Under the Golding administration Jamaica has undergone a strenuous programme of economic reform. Most of the measures were made necessary by the dire economic circumstances of years of excessive borrowing by previous PNP governments and the unexpected and prolonged global economic crisis.

However, the JLP administration with the voluble Mr Audley Shaw as finance minister undertook these measures of their own volition and executed them with conviction. Give credit where it is due. The economy has shown economic growth in the last two quarters and could receive a further boost from increased bauxite production and the Chinese investment in the sugar industry.

The economic fundamentals are in very good shape. Interest rates are much reduced, inflation is very low, the exchange rate is stable, international reserves are healthy and tourist arrivals have been maintained. Add to that the resumption of pre-crisis levels of remittances and the Government’s smooth management of the unprecedented and now famous debt exchange.

However, there are still some difficult issues to be addressed, including public sector wages, pensions, downsizing of the public sector and tax reform.

A comprehensive tax reform has to be completed to complement and reinforce the economic reform programme. This must encompass a rationalisation of the package of taxation measures and the creation of an efficient tax administration.

Tax reform is necessary because of a multiplicity of reasons.

First, improving tax collection will increase fiscal revenue, and, in conjunction with controlling government expenditure, will help to close the gap between revenue and expenditure and thereby reduce government borrowing. Less resort to borrowing by the Government, including the relatively inexpensive funds from the World Bank and the Inter-American Development Bank (IADB) will contribute to a reduction of the extremely high debt/GDP ratio.

Second, tax policy will no longer be a back-of-the-envelope money-raising exercise devoid of any economic rationale. Tax policy must, for the first time in Jamaica’s history, be a tool for the promotion of economic development. Tax policy is not accounting, it is economic policy, and therefore each tax must have an economic rationale and be part of a coherent policy.

The urgency to complete tax reform derives from the impatience of the International Monetary Fund for the exercise to be part of its stabilisation programme and because the World Bank and the IADB regard this as a critically important step in the resuscitation of economic growth.

Successive governments have been talking about tax reform since Dr Omar Davies dismissed the report of the Matalon Committee. Since the tenure of the Golding administration we have been hearing the old refrain of “soon come”. Tax reform is a clear case of paralysis by analysis and consultation. The reform is long overdue and needs to be completed before the end of this year.