Gov't seeks to avert crisis

By McPherse Thompson, Staff Reporter

FINANCIAL analysts said yesterday that the Government would mostly likely seek to cut its expenditures as part of the effort to make up for the shortfall in revenues that has resulted from the fall out in tourism and international trade since the September 11 terror attacks on the United States.

Finance and Planning Minister Dr. Omar Davies told Parliament earlier this week that, among other things, revenues for September fell to 5.3 per cent below budget and that there was "a crisis."

A Planning Institute of Jamaica (PIOJ) official said that in view of the fallout from the September 11 attacks, there were really only three options open to the Government - either increase taxes, cut its expenditure or borrowing on the local or international capital market.

One analyst, Paul Bryan of Edward Gayle & Company in St. Andrew, said, however, that it was "not a good time to go to the international capital market, and to raise taxes would be politically suicidal," especially in view of the upcoming general election.

"The other thing that they could do is to tighten their own belt," he said, referring to a cutback in state expenses, even as the Government faces the challenge of a multimillion expenditure resulting from infrastructural damage in Portland, St. Mary and St. Ann following heavy rains in those parishes this week.

The Government could also borrow on the local market, said Mr. Bryan, but, in order for the deal to be successful, when they seek to come to the market the variable interest rate on the one year instrument would have to be at or about the same rate of 19.90 per cent to which it was increased earlier this week.

The PIOJ official, who spoke on condition that he not be identified by name, said that with the revenue fallout, the option chosen would be influenced by the time in which it was anticipated that normality would return in terms of the intake from tourism, customs duties and other areas.

He said it should also be realised that the Government's ability to respond to calls for assistance has also been hampered by the disruption in revenue intake.

For the PIOJ official, increasing taxes would be counterproductive and therefore the Government had to take that into consideration when deciding on a response to the crisis.

Director of tax administration, Clive Nicholas, asked what strategies would be used in the "aggressive revenue collection" drive to which the Finance Minister referred earlier this week, said the mechanisms used to collect taxes would not change to any great extent.

He said efforts would continue to be made to get those taxpayers who have not been fulfilling their statutory obligations to do so. "We will try to get those who are not on the system to file their returns and where they don't we will seek to assess them," said Mr. Nicholas.

In addition to using existing mechanisms such as the Taxpayer Registration System (TRN) to capture those who were not yet caught in the tax net, Mr. Nicholas said they were also urging voluntary compliance by computerising and training people to provide the level of service required by the tax paying public.

Noting that the General Consumption Tax (GCT) was one of the main contributors to total revenue, the director said they had a problem collecting from businesses that were not registered. However, a recent piece of legislation has put the tax commissioner in a position to forcibly register those persons selling goods and services who were not paying their taxes. Mr. Nicholas said those measures were recently put in place.

During his presentation on Tuesday, the Finance Minister said overall economic activity was affected by a reduction of about 25-30 per cent in visitor arrivals during September, arising from the airborne attacks on the United States.

The Jamaica Tourist Board (JTB) said yesterday that 63,503 visitors arrived in the island by air in September 2001, a 20 per cent reduction when compared with the 79,422 in September 2000.

Although cruise ships have chosen destinations in the Caribbean over Europe and Asia following the September 11 attacks and the war now taking place in Afghanistan, cruise passenger arrivals decreased by 24 per cent during the period, to 41,912 from 55,263 in September 2000, according to the JTB figures.

The Finance Minister had told Parliament that through close collaboration, the Government and the tourism sector had worked out special arrangements aimed at providing relief during the short-term. Based on representation from the sector, he said, the relief has also been extended to the transport sector serving the industry as well as the inbond trade.

In an effort to close the gap in revenue intake, Dr. Davies said he would indicate to the country, in due course, the choices which have to be made. One option, said Mr. Bryan, is to bring the growing grey economy in to the mainstream to raise additional revenues, but that will take time. The question is, how much time does Jamaica has to raise the revenues?

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