Business

Mark Golding attacks Jamaica'slow growth and inequality

BY KEITH COLLISTER

Wednesday, March 13, 2019

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Shadow Finance Minister Mark Golding began his budget speech yesterday by noting “the burning issue of low growth”, observing that even what he called the “modest but achievable” growth targets the last PNP Administration had set for the years 2013/2014 to 2019/2020 had now slipped — and that if they had been achieved there would have been more money to spend on wages, hospitals, farm roads and water systems.

Golding also observed that the government had therefore “failed miserably” in meeting the target they set themselves.

Mentioning reaching the target of 5 per cent of GDP in year four, he compared it to the 1.5 per cent GDP target for 2019/2020, our year four, comparing that to an average of over 2 per cent GDP growth between 2003 and 2006.

He argued that if the new definition of public debt introduced April 1st 2017 had been used for the debt in 2016, the PNP would have left it at 113 per cent of GDP as opposed to the then recorded 122.3 per cent.

He noted the cut in the primary surplus, allowing the announced $14 billion tax cut, was due to our reaching the debt to GDP target a year earlier due to the Petrocaribe debt buy back at less than 50 cents on the dollar, a reduction worth 9 per cent of GDP.

Golding credited previous administration's tax reforms such as third party information laws and transfer pricing rules (as well as organisational changes) with having driven the sharp recent improvement in tax collection, from $411.85 billion in fiscal year 2015/2016, to a projected $565.88 billion in fiscal year 2019/2020, or an increase in taxes of 44.3 per cent or $154 billion. He noted this is way above the 19 per cent increase in inflation, or the cumulative increase in nominal GDP of 32.8 per cent, but that it couldn't have come from growth “as there has been precious little growth”.

He argued that what he termed the “tax rollbacks” could have been directed to cutting GCT, or reducing SCT on gas, questioning the move to indirect taxation as “worsening inequality”, and calling for all taxpayers to get a break, “not just beneficiaries of corruption and poor governance”.

Addressing the tax package specifically, he stated that they had no objection to the abolition of the minimum business tax, which he said “was always intended to be a short-term measure.”

Concerning stamp duty, he argued than an important distortion (the registration fee of 0.5 per cent for mortgages on real estate) appeared to have been overlooked and argued the new $5,000 stamp duty fee was too high for transactions under $1 million for smaller secured micro and small business loans, which should be zero or a nominal $20 instead.

He argued that the reference in the budget to equity was not “to social justice and fairness”, as it was instead skewed to assets and wealth, when ordinary Jamaican consumers, the health system and public sector workers all needed a break. He also pointed out the still low allocation to PATH on a per head basis despite the 25 per cent increase.

He asked whether part of the $72 billion spent on central government capital expenditure could have been better spent on human capital.

A key critique was what he described as the poor performance of the Ministry of Growth and Job Creation in improving Jamaica's world rankings for Competitiveness and Ease of Doing Business.

He argued that the government's inability to drive growth-inducing reforms is having negative consequences for Jamaica's international competitiveness. He added that the Economic Growth Council needed broad-based representation, as so far bureaucracy problems had been addressed through governance by “phone calls” or “behind the scenes pressure” rather than transforming “an inefficient, wasteful and uncompetitive system” arguing “the Government does not have what it takes to transform the system”.

He contrasted the government's weakness “in developing transformational legislation” with the Opposition's time in office which included the “Super Form” for starting new businesses, the “Secured Interests in Personal Property Act”, and modern insolvency legislation.

He recommended that the prime minister decentralise his currently excessively concentrated executive authority (which includes more than 30 departments and agencies and some of our largest and most complex and diverse public bodes), due to what he called its unwieldy, “giant octopus” type nature. to allow greater focus and clearer lines of responsibility,

He added that the consolidation of agriculture into industry and Commerce was misconceived, as agriculture continues to underperform in the absence of any clear vision for rural development, while Industry and Commerce has failed to continue the focussed drive on improving Jamaica's international competitiveness.

Golding mentioned a number of other issues of concern: corruption and weak governance such as Petrojam, counter-productive execution of capital expenditure (three major road projects occurring at once), the labour force shrinking due to people dropping out, Jamaica's rollercoaster foreign exchange market (wild swings in our dollar) and the need for participatory decision making in the move towards inflation targeting (he called for a transparent and inclusive process).

He also called for more innovative policies to promote credit creation, and the “normalisation” of the capital requirements for general insurance companies to allow capital to be re-directed to productive assets.

Finally, Golding called for social transformation through investment in human capital and rural development, including a new housing deal for the poor and improved social amenities such as street lighting, garbage collection and water supply for those deprived communities “treated shamefully by the state”, arguing in conclusion that the emphasis of his party on social justice was the key difference between the JLP and PNP.

 

 


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