Taxation, Corruption and the IMF Programme

Taxation

Putting our baskets where we can’t reach has been our practice for years now. The Government of Jamaica (both JLP and PNP led) has introduced several new taxes and new items to the tax list.  Last fiscal year General Consumption Tax (GCT) was introduced on all raw food except chicken, flavoured milk, oats, patties and animal feed. The Ministry of Health (MOH) has indicated that fastfood restaurants may be required to pay a special tax. This is so since fastfood has led to some of the health issues (obesity, hypertension, diabetes among others) that has put a strain on the MOH budget.  Mention is been made of GCT on gasoline as a viable option to collect the projected amount of revenue to support the 2014/2015 budget. However, even if every item and service provided to the nation is taxed, the GOJ will never have enough resources to finance the budget. The issue that we face is not taxation, too many things are taxed in Jamaica. The main challenge that we experience is the inability to collect these taxes and corruption.

Recommendation: The GOJ must broaden the tax net so that more companies are under the tax paying umbrella. Additionally, if a company does not pay its taxes, deny them all incentives and start confiscating assets for auction.

Corruption

I observe the National Integrity Action (NIA) https://niajamaica.org/issues-of-corruption/ focus on corruption, investment and development. My main contention with corruption is it is too commonplace in the public sector. The public sector is the single largest employer in Jamaica, as at 2009/2010 it accounted for approximately J$126 billion or 12% of GDP http://www.capricaribbean.org/sites/default/files/text/Public%20Sector%20Reform%20in%20Jamaica%20July%206%202011.pdf.  Public sector effectiveness and efficiency are critical to the nations development, but might I add that a renewing of the minds of public sector employees is most critical to Jamaica’s development. There are key sectors that are responsible for revenue for the country, yet, the same persons entrusted to carry the revenue buckets have punched holes in the sides.

The Auditor General, Pamela Munroe Ellis and her department cannot do it alone. The GOJ and the people of Jamaica must demand more accountability and responsibility from those who are employed, not volunteering to get the job done. The  Licencing Authority, Examination Depot, Port Authority of Jamaica, Jamaica Customs and the Jamaica Constabulary Force (Police Traffic Division) just to name a few public serving entities that have a high corruption rate. I would not even go into mainstream political corruption, that is for another article. However, one should be clear by now the why the GOJ cannot collect the revenues it should.

The GOJ, I believe lacks the political will to seriously prosecute companies and individuals that are evading tax compliance. I know of a few companies that withdraws NIS, NHT, Education and Income taxes from their empoyees year after year and never pay over a cent to the GOJ, hence employees have no benefits.  Everywhere one does business GCT and other related taxes are superimposed, however, the GOJ has never been able to collect it. Is it that the GOJ cannot or will not collect?

Recommendation:  Whenever the GOJ finds its employees (at all levels) involved in corruption, especially defrauding the public purse, they ought to be fired, charged and any assets they have they can be proven was gained by their corrupt activities must be confiscated and auctioned where possible.

For private sectors, they must remove all incentives and enforce the laws that apply for them to pay what is owed. In developed countries, business owners often times compliant with tax laws.

IMF Programme

Proverbs 22:7The rich ruleth over the poor, and the borrower is servant to the lender“.

The IMF expects Jamaica to reduce its public sector wage bill from 12% to 9% of GDP by 2016. This is a major move, since the GOJ does not seem to have a growth strategy. Proverbs tell us about rich and poor. We have leaders who are not innovative. Jamaica is a wealthy place, however, we need the IMF to give us ultimatums and conditionalities that will eventually erode our riches. I say we are rich, that is why investors can come and make millions in profits annually.

Jamaica need to review the programme between Greece and the IMF so that we do not go down that slippery slope. On a serious note, couldnt the GOJ pass new bills and laws and develop new policies without the intervention of the IMF?

Conclusion

The GOJ has realized that things cannot continue the way they used to – free for all. The country must be managed like a successful business like NCB, and not a social welfare club. The public sector must refrain from the glitters of corruption and help in nation building. The general population must try not to support corruption and finally the businesses and individuals must pay their taxes by will or by force.  In this way we can say goodbye to the IMF sooner.

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