BASSETERRE, St. Kitts – WITH the private sector being a major component of economic stimulation, President of the Chamber of Industry and Commerce David Lake said certain debilitating factors must be addressed if a better domestic economic environment is to be realised in the Federation.
Lake – who spoke yesterday (Sept. 11) at the National Consultation on the Economy (NCoE) held at the St. Kitts Marriott Resort – said the economic challenges which the Federation faces could be overcome through an amalgam of ideas and efforts by both the government and private sector.
But with stimulation of the economy imperative to growth, Lake explained that issues relative to taxes, energy and national productivity must be at the forefront of the economic strategy.
The establishment of a National Productivity Unit and a Department of Job Creation, under the purview of the Ministry of Trade, Industry and Commerce, are two key suggestions Lake forwarded for consideration in boosting the economy.
“In this challenging economic environment when times are hard and resources scarce, the nation has to dig deep within itself for its own survival. In this regard, we need to use our existing human resources more effectively and efficiently to improve national competitiveness.
“The Chamber recommends the creation of a National Productivity Unit to improve our economic output. The ideas and suggestions of the National Competiveness Council should be implemented as a matter of urgency. The National Productivity Unit should be set up as a joint Public/Private Sector organisation to conduct productivity training throughout the nation using for example…‘Lean Concepts’.
“The Chamber believes that the adoption of such a preoccupation will focus policy on increasing jobs. As such, the Chamber recommends the formation of a Department of Job Creation. Such a Department could form part of the Ministry of Trade, Industry and Commerce.”
In addition to cracking down on tax evasion, Lake submitted a number of tax reform proposals which he says the Chamber is confident would both increase the government’s revenue and stimulate economic growth.
The proposals are:
• Reduction in the rate of Corporation Tax from 35% to 30%. Most of the successful emerging economies have rates of 30% or less;
• Removal of Restrictions on Capital Allowances;
• Implementation of Accelerated Depreciation;
• Removal of Restrictions on Losses carried forward;
• Removal of Restrictions on Bad Debt;
• Passage of Legislation to address restrictions on donations; and
• Removal of restrictions on write-offs for employees earning in excess of EC$60 000 per year. This would enable companies to attract premium talent at competitive rates.
The cries of the CIC concerning energy costs are akin to those of the other members of the community, in that – as Lake explained – they have a “deleterious effect”. He said inroads were made in addressing this problem but much more could be done.
His corrective suggestions include: further improvement of tax incentives on alternative energy equipment; the expeditious enactment of the National Energy Policy to allow private entities to generate solar electricity; the passage of legislation to allow reverse metering and as a long-term measure, shifting towards large scale alternative energy sources such as wind, geothermal and solar energy.
The introduction of VAT has resulted in cash flow constraints for medium-sized and small business owners and, as expressed by the CIC President, these could be remedied by tweaking the VAT regulations to benefit both businesses and consumers.
“Since the introduction of VAT, small and medium size enterprises have faced increased cash flow constraints to make the VAT payments and returns within 15 days and still find cash to pay employees and keep shelves stocked. We are therefore recommending that government lengthens the time period to make VAT returns to 30 days. Small and medium sized businesses which have to give the normal 30 days credit have to pay the VAT 15 days before it is received from the consumer.
“Consumers too are in dire need of relief from the VAT. Cognizant of government’s revenue concerns, we would recommend an increase in a select range of essential consumer goods for zero-VAT rating. These items should be selected based on appropriate research. This can achieve a positive message without significantly compromising government treasury receipts.”
The NCoE was held under the theme “The Challenge of Fostering Economic Growth given the Conditions in the Global and Domestic Environments” and Lake expressed his hope that the ideas generated from and through the forum “would redound towards fostering economic growth in the domestic environment during 2013 and beyond”.
