THE PRIVATE Sector Working Group (PSWG) has been vocal that its tax-reform package should be accepted in its entirety.
I must say, there are some commendable proposals in its 62-page document. However, the section on removing the exemption from basic foods is woefully inadequate, lacks intellectual rigour, and is deficient in research and analysis. In fact, the Ministry of Labour’s Position Paper for GCT Tax Reform is much more relevant because it uses 2011 data. The PSWG uses 1988 data to come to a conclusion; does not offer any macroeconomic assumptions such as the foreign currency exchange rates or the price of oil; does not tell us how many persons are living under the poverty line (doubt they know the figure); does not mention what is the amount of money given to Programme of Advancement Through Health and Education (PATH) beneficiaries and the inadequacy of the said amount; does not state how many persons now deserve to be on the PATH and are not; does not wrestle with the International Monetary Fund (IMF) report on Jamaica’s economy published in 2011; and does not acknowledge that rebates will have inequities.
Additionally, the PSWG envisions further subventions to the Jamaica Urban Transit Company but ignores the needs of the rural transportation system; does not understand that no two families consume at the same rate; and ignores household size. While the Planning Institute of Jamaica expects the removal of the exemption on basic foods to have ‘significant impact on poor’, and ‘heightened hardships’, the PSWG estimates an increase of six per cent on basic food prices, etc.
The PSWG misunderstands ‘basic foods’. It is about food that is critical, essential, fundamental and indispensable for human existence. Therefore, basic foods, air and water, by definition, should not be taxed. Governments do not have a right to tax basic food. In fact, it is subsequent to 1990 that Jamaica implemented GCT so it is not that the Government is not giving up billions, because the Government is not and was never entitled to it.
But assuming for argument’s sake that the Government was entitled to tax basic foods and was being benevolent in giving it up, let us examine the weak defence by the PSWG. The document is a coalition of the willing, because some groups, for example, the agricultural and tourismsectors, on whose behalf the PSWG speaks, have not signed off on the document. Furthermore, when it comes to the amount needed, this is an estimate and is based on a belief – “We believe that $2b is sufficient for the safety net”.
The document does not show how they arrived at consumption patterns of persons who are rich. Purchases do not mean consumption. It is possible that persons who are rich are giving away food to the less fortunate. There are many churches, businesses and educational institutions who help with meals, and we should consider the impact on beneficiaries if GCT were to be added to basic food items.
In 2010, PATH spent $2.9b and gave 120,000 persons cash transfers as of December 2011. Therefore, based on the IMF report that 1.1 million persons are earning $250 a day, it means that the Government would need to provide $29b to alleviate those at that level and not $2b as the report states. Even if the Government had that money, it is not a good idea to have 1.1m people or half of the population on food stamps. We must remember that people have their pride. Furthermore, we are creating a mendicancy culture among Jamaicans when the PSWG recommends that 40 per cent of the population should receive food stamps. And the amount the group is suggesting for food stamps works out as $6 a day. And this is hailed as a great idea!
We say, no GCT on basic foods.
Rev Devon Dick is pastor of the Boulevard Baptist Church in St Andrew.