Dawn Ritch, Contributor

The frequency and hysteria of proposals from the private sector on tax reform have begun to irritate. Because of Dr. Omar Davies, Finance Minister, who can make no tax stick, the private sector apparently believes that taxation is open to, as they call it, 'dialogue'.

Bear in mind that this is the only tool a government has to raise revenue, discourage certain activities and encourage others, or accomplish national development. People who ran for no elective office have therefore formed themselves into committees. They are not elected officials, but are confident that their cash will do all the talking for them. Unfortunately, too many of them make their cash do the thinking too.

It can be of little importance what the rest of the Caribbean does in their tax regimes. They don't have the public debt this island does, the vast majority of it owed not to multilaterals but to the private commercial market in Jamaica herself. Anybody with a deposit in Jamaica has it probably invested in Jamaican government bonds. Significantly, therefore, nobody in the Jamaican private sector has advocated in all their proposals for tax reform, that Jamaican bond holders take a haircut on their principal. But more than half of government revenue goes to paying out interest and loans.

The debt strategy of the Government is fundamentally wrong because they borrow from Jamaicans instead of multilaterals set up to lend cash-strapped governments money. These institutions regularly forgive, or write off larger portions of that debt. But we as creditors cannot. That's why Dr. Davies' debt strategy is totally wrong.

The private sector is not calling, however, for a reorientation of the source of borrowing. Instead, they want the tax code simplified, the rates of income and corporate tax to be reduced and made the same, and they want the threshold for income tax lifted. This is a recipe for disaster.

Break from new legislation

What the island needs is a break from all proposed new legislation, and a thorough review of the past twenty years' worth of legislation to ensure that it is coherent and beneficial. The decline in the social and economic life of the country is a testament to the deleterious impact of the legislative frenzy in Parliament over the last two decades. We have more laws than ever before, and none of them work.

The vast majority of Jamaicans have incomes well below the current income tax threshold. The pay as you earn (PAYE) income tax is the biggest revenue earner the Government has, and next to that is the general consumption tax (GCT). Sometimes the in terms of the most revenue raised. If the PAYE rate is reduced, then the rate of GCT will have to be increased in order to make up for the shortfall in overall revenue.

GCT is paid by everyone, including the poorest of the poor. Currently it is at 16.5 per cent. The International Monetary Fund (IMF) thinks we should hike it so that government revenue can increase to pay down the public debt.

In the beginning, which wasn't really that long ago, there were some GCT zero-rated items. But year after year, Dr. Davies has been removing them one by one. At a time when there is no safety net of any sort for the poor, the IMF openly advocates and the Jamaican private sector recommends measures that will inevitably result in higher GCT upon the backs of the poor, the infirm, the elderly and the pensioners. As proposed public policy, this is as mad as it is cruel.

What seems to be happening is that as interest rates in Jamaica have declined, the deposits held by private companies and individuals aren't throwing off the cash they used to. So, businessmen are looking at their companies and trying to figure out how to hold on to more of the cash flow coming through them. Hence, they want income and corporate taxes lowered, and if all taxes could be bundled up as one, perhaps there could be 'dialogue' on a lower overall tax rate too.

Jamaica currently ranks internationally as one of the most heavily taxed countries in the world, if not the most taxed. This ought to be reason enough to lower taxes across the board in the island.

Monumental sums wasted

But when I think about the monumental sums wasted by the public sector in cost overruns, double and triple payments for the same job of work, and outright theft, I have to conclude that this is a government that needs every cent it can lay its hands on.

As a cigarette smoker, I'm accustomed to tax abuse. Not even a 20 per cent increase in cigarette tax will stop me. But Madame Prime Minister will find herself rolling in clover, once she cuts out waste and corruption in the public sector. Were she to do so, we probably wouldn't even want a tax rebate because this island would become a First-World country overnight.

What can't happen overnight is the reform of the tax system and the tax code. You can be certain, however, that any number of wise men in the private sector and the Opposition Jamaica Labour Party are even now meeting on it. All that's going to cause is a rash of new legislation that will make no sense. The only people to benefit from it will be the very, very rich.

I certainly don't agree with the capping of the national debt by statute, or anything else. I doubt there's a sitting prime minister anywhere in the world who would agree to having his or her hands tied in this regard. A country is not a company. Sensible people pull the plug on losing companies. No sensible person could advocate that for a country.

Borrowing money must be done overseas, and spent on well-managed public projects that benefit the country as a whole. Not borrowed from Jamaicans, and frittered away on trophy projects that don't make any sense.

Surely there must be something the private sector and Opposition can do productively, rather than pretend to be the Government. And if the JLP MP Karl Samuda is right and they're really coming up with 87 points on the subject in their manifesto soon to be published, the place to start with simplification is indeed right there.