VIDEO: Bite the bullet now, Government urged

PSWG urges Gov’t to make use of time, mandate

THE Government is being encouraged to take the tough economic decisions now that will put Jamaica on a path to growth and avoid tinkering around the edges of proposed comprehensive tax reforms.

Chairman of the Private Sector Working Group (PSWG), Joseph Matalon, made the call during yesterday's Observer Monday Exchange in response to a query as to whether his group felt the Administration was prepared to implement tough measures at the risk of its political fortunes.

Joseph Matalon (2nd right) chairman of the Private Sector Working Group (PSWG), addressing yesterday’s Observer Monday Exchange. Flanking him are other PSWG members (from left) Rev  1/1

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"What I would say to the current Administration is, you are four months old, you have a huge political mandate, the time to do it is now. Let us take the difficult decisions now that will allow us to put this country on a path to sustained growth," Matalon said.

"Ultimately, growth is the only thing that is going to cure both our economic and our social ills, and to whatever extent we are fiscally constrained and therefore cannot implement the kind of counter-cyclical economic policies and fiscal policies in particular that some developed nations in a better economic situation would be better able to do, that then demands that we be intelligent about our fiscal policy and how we implement it, both on the revenue side, to be efficient as possible, and on the expenditure side," he added.

Matalon and members of the PSWG — Dr Wayne Henry, Professor Rosalea Hamilton, and Rev Dr Garnett Roper — used the Monday Exchange to explain the group's tax reform proposals which have generated a lot of debate in recent weeks.

Addressing the concern about the political will within the Government to take the decisions, Matalon said his biggest fear with the tax reform programme was that "we might end up, as we have done in the past, tinkering around the edges and not doing any kind of comprehensive reform".

Too often the "difficult decisions" that will encourage growth and development are not made, Matalon said, and that has affected the country's ability to move towards greater levels of productivity.

"I guarantee that if we don't do that, we are going to find ourselves at this juncture once again, and there will be fewer options available to us," he said.

Roper, in addressing the concern, said we had to break the cycle of mistrust. "We have to give people the benefit of the doubt. They are intelligent, they're nationalist, and therefore, let's see if, in this particular set of measures, in which the wicket has been laid — I think it must be the easiest to implement because so much preparation has been done — let's see if we can use that, as happened with the JDX, to begin to convince ourselves that we can take tough measures without burning down the country and we can incrementally move in a positive direction," said Roper.

He said that the exercise of sharing information with the country, as was being practised by the PSWG, made it less likely that we have to be extreme.

"There was a time when it was believed that you could not impose a gas tax without riots, but it was done," Roper said in reference to the imposition of a tariff on petrol by the previous Government but which did not trigger violent protest as in the past.

"One way or the other, we are going to bite the bullet this year," said Roper. "One way or the other, it is clear, from everything that has been said, that we are in deep, deep trouble economically, and this budget that is coming will have to help us face the music; what we hope it will do is help us face it kinda for the last time."

Henry, acknowledging that politicians are frequently concerned about their political future and are unwilling to risk that by making unpopular decisions, noted that "too often we sacrifice the economic good on the altar of political expediency".

However, he said that civil society, the private sector and the media have a tremendous role to play in not just elucidating and clarifying the issues and bringing pressure, but by helping to alleviate that concern of the Government.

"Tax reform is not just a good idea, it is imperative," Henry said. "If we don't voluntarily take hard, well-thought through, informed decisions, then we may reach the stage where they are taken for us."

Hamilton said the decision-making process is important but was previously dominated by people who have influence and not those at the bottom who the measures affect most.

The tax reform proposal, which was submitted in February this year, focuses on consumption taxes that are difficult to evade. By its calculations, this will make $7.3 billion more available to Government compared to the current measures.

The proposal is for personal income tax to be reduced from 25 per cent to 15 per cent and corporate income tax from 33.5 to 15 per cent.

Additionally, the PSWG's proposal calls for a five per cent reduction in general consumption tax (GCT) to 12.5 per cent. This is coupled with its recommendation to apply GCT to basic food items, such as sugar, rice and cornmeal.

But Prime Minister Portia Simpson Miller has said she would not support that proposal, given its likely impact on the society's poorest.

Yesterday, Matalon made it clear that the proposal was not meant to hurt the poor, as such measures would mean vulnerable families could receive government grants, introduced for that situation, to offset the increased prices.

Read more: http://www.jamaicaobserver.com/news/Bite-the-bullet-now--PSWG-urges-Gov-t-to-make-use-of-time--mandate_11378918#ixzz1tdZMf4Pp