Holness sounds election campaign bell


Sunday, April 27, 2014    

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"PRIME Minister, withdraw the tax, or else." Opposition Leader Andrew Holness did not spell out the "or else"; but as the live television broadcast showed him looking across the aisle directly at Prime Minister Portia Simpson Miller, viewers could hardly be in doubt that he was threatening political counter-action.

And just in case we missed the body language, the oral language was inescapable: "It would be irresponsible of the Opposition to merely say we oppose the tax. We will resist the tax. This is now a point of departure," he declared.

Mr Holness, who was making his contribution to the 2014/15 budget debate in Gordon House Thursday afternoon, was reflecting the near universal opposition and anger to the proposed tax on bank transactions announced a week earlier by Dr Peter Phillips, the minister of finance, as he opened the budget debate.

The tax is expected to raise $2.5 billion, representing the bulk of the $6.6 billion in new taxes the minister says is needed to plug the hole in the budget. It will be imposed on withdrawals from deposit-taking institutions through electronic banking, point-of-sale transactions (debit/credit cards), cheques, Internet transfers and transactions involving ABMs/ATMs.

The depth of public outrage seemed to have caught the finance minister off guard as he had argued that the impact -- at $1 for every $1,000 transaction -- was modest; that it would have minimal impact on consumers as it would be absorbed by the financial institutions; and it would be collectable and certain since it would require compliance only from the handful of companies that make up the financial sector. It's not like chasing hundreds of thousands of individual taxpayers.

Nevertheless, it has galvanised opposition from a cross section of social classes and financial interests who see it as the final straw on the backs of already over-burdened taxpayers in the context of a weak economy and bleak job prospects.

The message may be getting through. A news release from the Ministry of Finance and Planning Thursday said Dr Phillips had told trade union leaders that he will review the proposed revenue measures, and will announce the results of the review Wednesday, when he is scheduled to close the budget debate.

But he must also convince taxpayers that the ministry is not only about meeting revenue targets required by the IMF agreement but that, under his leadership, the Ministry of Finance will demonstrate a greater capacity to get things done; to do the analysis to ensure that taxes do not only plug budget holes but are carefully designed to incentivise production.

In the context of credibility and efficiency, the finance minister must quickly show progress this year on the sale of assets like the Norman Manley International Airport, Kingston Container Terminal, Caymanas Track Ltd and Petcom. These have been promised for far too long.

Placing the ball in

Portia's court

Whether the transaction tax is rolled back, modified or retained it is clear that the opposition leader will seek to use it as an issue to make his case for regaining the political office he lost in the 2011 general election, just months after assuming the leadership of government.

The JLP, under Mr Holness, was voted from office in December 2011, after four years at the controls, losing the election by a 2-1 margin in the 63-seat House of Representatives and was also later wiped out in local government elections.

Officially, the governing People's National Party (PNP) has more than two years before its mandate runs out.

However, by tradition, the PNP tends to call general elections ahead of the constitutionally due date. That's likely to happen again as there are tough reform measures, under the four-year Extended Fund Facility (EFF) with the IMF, that are due to take effect in 2016.

These include reform of the public sector to make it more efficient and requiring public servants to contribute to their pensions. Tax reform is also on the agenda, inclusive of proposals to widen the GCT net by including more items that are now zero-rated primarily to protect the poor. Neither measure is likely to go down well with two key elements of the PNP constituency -- public servants and the poor.

Accordingly, a bet on elections between late 2015 and early 2016 could be safe. Mr Holness seems to think so. "We, in the Opposition, are preparing ourselves. We are ready. We will be hitting the road to answer the call of the people."

In his wide-ranging contribution to the budget debate, Mr Holness laid out some campaign markers. One is to seek to puncture Mrs Simpson Miller's credibility as a caring leader with a special place in her heart for the poor. His argument was that the very constituency from with the PNP leader draws her political strength has been subjected to pain and punishment by an Administration which, he argued, has destroyed social mobility through a politics of poverty.

"Prime Minister, you claim to be looking out for the interest of the poor and vulnerable. In today's Jamaica, the poor and vulnerable use banks and ATMs. Remember, they have to cash their PATH cheques; they have to take their remittances from accounts they were encouraged to open," he insisted.

Another marker is that he will seek to place responsibility for the $1.7 trillion debt on the PNP's management of the economy, especially in the 1990s which was a period of extensive borrowing, and a period that also saw the collapse of the financial sector and the failure of a large number of businesses.

Mr Holness also proposed a major overhaul of our approach to education and training to prepare the next generation of Jamaicans to participate effectively in today's knowledge economy where Jamaican workers can compete for high-paying jobs.

The warning of political action if the tax is not rolled back has placed the prime minister in an awkward situation: Ignoring the calls for the rollback could be used to drive a wedge between her and her constituency of the poor black majority; rolling it back could be interpreted as bowing to threats; or it could be seen as throwing her finance minister under the bus.

Will Mrs Simpson Miller act more like the PNP president responding to the JLP leader, or will she act more as prime minister presiding over an Administration committed to staying the course of the four-year agreement with the IMF, even with its clear

political risks?

In recent speeches, she has acknowledged that Jamaica, as a country, is in the precarious position in which it finds itself, primarily because of debt which must be addressed. Further, she has embraced the remedies, not as an IMF imposition, but as inescapable. Tight spending and more revenue are the order of the day.

After Mr Holness has thrown down the political gauntlet, Portia's speech on Tuesday should be appointment television.





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