On the right path, Dr Clarke

Editorial

On the right path, Dr Clarke

Friday, March 13, 2020

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The new tax-reduction measures announced by Finance Minister Dr Nigel Clarke are the House of Representatives on Tuesday is further proof that the Government is in tune with the type of stimulus needed to pull Jamaica out of the economic quagmire left by misguided policies of the past.

Actually, the first real indication that the Government “gets it” came last year when Minister Clarke, in opening the budget debate, announced a $14-billion tax giveback designed to lower the cost of doing business, reduce informality, and increase economic activity.

The decision, despite criticism from some quarters, was commended by the International Monetary Fund (IMF), whose mission chief to Jamaica at the time, Dr Uma Ramakrishnan, pointed out that with the country improving public debt dynamics, the fund supported the reduction in the primary surplus target by 0.5 per cent of gross domestic product (GDP) to 6.5 per cent in the budget for fiscal year 2019/20 to further boost growth and job creation.

“The additional space accommodates much-needed growth-enhancing and social spending for citizen security, PATH [Programme of Advancement Through Health and Education], and rural infrastructure,” Dr Ramakrishnan said at the time.

On Tuesday of this week, Dr Clarke, in what he explained was a continuation of the reform of the tax system towards equity, efficiency, and simplicity, said the new tax-reduction measures are expected to cost the Administration $18 billion in 2020/21 and support the 2019/20 tax reform that saw reduction in tax rates and the elimination of some tax types considered distortionary.

The budget, he added, is strategically focused on moving forward, in the right direction, consistently, and where the fruits of collective effort are shared.

We are particularly encouraged by the tax credit being offered to micro, small and medium-sized enterprises (MSMEs). Minister Clarke has said that the Government wants more young people to see starting a business and pursuing an entrepreneurial path as a viable option for them.

That is commendable, for we firmly believe and support the view that growth in the MSME sector can only redound to the benefit of the economy. Being assured of a tax credit of $375,000 once taxes are filed should certainly ease the cash-flow burden that many, if not all, small- and medium-sizes businesses face.

Minister Clarke has correctly argued in the past that attempts at short-term fixes to historical inequity have led to unsustainable debt or high inflation and, as such, have been the most detrimental to equity in Jamaica over the long term.

It is with that in mind that he has placed emphasis on institutional reforms such as a fiscal council and an independent central bank.

Another indication of his rightness is the wiggle room we have to respond credibly in the fight against the novel coronavirus disease (COVID-19). This is a clear pay-off from stringently following disciplined fiscal policies, some dating back to the previous Administration.

It is noteworthy that in last year's budget the Government delivered policies designed to push growth and equity with a sustainable plan for long-term economic independence. We dare say the Administration is continuing on what we believe to be the right path.

Good going, Dr Clarke.


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