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JLP would have moved swiftly on measures to correct economy

— Holness

BY VERNON DAVIDSON Executive editor — publications davidsonv@jamaicaobserver.com

Thursday, February 07, 2013    

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ANDREW Holness is convinced that had his Jamaica Labour Party (JLP) won the December 2011 general elections, Jamaica would have had an easier time arriving at an agreement with the International Monetary Fund (IMF) because his Administration had laid the foundation on which to act swiftly on a number of issues critical to a funding deal.

According to Holness, the JLP Government had largely dealt with structural reform through regulation and legislation, as well as public sector management by the establishment of the Public Sector Transformation Unit.

"In terms of managing wages, that was outstanding — we needed an agreement and we were very close to that," Holness said in address to the Jamaica Observer Press Club last week.

"Pension reform, we were very close to that; taxation, waivers, and the structure of our economy, those were outstanding, so that would have been the next thing that we would have done," the opposition leader explained.

"You will recall that the very first thing I did when I became prime minister-designate was to visit the IMF, and it was clear in meeting with them that they wanted to see Jamaica do the things necessary, at the time," he said.

The recession, he reminded, has given the Government the opportunity to take the decisions and implement the measures necessary to take the country out of the crisis.

He said he returned to Jamaica from that meeting with the clear understanding that we would be merely wasting time trying to seek out a best deal, which is what the current Government, he said, is doing.

"The longer you wait, the greater the problem becomes," Holness argued, adding that there's a trade-off between getting the best deal and the situation worsening.

As such, he said it was his Government's opinion that Jamaica was at the point where it was in our interest to take the tough decisions.

It was against that background, Holness said, that he arrived at the position that he should call the election, as he needed to have a mandate to implement the measures.

The JLP, however, lost the vote to the People's National Party which, more than a year after taking office, has not yet inked an agreement with the IMF, a delay that Holness criticised last week.

While acknowledging that the talks with the IMF were on shaky ground during the last year of the JLP Government, Holness said that having visited the lending agency and committed to implementing the necessary measures, his Administration was confident that it could have "brought the agreement back on track sufficiently, such that it would be easier to get a follow-on agreement".

"So, we would not have waited five months for the agreement to expire and then say, well the agreement is dead, we're not going to do anything, we're going to wait until it expires and then we try and get a new agreement. We would have followed through on the programme and we would have, in a more substantial way, dealt with tax reform," Holness said.

His Government, he said, would have lowered tax rates. "We were prepared to do far more than is being done now to bring people into the tax net," he said. "You need leadership that is willing to challenge the cultural and psychosocial practices that are antithetical to growth; one of them is the informality of the system."

Widening the tax net was the only way to address the deficit, he said, arguing that Jamaicans are already overtaxed.

"I don't see the logic and wisdom in putting on more taxes and increasing the tax rates," said Holness. "If it is that you believe you have a substantial number of potential taxpayers outside of the tax net, increasing the rates is like increasing the fence that divides those in the formal system and those in the informal system; it doesn't make sense, and it is unfair to those already paying taxes. So what you're doing is putting the burden of taxation on those who you can catch."

He said that his counter to Finance Minister Dr Peter Phillips' statement that he wants to increase the power of the State, is "to create a larger formal space that the State regulates".

One way of achieving that, Holness said, was to establish a national system of identification, which he was prepared to do.

"If you don't know who your citizens are, how are you going to bring them into the formal system?" he asked.

For people who believe that a national identification system would be designed for taxation purposes only, Holness assured that it also had a social component.

"Some people say you want to know me to tax me; I want to know you so that I could also provide welfare for you. So it is a national social identification system," he explained.

He said it was not unlike the social welfare system in the United States and in countries in Europe.

"So, I was about to push that; that is why I made my statement at [the JLP annual] conference that you have to go to social protection before you go to taxation," Holness said.

With that in mind, the JLP, had it been re-elected, would have "spent some effort, in the first month after the election, in expanding and improving the Programme of Advancement Through Health and Education (PATH)", he said.

Under the PATH, poor families receive benefits in the form of cash grants.

Holness also said that his Government had been prepared to give serious attention to waivers and incentives. Acknowledging that there are some waivers that are statutorily required, Holness argued, however, that they should be examined and a decision taken as to whether they are still relevant, and if they're not, they should be taken off the books.

"We should find a way, as far as possible, to remove discretionary waivers and we should, in bringing the [tax] rates down, totally lessen the need for waivers, so we were prepared to remove, not fully, but those that seemed logical, discretionary waivers," he said.

"It's not something that I am saying would happen overnight, but we would have started on the path," he added. "So, we were prepared to act, and were we the Government, I think we would have had an easier time in getting a follow-on agreement."

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