Nigel delivered a tour de force

Raulston Nembhard

Wednesday, March 13, 2019

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Last Tuesday, in the Jamaican Parliament, Finance Minister Dr Nigel Clarke delivered a tour de force in his maiden presentation of the country's budget for the 2019-20 financial year. His presentation has been greeted with appreciation from a wide segment of the society. Apart from the predictable naysayers, the general comment was complimentary of an effort that was well thought out, comprehensive and appreciative of the limitations of the fiscal space in which the country is currently operating.

The real basis for the enthusiasm that greeted the finance minister's presentation was that for the first time in the living memory of most Jamaicans they saw a budget that gave back an appreciable net return of tax revenues to the people. They had grown accustomed to the predatory tactics of governments over the years to oppress them with ever-increasing taxation. Anything that moved could be taxed. So people were understandably sceptical as to what this new minister of finance would impose. Would he beat them with whips, or chastise them with scorpions? As it turned out, there were neither whips nor scorpions in this budget, but a pathway, however incremental, which gave them hope of a brighter tomorrow that could dawn on their economic prospects.

The minister outlined a suite of what he described as “distortionary” taxes that would be scrapped. The minimum business tax, introduced by a previous People's National Party (PNP) Government, is easily one of the stupidest and most counterproductive taxes ever introduced in Jamaica. It hurt businesses. Small and big businesses alike were subject to it. It was a whip on the backs of businesses that were already struggling to survive in an environment which Phillip Paulwell aptly described as being inhospitable to investments and which the Leader of the Opposition Dr Peter Phillips characterised as a shafting mechanism for those who played by the rules.

This tax was at the top of the list of those to be removed immediately. This, along with other discriminatory taxes, inhibited the business sector and hampered production. Stamp duty on a host of business transactions were removed and replaced by a flat fee of $5,000. Transfer tax on the transfer of property was reduced from five to two per cent.

This fiscal stimulus to the economy was facilitated by arrangement with the International Monetary Fund (IMF), which saw the primary surplus target being reduced from seven per cent to six and one-half per cent. With the lowering of the primary surplus the Government was faced with certain options as to how to apply it to bring the greatest relief to the people and, at the same time, augment the prospects for the economy. The decision landed on this suite of tax givebacks which, in my view, was the right decision. Some critics are saying that the tax on fuel should have been removed along with a lowering of the General Consumption Tax (GCT). But with so many competing priorities there is just so much that can be done at a given time considering that we are still faced with fiscal challenges.

Any attempt at using fiscal policy to stimulate growth in the economy, however small, must be welcomed. This is even more so in a context when it will have a net positive effect in a wide area of the economy. The removal of egregious tax measures is welcomed anytime in my book. At this time, it is not appropriate to remove the asset tax from financial institutions, especially the banks. There has not been any encouragement coming from the banking sector that they are prepared to play a robust role in financing new business and existing small businesses. They have enough incentives from central government to lower interest rates, yet they have not done so in a manner that encourages people to borrow.

It is clear that the people deserved the fiscal relief that their legendary self-sacrifice over the years made possible. It is their resilience and strength in maintaining the strong macroeconomic environment we enjoy today that is being rewarded in the lowering of the fiscal surplus. To apply these gains to situations in which people will immediately see and feel the relief, especially in the productive sector, is a welcomed development. The Government must be congratulated in making this choice above many others that could equally merit its attention.

A paradigm shift is taking place in the country, and young, thoughtful politicians are at the vanguard of this shift. For a first budget presentation Clarke was masterful. He brought erudition, and at the same time a sense of compassion to his task. It was a conscience-driven budget that embraced concern for the more vulnerable groups in the society. He seems to be at home in the finance portfolio and comes across as one who understands its wide ramifications and also the limitations of exuberance in the face of still harsh economic realities. We will see how far he can grow the Jamaican economy with equity, but so far he is assuming the right posture and is bringing what appears to be a formidable intellect to the task assigned to him. As others have cautioned, we must temper enthusiasm with the continued realism that we are not yet out of the woods. But we must continue to build our economy with conscience and pragmatism until we achieve the prosperity we seek.

Dr Raulston Nembhard is a priest and social commentator. Send comments to the Observer or stead6655@aol.com.


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