Opposition Spokesman on Finance Omar Davies. - Norman Grindley/Chief Photographer

Dr. Omar Davies, the opposition spokesman on finance, says the Bruce Golding administration lost the "moral authority" to deal with the middle class and the poor when it refused to raise $21.8 billion of additional taxes from the holders of government investment instruments.

On Thursday, Prime Minister Bruce Golding said Jamaica risked higher interest rates if the State increased the tax on interest on government papers from 25 per cent to 33 per cent.

The Opposition People's National Party (PNP) had made the proposal in April when Finance Minister Audley Shaw unleashed a $24-billion tax package.

However, Golding dismissed the suggestion then, saying that it would lead to capital flight. On Thursday, however, the prime minister said it was not a sleight-of-hand dismissal.

Said Golding: "It is not an idea that you just dismiss with the brush of a hand. If you examine it carefully, it is not an advisable approach to take. We need to increase revenue, yes, but we need to reduce interest rates as well, and taxing high-interest rate income is not going to reduce interest rates. If anything, it is likely to cause the market to demand higher interest rates in order to compensate."

none of the above

However, speaking at a PNP press conference on Friday, Davies said that Prime Minister Golding was only trying to explain away the imposition of tax.

"Whenever people give you several reasons for an answer, it is usually none of the above," Davies said.

He added: "He started with capital flight, now he has gone to high interest rates."

According to Davies, when Golding spoke about the issue during his midnight presentation to Parliament in September, he got the impression that the prime minister was reconsidering.

"Obviously, he has been influenced to back away," Davies said.

The opposition spokesman said that the PNP's proposal was for a temporary cess within the period of "the extraordinary high interest rates that are far greater than anyone could have anticipated".

"It is certain (revenue) because it is collected at source, but beyond that, it would give the Government, if not total moral authority, some moral authority to deal with the middle class and the poor, because at least there would be clear evidence of equity and that the burden was being shared," Davies argued.

But Government has said that it has been forced to go the road of the massive tax package because of a debt legacy it inherited and a country that has experienced low or negative growth in the last 20 years.

"We have had a long period of slow, anaemic growth. For almost 20 years, this county hasn't achieved as much as three per cent growth in any one year. In the last 14 years, our expenditure has consistently exceeded our revenues," Golding said.

daraine.luton@gleanerjm.com