The much anticipated visit to the IMF by Grenada’s prime minister and his delegation has come and gone. The nation held its breath as it was understood that Dr Mitchell was supposed to issue a “Letter of Intent” to the IMF that sets out the policy orientation of the government as it relates to its “Home Grown” Structural Adjustment Program.
By all appearances, that letter has not been issued. However, the contents seem to be a well guarded secret, as discreet enquiries with NNP insiders suggest that only the “Chief” and his close confidant Timothy Antoine, Permanent Secretary, Ministry of Finance, actually know what is enshrined therein.
The truth is that the Prime Minister has engaged personally with the Committee of Social Partners in an effort to attract their support. The committee comprises the Council of Churches, Trades Union Council and the Inter Agency Group of Non- Governmental Organizations.
This forum has been used by the government to engage with civil society on the proposed austerity program. These organizations, as well meaning as they are, find themselves between “the devil and a hard place”. This is so in that it was the reckless spending and poor management by the same NNP that is the root cause of our predicament. However, they are loathe to apportion blame as they do not want to be described as “politically aligned”.
The Prime Minister has used this forum to “feel out” possible reaction to the package of measures that he intends to take. He jumped at the position taken by the trade unions that professionals and businesses do not pay their fair share of taxes. This is nothing new to the NNP. In their previous stint in office, which ended in 2008, this issue was addressed.
In the budget speech of 2000, the then minister of finance, Anthony Boatswain said, “Mr Speaker, Inland Revenue Department (IRD) records reveal that, in 1998, there was 510 registered individuals (doctors, lawyers, engineers, accountants, etc) who are liable to pay personal income tax.
That is, individuals who earn in excess of $60,000 per year. Of that number, only 218 or about 43% filed returns. The remaining 292 or 57% did not pay one single cent of personal income tax. Mr Speaker, this is unfair, unjust irresponsible and illegal.”
Well said, Mr Boatswain, but the NNP spent eight more years in office and did nothing to correct the situation. Do they now have the political will to go after their many friends who are part of this group of tax evaders? Many will scratch their heads in disbelief.
Dr Mitchell used a public forum in an area of low income earners to indicate that the government has to lower the threshold for income tax. As of the date of writing this commentary, the country has been left guessing “how low is low”.
This tinkering with the income tax threshold goes against the grain of the economic philosophy of the NNP and its leader. Again, Mr Boatswain puts their views on the public table in the 2000 Budget Speech.
He said, “Mr Speaker, in 1995, this New National Party administration instituted a fiscal regime that is simple, transparent and predictable. Putting more disposable income in the hands of our people, has been, and will continue to be our basic philosophy.”
The chief architect of this “philosophy”, Dr Mitchell, finds himself having to abandon a position that catapulted him to office in 1995. His argument is that we have to make those adjustments because the citizens of the countries that we are asking for help are paying significant levels of income tax. So we have to follow suit.
The Prime Minister finds himself face to face with economic reality. Maybe he envisioned that Grenada will never have to face an austerity program.
On October 21, the Prime Minister held a press conference in which he again spoke in generalities. He had just returned from Washington, where he met with the IMF and a quick stopover in London. He spoke about property tax adjustments and committed to “working out an arrangement with trade unions as it pertains to salaries of public workers”.
Again, he emphasised that sacrifices must be made for what appears to be a three-year period beginning 2014. This brings us to 2017, which is within striking distance from the constitutional due date for elections.
On Tuesday, October 22, he is reported to have said to a delegation of the Trades Union Council that VAT on building materials will revert to 15% after he had reduced it to 5% in this year’s Budget, from the previous rate implemented by the NDC administration of 7.5%.
Dr Mitchell obviously sees this looming crisis in purely political terms. Many observers opine that he will be more concerned with his political survival than doing what is right to lead the country out of this economic quagmire. He is quoted as saying, “We were forced into a corner where we have to do something.”
Dr Mitchell went on to say, “I do expect fall outs from the decisions to be taken.” Many observers have noticed that a hide and seek strategy roll-out is well on its way and the jigsaw puzzle is slowly taking shape.
#The national community is waiting, with bated breath, for the prime minister’s address where the austerity measures will be spelt out in detail. This we expect will precede the 2014 Budget.
We now know that the income tax threshold will be lowered, property tax will be increased, some arrangement will be made with the union representing public workers and VAT will be increased at least on construction materials.
In the meantime, drip disclosure continues.