Keith Collister, Contributor
THE JAMAICA Chamber of Commerce's (JCC) conference board chairman, Desmond Blades, says the chamber wants the development of the national budget to become much more inclusive and transparent.
Individuals and firms should not be spending valuable time wondering what new tax measures are suddenly to be revealed in the first quarter of the financial year, as this wreaks havoc with any process of strategic planning, Mr. Blades said. In his view, Jamaica should move to a longer term process, one that would support rather than undermine business planning.
He was speaking yesterday morning at the Hilton Kingston Hotel at the first of what the conference board plans to be a series of pre-budget forums.
Pointing out that no legitimate business can operate successfully over the medium to long-term with a planning process that extends only through the next year, Mr. Blades asked whether the Government should not be considering five, 10 or even 15-year budgets, complemented by focused annual budgetary reviews.
CONSULTATION IS KEY
Tax specialist Brian Denning, representing the JCC's seminar partner, PriceWaterhouseCoopers, gave the opening presentation on the main components of the 2005-2006 budget.
Mr. Denning began by echoing the sentiment of Mr. Blades, that consultation is key to the budgetary process. In his view, the Ministry of Finance needed to involve the leading stakeholders much earlier in the preparation of the budget, as it facilitated informed decision-making and implementation.
Mr. Denning analysed the six-month fiscal performance to September 2005, noting that the $3.8 billion higher than projected deficit was mainly due to a $7.3 billion shortfall in tax revenue, which had partially been offset by significant cutbacks in capital and recurrent spending of over $4.6 billion.
The underperformance in tax revenue had occurred mainly in the second quarter, and was largely a consequence of the under-performance of GCT, both local and on imports.
MATALON RECOMMENDATIONS
While the original proposals in the Matalon Report were revenue neutral, the 2005 budget projected that the full implementation of the Matalon tax recommendations would be over four years. He noted that the greatest fear of the Matalon Committee had been that it would be primarily their revenue generating recommendations that would be introduced due to the need to close the fiscal gap.
CLOSING THE FISCAL GAP
Mr. Denning argued that rather than additional taxes to meet the fiscal gap, or going down the rocky road of further domestic borrowing, the Government needed to focus on increasing economic growth (and, therefore tax revenues), significantly increasing tax compliance and urgently working out what role incentives would play going forward.
He also stated that lack of consultation has frequently caused the need for tax measures to be reversed, modified or put on hold, with tax legislation frequently poorly drafted, as a result impeding implementation.
He cited the case of the restriction on carried forward losses to five years, where there had been no supporting legislation or consultation on the issue to his knowledge, despite its planned implementation on January 1 next year.
According to Mr. Denning, the World Trade Organisation required that Jamaica dismantle its export tax incentives by 2006, requiring the country to make a decision on the way forward. In his view, it was likely that those not receiving incentives who were taxed in the formal sector are paying very high levels of tax. In his view, compliant taxpayers were an asset to the nation and needed to be treated as such.
UNEMPLOYMENT UNDERSTATED
Opposition Spokesman on Finance, Audley Shaw, followed by leading economist Jason Morris of Jamaica Money Market Brokers, rounded out the seminar.
Mr. Shaw argued that the Government's need for funds was starving the productive sector, while the unemployment caused by this lack of production was severely understated.
In his view, the figure for recent fall in unemployment to below 12 per cent did not include all those who were not actively seeking work, which meant that our true unemployment level could be up to a third of our adult population, excluding the old and the young.
Despite collecting record taxes, the Government was unable to reduce the huge 'social deficit', the best example of which being our fast approach to becoming 'the murder capital of the world', because of the need to service debt, Mr. Shaw said .
In his response to Mr. Shaw, Mr. Morris argued that Jamaicans should focus on employment creation, not unemployment, as the unemployment rate could be manipulated. In his estimate, net employment had only increased marginally over past six years (due to an increase in the public sector), which was a poor performance.
