These days the talk in Grenada is about the Government going to the IMF. People are worried and asking questions. One common question is why do we have to go the IMF? Another is can we solve our problems ourselves? Yet other questions express concerns of the kind of the programme and is it going to be another period of belt tightening and hardship.
The GULP, as the oldest political party in Grenada is also concerned about the IMF programme and its impact on our people. Let it be stated that we are not afraid of the IMF; as a political party we have the talent and skills to engage the IMF in a meaningful programme that would correct the wrong in the country while not bring too much hardship to bear on our people.
We say this because it is our Party under the leadership and forward thinking of our Founder, Sir Eric Matthew Gairy who took Grenada to the IMF in August 1976. Sir Eric understood very well that the development of our nation required the support of the Community of Nations and the IMF is well placed to provide that support given that more than 170 nations are members of the IMF. In that sense we are happy that through the foresight of Sir Eric we can now turn to the IMF to assist us with our economic woes created largely by those who are now trying to fix it.
While the Minister of Finance has indicated in a National Address his intention to go to the IMF, he has not provided us with full details of the nature of the engagement and of the full list of measures to be implemented to correct his failure. Suffice to say reference has been to only one tax; that is reduction in the threshold of the Income tax to $3,000.00 per month.
With that specific measure we are told that the government intends to raise about $25M annually as a major input in correcting the country’s fiscal imbalances. Our concern as a Party is whether that specific measure is enough and whether administrative arrangements have been put in place to ensure compliance and collection. We are also concerned of the ramifications of the failure of such a measure and whether additional measures are being considered but not made public.
As a Political Party, our approach to politics is to always reduce the hardship on our people, even in the midst of unfavourable economic conditions. While it is admitted that under such conditions, sacrifices are required by our people, efforts must also be made to entice them in making those sacrifices.
In this regard, it is not sufficient to have lengthy political addresses with hope as its essence, but it also important to indicate in clear terms a number of enticing measures as a means of seeking a balance between taking and giving. Put differently, you just can’t take away from the people without giving them anything in return; or just allowing them to live in hope.
In the next few weeks, our Party will be publishing a series of articles expressing our opinion on how we think the programme with the IMF should be designed to achieve a balance between taking from the people and giving them back something in return. This is important, for the success of the programme hinges on the early buy-in from the populace. We ask the people of Grenada to read our articles, so that you can fashion our own thoughts for making future political decisions.
We repeat that we are not against taking measures to correct our fiscal imbalances; but we don’t think that it is politically correct to impose heavy taxes on our people as the only appropriate measure. In our opinion, there must be a two-way street to solving the country’s problem. This means that the people alone must not bear the brunt of the burden, since the burden itself resulted from poor fiscal management on the part of our decision makers.
Our two-way street therefore calls for relief or enticements for the people. That relief in itself would redound to the benefit of the government and to the success of the programme, since it would mean additional money coming into the Treasury. Moreover, it would help revive the shrinking economy (which the Minister of Finance recognises) thereby saving jobs and making the economic recovery process a lot easier.
Our two-way street calls for the government (as part of the programme with the IMF) to provide an Amnesty on Tax Arrears related to Interest and Penalty. These penalties and interest arose because of the failure of tax payers to make payment on time given the slowdown in economic activity over the years. These penalties and interest are calculated as a percentage of the tax itself; but had all taxes were paid on time, then government would not be collecting this additional revenue through penalties and interest.
In one sense, those penalties had nothing to do with government’s efficiency in tax collection, and in any case if government was efficient in its collection and did not play politics with its revenue there would not have been so many arrears to be collected in penalties and interest. In that sense, these penalties are not affecting what is due to government (i.e. the tax); but they represent free money for government, which can be appropriated only because of the nature of the Income Tax Act.
Our view is that this measure can be implemented for a period of six months. The government having the figures at its disposal can determine the amount to be collected in that period; and can use that figure as a basis for reconsidering the reduction in the threshold for income tax; or the rate to be applied.
GULP considers this measure to be not just economically sensible (since it is a cheap and easy way of collecting money) but is also politically acceptable since it entails the two way street that should characterise good fiscal and economic policies. Expressed differently, while the people are asked to pay more on the one hand, on the other hand, they are asked to pay less, when their overall tax situation is taking into consideration.
In summary, not only does the Government needs a “Hair Cut” but the people of Grenada also need a “Hair Cut” as well.
(The above reflects the views of the Grenada United Labour Party)