Innovation and clever incentives are required to grow the economy. I think that our citizens are hungry for a more pragmatic and concrete discussion on how we can navigate the stormy seas ahead. We need more than radio call-ins and random polls.
Any Government has a wide array of tools available to it in their arsenal. Fiscal policy relates to the revenue or taxation measures and the expenditure options at the State’s disposal. Monetary policy is the domain of interest rates and reserve requirements.
The other tools include legislative measures, moral suasion and collaborations or other measures emanating from the various Government ministries.
When it comes to taxation, there is progressive taxation or taxation set relative to the ability to pay and there is regressive taxation or taxation which taxes the wealthy and poor at the same rate without regard for the disparity in income level.
One can argue that our proposed Property Taxes are regressive because it indiscriminately taxes in relation to a deemed rental value with no consideration of whether any rental income is actually received.
Similarly, a tax imposed (or the withdrawal of a subsidy) on fuel or online purchases can be considered as charges levied with no regard to the ability to pay. Even the recent imposition of Value Added Taxation (VAT) on previously zero rated food and other items can be said to be a tax which the rich and poor must bear equally.
Of course, it is generally explained that a tax on consumption has a certain discretion attached to it because a consumer must not necessarily consume the taxed goods or services. This last point tends to pale in significance if the consumer does not have much latitude within which to operate—which would be the case, for example, for basic food items.
Some years ago the then PNM administration removed the two-tier income tax rates in favour of one tax rate for all taxable entities—whether an individual or a corporation or business. This was clearly a move in the regressive direction since the higher rate of tax for higher income earners was removed.
Commentators in favour of progressive taxation argue that higher income earners would have benefitted from their citizenship at a higher rate and would also consume a greater portion of State services than a lower income earner. Those against it would argue that a higher rate of tax on the wealthier taxpayer would lead to the stifling of further entrepreneurship and investment which grows an economy.
The pattern emerging is that the PNM seems to have leanings similar to those of the Republican party in the United States of America. This is bolstered by other similarities such as a low voter turnout favouring the Republicans, Republicans working alone, strong support of the evangelical Christian base, business conglomerates etc.
On the other side of the spectrum, the UNC seems akin to the left leaning Democrats with populist policies, big Government, having a Trade Union leader founder and a preference for State expenditure especially on infrastructure.
I think that our economy would do well to acknowledge these two extremes of ideological philosophy and instead move towards a balanced, more targeted approach, specific to our present predicament.
As an example, we need specific measures to exploit lucrative export markets like organic (non pesticide certified) produce. This requires a centralised certification body to audit and endorse organic produce, but also support in allowing the export of these items before they perish. Naturally, this is not a task that our typical farmer can embark on alone as it requires high levels of research, co-ordination and monetary support.
Diversification of the economy will not take place by employing the same simplistic policy measures which have been in operation. Unfortunately sufficient resources were not invested in laying the foundation when times were good, so it has become that much harder now that revenue is curtailed. Nevertheless, without a start, we remain that much further from our goals of self sufficiency.
Rishi-Nirvan Balroop,
Diego Martin