THE RECENT budget debate has reinforced many lessons for government, technocrats and the wider society, about the management of the economy.
In the first place, the presentations from both the Government and Opposition tended to be more realistic and lacked the usual embellishments of previous years relating to perceived policy successes. This, no doubt, resulted from recognition of the formidable economic challenges facing the economy.
A second lesson is in the negative impact that a burgeoning debt crisis has on the economy. This was evidenced not only by the magnitude of the tax package but also by the absence of any real discretionary spending by the government, with debt servicing commanding the largest chunk of the budget.
A third obvious lesson is the need for the technocrats to do more detailed examination of the likely impact of any new tax measure. The continuing uncertainty about the impact of GCT on gambling, is hardly the kind of environment that should accompany the imposition of tax. The canons of good taxation demand certainty, simplicity and ease of calculation.
Yet another lesson that should not be missed is the imperative of consultations between the authorities and stakeholders that are likely to be affected by any tax measure before the taxes are imposed. Mike Fraser, outgoing President of the Life Insurance Companies Association (LICA), revealed, with displeasure, that the industry only knew that the sector would be paying GCT from an announcement in the papers. In our view, the time is long past when the imposition of taxes should be shrouded in secrecy when the likely impact will be pervasive for the productive sector. This issue assumes more significance given the impasse between government and the productive sector on the four per cent cess on imports.
There still appears to be a great divide between the government and the private sector fuelled by mistrust. This was reflected in Dr. Davies' statements concerning his difficulty in accepting data provided by the private sector on net margin levels. Prime Minister Patterson has called for consensus. If this is a genuine concern, then the lack of trust of the government and private sector must be overcome.
There could be a case for keeping details of a new tax confidential in specified cases but it is obvious that consensus can only be built by serious initiatives such as information sharing aimed at fostering compromise and eventual consensus. The economy is simply too small to do otherwise.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
