild analyses and promises while campaigning for power. This is by no means confined to Jamaica.

The second regarding the NHT however, overlooks the possible benefits to employment and shelter by simply being a tax that will not increase capital spending that is the basis for growth. Simply put, what would be the benefits accruing if the Trust set about building 50,000 houses with different payment options, and some down payment being recognized for the personal input of skilled and unskilled labour? A work-for-your-house programme that clears squatting and environmental and health degradation in a planned way.

The third concern of health insurance is that it is a negative rather than positive measure. The positive goal should be to have every Jamaican on a health scheme in order to assure wellness in the society and avoid some critical shortfalls that exist across the country that leave certain illnesses untreated until they require expensive critical interventions.

Only 25% of the population has health insurance and therefore have little choice in where to get healthcare. At the current time the largest pool of health insurance is the GOJ employees and they pay no GCT. In 2016 the total payouts of insurance claims were J$17 billion. So if the other 75% (uninsured) received or needed like treatment this would cost the public system (meaning Government) $51 billion. There is no budget to support this and so any measure that reduces the growth in health care is a negative measure that directly affects the poor.

The year 2017 onwards requires a change from the “already tried and proven wrong”, to a mindset that appreciates the carrot over the stick. The incentives that empower people at this time fly in the face of the two political philosophies that supplanted the self-reliance of Garvey and gave us the “vote for me and I will look after you” philosophy that also seduced other Caribbean leaders of the time.

The much vaunted “market forces”, by their nature, imply free choices by consumers, but directions can be given through incentives. Cayman pays no personal income taxes, but the cost of living is high. The citizens are then faced with the choices of living high and possibly having two sources of income; or educating themselves for really high-paying jobs; or living within their means.

We have no such incentives as successive governments continue to hold the whip like a jockey at Caymanas Park without realizing that we are not horses to be trained for subjugation. Motivation is a positive source and Jamaica needs it in several ways.

In my humble estimation, salaries may be identical, however the achievement of individual goals require that sometimes choices may influence outcomes. To assume that each employed person really understands their options is really a mistake that I have noted over the years. It is the job of management to assist the employee in achieving some satisfaction from employment.

People earning the same amount have the options of how about 5% of that salary is paid out. The person who wants a car should put the 5% in the credit union; the person who wants a house should put the additional 5% in the pension fund; the person who wants education for their children should put the 5% in the credit union or an attractive education insurance policy (possibly denominated in US dollars). The person with a sickly child needs to buy health insurance and major medical. It is that simple.

The first mind-changing policy could be “read my lips”, no personal income taxes. Payments relieved from taxes could be directed to higher voluntary payments to NHT or savings institutions, and upgraded health insurance. This could, at one go, become an incentive if placed in selected programmes that stimulate growth and social equity. This simple but far-reaching incentive could energize people to work, and those already working could seek second incomes from other jobs or innovative entrepreneurial activities.

The second policy would be a return to no taxation on dividends as was done previously. This investment vehicle is extremely important for people who invest for their retirement to either be their sole source of income or as a supplement for their pensions. The tax on dividends is paid out of profits and after the company has already paid corporate taxes.

Currently that money is taxed three times. The shareholder/investor pays PAYE tax then invests in a company; the company pays tax on profits; the shareholder/investor pays tax on any dividends paid. This cannot be an incentive for investing or saving, and is therefore counterproductive. It is a stick, not a carrot.

The public sector reform could free up large amounts of entrepreneurial energies that are currently being suppressed by a thoughtless bureaucracy based on a time that has long passed and which is irrelevant today. Some payments for dislocation/redundancies may be through land or housing settlements which can be used as collateral for sound business ventures in the future.

In conclusion, tax policy should not be used as a tool to theoretically punish the rich or the poor, but should empower those outside the system to join and have legal benefits that are not available for those in hiding (evaders). The informal economy must join the formal (with the exception of the illegal activities that destroy our credibility and reputation). We need leaders with vision in every field who can recognize that our future lies ahead, not behind us.

Categories
Featured
No Comment

Leave a Reply

*

*

RELATED BY

Powered by themekiller.com