Delroy Chuck THE ECONOMIC road ahead gets bumpier, more treacherous and desperately uncertain. The government did not have the political guts, economic understanding and clear foresight to craft a budget that could turn the economy around and on the path of growth and development. The 2003/04 Budget is based totally on taxes, loans and overspending. There is little room for discretionary spending, virtually nothing for capital expenditure and, if the Budget is not redrafted, the country will be much worse off at the end of the fiscal year.
How can one help a government that doesn't listen or act on useful suggestions and advice given? When people, including commentators, criticise the Opposition for merely opposing and not providing solutions, the issue is really does the government listen to anyone or any section of the society? Before the budget presentation, the government met in a weekend retreat with the private sector and, then and thereafter, much advice was given; in particular, private sector leaders and other businessmen urged the government to cut expenditure and avoid further severe taxation. The government did neither it simply refused to reduce expenditure and presented the largest and most crushing tax package in the nation's history. In its approach to governance, this government simply wants everyone to log on to everything it does, however foolish, unthinking and detrimental to the nation's interest.
DOWNWARD SPIRAL
The 2003/04 Budget has nothing new, nothing different and nothing extraordinary to extricate Jamaica from its downward spiral. The taxation measures will cause more businesses to downsize and many to capsize, which means more unemployment and even greater hardship on the Jamaican people. The government consistently fails to appreciate that taxation, loans and public sector overspending are more likely to suffocate and strangle businesses and the overall economy, when at this time more than ever the country needs a clear path out of the prolonged recession, crime-ridden communities and rotting social order.
Now is certainly not the time for the most massive taxation in our country's history. Now is the time for government to get real and cut its bloating bureaucracy and overspending. In 1985, when the Seaga government was faced with a similar dilemma, after extricating the country from the socialist failure of the seventies, it had to take drastic action and it did. The then Seaga government cut the public sector from over 100,000 employees to less than 75,000, and spurred economic growth in the rest of the economy. Indeed, when one examines the Orane Report, commissioned by the present PNP government, the singular message is to contain governmental waste, expenditure and size; yet, since that Report, the message has been lost on those who commissioned it. That is why the 2003/04 Budget is a most disappointing one, instead of cutting expenditure to close the deficit, it seeks to impose and unleash a tax package the full consequences of which are only now being revealed.
Truly, the country cannot accede and succumb to the proposed tax measures and the Minister of Finance, Dr. Omar Davies, needs to go back to the drawing board and wheel and come again. The taxes are unconscionable. The taxes on agricultural pesticides, insecticides, feed, fertilisers, etc. will surely make agriculture a lost cause. The taxes on pharmaceutical products, food and drinks and previously zero-rated items will bear heavily on the sick, destitute and vulnerable, many of whom are already unable to tend to their basic needs. The cess on imports of capital goods, raw materials and a wide range of commodities will make it impossible for many manufacturers and businesses to
survive.
A SLOW FORM OF POISON
These tax measures are undoubtedly a slow form of poison to kill the economy and lock down the country. Now, the real issue is will the country swallow the poison and die slowly?
Then, as if the proposed taxation was not bad enough, the government has sent the signal that it will continue with its high interest rate policy to finance the budget. To get enough money to spend, it absorbed 14.3 billion dollars from the market at 36.25 per cent interest, which is actually a higher rate of interest when annualised, as interest will be paid quarterly. When one contemplates that the Budget targets an interest rate on loans of about 20 per cent average, then it becomes clear that the interest rate target is already out of line even before the Budget is passed in the House.
Interestingly, investors raced to put their money into the 36.25 per cent long-term debenture, as if 36.25 per cent was the maximum the government would offer, what happens when government needs more money and offers 40 per cent or more for a short-term debenture? Obviously, the interest rate policy of the Budget has no rhyme or reason, no discernable limit to which the government will go in its desperate need to garner funds, and destined to further impoverish the country.
At the start of an historic fourth term, one expected the government to take the really tough and wise decisions to turn the country around and set it on the path of recovery, growth and development. That is not to be, a socialist government cannot do other than carry out socialist policies. The country is likely to continue on the same path of more loans, higher taxation and overspending, which can only bring stagnation, recession and greater hopelessness to a people in need of hope. Unless redrafted, the Budget can and will only bring greater disappointment to a long-suffering people.
Delroy Chuck is an attorney-at-law and Opposition Member of Parliament. He can be contacted by e-mail at delchuck@hotmail.com
