Jamaica is in the midst of an annual ritual, with its politicians arguing about the national budget presented to the country by the finance minister, then initially criticised by the Opposition spokesman on finance. Others then join in the debate. Outside of Parliament, some ‘experts’ discuss what has been presented openly–on television or radio, or in the pages of national newspapers, or in the social media spaces that now exist. It’s possible to get an idea of all of that discussion, but you’d be somewhat superhuman if you managed to do that. Outside Parliament, we also know that many people argue over the measures and the things that have not been done, and some will do their own calculations of how they will be affected. Some, will wonder what has been done, but not have much capability to make sense of it all, either nationally or even in their personal circumstances. Some also have no interest in any of this, and just wish the ‘noise’ would stop so that they could get on with life: they live with the measures and suffer or gain in silence.
But, one of the things that happens a lot in Jamaica is that much of the discussion that goes on happens with the tinge of political bias deeply ingrained in the views expressed. We need to stop that!
Over the weekend, I had an article published with my brief views on the latest budget. But, I also spent some time thinking about measures that could have been made. Some people react to those who criticise the budget presentation by saying ‘Show us your plans!’. I commented that this is empty rhetoric: national budgets reflect national priorities, so if say the Opposition were to present its plan, it would reflect its priorities. Those need not intersect with the priorities of the government of the day, so we may not have anything that is truly comparable. But, what I think would be useful would be to have a better idea of what certain well-defined options could mean for the country. Let me explain.
Governments often try to get tax revenue from what we may see as ‘low-hanging fruit’, often ‘sin’ taxes–adding levies on things such as alcohol and tobacco products. In other words, the government acts a bit like a nanny and says that it knows we do some bad things and will raise the cost of doing them. But, another approach would be for the government to adopt the view that certain common behaviour is not good for the health of the nation and suggest taxing them. Because many believe that leaving people to choose for themselves, governments may be reluctant to ban things, but will raise the cost of doing them. So, if the government has a belief that it should be helping to improve the nation’s health and, say, that it wants to reduce the occurrence of things like non-communicable diseases (NCDs), it could reasonably look at taxing things that contribute to those. Last October, the World Health Organization called for worldwide action on the consumption of sugary drinks. Its main message was:
‘Taxing sugary drinks can lower consumption and reduce obesity, type 2 diabetes and tooth decay, says a new WHO report…Fiscal policies that lead to at least a 20% increase in the retail price of sugary drinks would result in proportional reductions in consumption of such products.’
Many jurisdictions have already tried to do this with taxes on sugary drinks: Denmark has had such a tax in place since the 1930s. But, it’s now on the radar for many countries and regions. So, why should Jamaica’s finance ministry not make a calculation of what a 20 percent increase would yield, assuming that we got a proportionate reduction in consumption? We could then see what economists would call the ‘opportunity cost’ of the measure, because we could then see what we have decided to give up in potential tax revenue.
My experience in economic policy making informs me that such options are often assessed, but behind the closed doors of political discussion, some options never get out of the room. The personal preferences of ministers or the political calculations of parties may block some ideas from coming to the light. But, the nation needs to know these options. I may be a serial optimist to think that a political party would show such calculations. But, in a mature democracy, what would be better? When we hear that J$2 billion will come from a particular tax, it would be good to know that this amount could perhaps have come from another tax. Doing this would also force the government and the nation to understand or discuss why a tax was imposed and another option ignored. It would also force us to try to understand who will be affected by tax measures.
This last point is a gaping hole in the way that budgets are done in Jamaica: we do a poor job of pointing out who are the gainers and losers of budget measures. Doing that analysis is not easy, and is subject to lots of criticism, but we could live with that and try our best to refine our understanding in this area.
I taught a seminar on income inequality at the University of the West Indies, Mona, this week, and one of the things I asked the students to think about was who gained and who lost from the budget and what has it done for income inequality.
But, it’s not just a range of tax measures that need to be assessed this way. Jamaica should always have at its fingertips figures for those people and organizations who do not make a contribution when they should–tax avoiders and evaders. The cost of tax delinquency should always be in the budget discussion. At the start of FY 2015/16, Tax Administration Jamaica (TAJ) estimated the stock of arrears at J$350 bn. During the year, arrears amounts deemed to be uncollectible for the Years of Assessment 2009/10 and earlier, were written-off, as outlined in TAJ’s Debt Write-Off Policy, so that greater focus could be placed on pursuing more recent liabilities. As a result, the stock of arrears was reduced to J$125 bn at the close of the fiscal year. That’s a significant reduction. While TAJ may be doing its compliance work better, with its National Compliance Plan 2016/17, the nation needs to understand what it’s doing and what it hopes to gain. I’m for ‘naming and shaming’ tax delinquents–I’ve seen it work in other countries to great effect–but our laws and regulations on that are somewhat restrictive. Moreover, the finance ministry should at least tell us why going after more arrears is not one of the measures that it wants to see pursued more vigorously. If, say, we could get back 25 percent of the existing arrears during the fiscal year, then a J$30 bn tax package may not seem necessary.
In the same way that I suggested that we could see coherence in government policies, with health objectives being underpinned by fiscal measures, we could get coherence in matters like energy policy. As I tweeted over the weekend, policies should direct us towards energy efficiency and better use of renewable energy, such as through solar power and hybrid vehicles.
Neighbour country, Barbados, saw decades ago the sense of promoting the use of solar energy and its use has been compulsory in all new buildings for years. Why has Jamaica, with its similarly abundant sunlight, been so reluctant? Another debate.
We also need to be open and clear about why certain bodies of the nation continue to gets special treatment in terms of tax obligations. In that conversation, we need to ask and have answered why religious institutions are treated the way they are. Let me not be prescriptive for the moment, but suggest that the nation could do worse than to get a better understanding of what the current situation is deemed acceptable, and why in an era when the finance minister is urging us to be ‘responsible’, that burden only falls on certain shoulders.
There are other specific topics that could be brought into the conversation, but we would go far by having a more neutral discussion and facts on the topics touched on above. The finance minister has talked about the status of a range of public bodies and how they could contribute to government finances. This is a wonderful topic. Personally, I would have preferred to have seen us have that conversation first before deciding to dip hands into the surplus of the National Housing Trust to the tune of some J$11.4 bn. Call me old-fashioned for wanting to put the horse before the cart.
So, Jamaica, how mature are we? Can we have such conversations?