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Editorial
December 20, 2009

Uncertain times ahead

The public anger and resentment flowing from last week’s announced tax measures should not have surprised Prime Minister Bruce Golding and his Jamaica Labour Party (JLP) Government.

Equally, given the political realities, yesterday’s decision by the opposition People’s National Party (PNP) to orchestrate “disciplined” street protests should have been expected. How disciplined such protest action can be is left to be seen. The news from Jamaica House late yesterday evening that, having “heard the cry and the appeal of the Jamaican people”, the Government will now “re-examine the existing composition of the tax package” leaves us to wonder at the savvy and foresight of the Golding administration.

That aside, to understand the desperation of the Government as it seeks to meet the demands of the International Monetary Fund, or as Finance Minister Mr Audley Shaw puts it, “enhance Government revenue and curtail the fiscal deficit”, we need only glance at some of the previously GCT (general consumption tax) — exempt basic items now listed to be taxed. Bear in mind that this is the third tax package of the fiscal year.

Just as a memory refresher, come January, fresh fruit and vegetables, ground provision, meat and poultry, fish, cornmeal, tinned meats and fish, bread, buns, bullas, biscuits and crackers, sugar, salt, eggs, patties, rolled oats and baking flour, disposable diapers for the incontinent, sanitary towels and tampons are among the many previously exempt items that will now attract 17.5 per cent GCT.

To compound matters, there is to be an increase in the special consumption tax on gasoline. Also, residential electricity customers will now be expected to pay GCT on usage exceeding 200 kilowatt hours per month. And Mr Golding says public sector workers, already subjected to a wage freeze, should not expect that situation to change for another two fiscal years.

It all sounds like political suicide. In normal times, it most certainly would be. The one thing that’s going for Mr Golding and his Government is that these are not normal times.

Ordinary people understand that the globe has been hit hard by arguably the worst economic and financial meltdown of modern times.

Ordinary people understand that with half of the bauxite/alumina sector up in smoke and remittances from Jamaicans abroad slashed as a result of the turmoil in North America and Britain, Mr Golding’s government is under more pressure than most. People understand also that the Jamaican economy was in bad shape, to begin with.

So that even in a very rudimentary way, people, generally speaking, understand the rationale for the $21.8-billion tax package as part of the effort to satisfy the IMF as Government, out of necessity, seeks to re-enter a borrowing relationship.

For the Golding Government, the trouble is the growing perception that the poor are being asked to bear the brunt of the burden while the rich get off easy.

Maybe there are good technical reasons for rejecting Dr Omar Davies’s recommendation of a special cess on treasury bills, which he claimed in April would have brought in at least $10 billion. We do not know if Mr Davies’ proposal will now be part of the Government’s tax re-examination. If it isn’t, Mr Golding and Mr Shaw will have to take pains and find creative ways to explain what those reasons are in order to escape the tag of ‘big man’ or ‘rich man’ government.

The bottom line, however, is that there will be serious political implications flowing from all of the above.

For one thing, should the promised re-examination of the tax package fall short of Opposition expectations and, as a result, protests take place and ‘tek life’, the two year-old Golding Government — already operating with a pencil slim parliamentary majority — may well be left with no option but to seek a fresh mandate.

Jamaicans need to brace themselves for some very uncertain days, weeks and months ahead.

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