The truth about taxes

Jamaica continues to pay lip service only to comprehensive tax reform without which, I believe, economically speaking, we'll be running around in ever-decreasing circles until we disappear up our national behinds.

Green Paper No. 1-2011 ('Tax Reform For Jamaica') tabled by the finance minister postulated three tax-reform objectives:

Simplicity, equity and broadening of the tax base.

Improved compliance.

Economic growth and competitiveness.

Having done so, the Green Paper then subsumed these goals into an overriding objective expressed as: "Most importantly, these measures must meet the revenue demands of the Budget while maintaining macroeconomic and social stability." This assumes our current revenue demands are in sync with the above objectives. Since that's obviously not so, it appears this bit of sideways logic is another plot to make politics as usual appear new.

Last week, I dealt with (3) above, albeit without specifically linking the principles espoused to tax reform. But they are inextricably linked. As I suggested then, economic growth won't be achieved without strategic government spending on education, infrastructure and alternative energy. Now, the challenge is how to pay for all this. The problem with Government's tax-reform proposals is that they're being presented as if the priority is to find a way for everybody to pay less tax rather than to fund necessary additional spending.

That's a hoax. Without revenue enhancement, we won't meet our economic targets. However, true tax reform should achieve revenue enhancement without raising taxes on the few persons currently sharing Jamaica's entire tax burden despite the incongruity with their asset value. For too long, our revenue-enhancement measures have focused on the already compliant, and attempted to squeeze more blood from that dry stone. Then these persons are threatened, bullied and called 'tax cheats'. But the real tax cheats, namely those not paying any taxes despite having millions of dollars in cash lying around in their bedrooms, aren't harassed by tax authorities.

The Green Paper's sections 4 and 5 paradoxically include long, complicated pro-posals to simplify and reduce tax rates. That's all well and good (and some tax rates, espe-cially import taxes, should be reduced) but, again, the objective appears to be to find better-disguised ways for persons already compliant to pay more.

Focus on consumption taxes

It's a cliché that Jamaicans are overtaxed. It's also untrue. What is true is that those Jamaicans who are tax compliant, despite being worst able to pay, are overtaxed. These are the persons for whom a way to pay less tax must be found. If we accept that broadening the tax base is an absolute necessity, we must stop fantasising about 'compliance' in a system encouraging rampant corruption or about new legislation when we can't enforce the existing legislation.

It's time to start concentrating on consumption taxes. The guiding philosophy must be: EVERYBODY ('rich' and 'poor' alike) pays taxes according to affordability. We're beyond the luxury of posturing and pretending we're fighting a 'rich' vs 'poor' war in which it's noble only to be defending the 'poor'.

Why this irrational fear of gas tax increases? Jamaicans are too laissez-faire about petroleum-product use. We need taxation-based encouragement to use alternative energy and take more exercise. Yes, we must simplify the tax code. Income taxes must be paid at one rate across the board. Import duties must be reduced and simplified.

But, if Government insists on waiving, essentially, income-tax payments for large corporate entities, where's the moral authority to send bailiffs to seize our negligible assets for non-payment of those same taxes? What exactly do these corporations contribute to economic growth that we individuals don't contribute, both by being customers of those corporations and also by our individual social or economic activities?

If a farmer is to be exempt from import duties for importing a van for his farm, why must I pay to import my sedan in which I reach work, best able to produce and transport my children to school for their and the nation's future benefit. Why is the farmer's contribution to 'maintaining macroeconomic and social stability' so much more important than mine as to exempt him (but not me) from meeting "the revenue demands of the budget"?

Let's be real. Decades of tax incentives haven't worked. Bullying and maligning of the already compliant hasn't worked. Let's try clear thought instead. Let's fight for the 'poor' by abolishing PAYE; significantly reducing income-tax rates and import duties; and significantly increasing consumption taxes, including on petroleum-based products.

Peace and love.

Gordon Robinson is an attorney-at-law. Email feedback to columns@gleanerjm.com.