Under the Saint Lucia Labour Party (SLP) government, fiscal accountability has always given way to pure political messaging.
On April 29, prime minister and minister for finance Dr Kenny Anthony delivered the 2015/16 estimates of revenue and expenditure in the amount of EC$1.464 billion. What followed made history, with a question mark, when the House of Assembly in Saint Lucia declined to debate budget estimates. Perhaps, voodoo tricks by Team Labour may have worked to swindle compromising minds into submission. Even so, it was a sad day in the history of democracy in Saint Lucia.
On May 13, 2014 the budget statement “Advancing Sustainable Development and Fiscal Stability” was read, however, in this budget cycle, elevated partisan rhetoric in a destabilized economy has reached a stalemate.
There is evidence that both documents as presented seem well strategized to confuse. And as citizens come to understand this chaos, in an era of government leadership in the economy: “government is not the solution to our problem; government is the problem”. ~ Ronald Reagan.
Here are the facts from the Budget Statement 2015:
“(a) The overall deficit narrowed to $138.8 million in 2014/15, compared to $213.5 million in 2013/14. This is a reduction of 35.0 per cent in nominal terms. (b) As a ratio of GDP, this translates to an overall deficit of 3.7 per cent, compared with 5.8 per cent in the previous year. In other words, we have secured a reduction of 2.1 percentage points. (c) A current account surplus of $43.1 million was recorded compared with a current account deficit of $0.7 million in 2013/14.
“All revenue sub-components expanded in 2014/15, contributing to total revenue and grants increasing by 5.2 percent to $970.4 million. The bulk of the growth… was led by higher collections of both VAT and taxes on income and profits. Receipts from VAT rose by 12.4 percent to $335.9 million and now accounts for more than a third of current revenue. This improvement in VAT collections reflects the change in the rate of VAT on hotels and related services from 8.0 percent to 10.0 percent, effective April 2014 and the narrowing of the VAT exempt list.
“Total expenditure of the Central Government fell by 2.4 per cent to $1,109.2 million in 2014/15 driven by a 12.3 per cent decline in capital expenditures to $235.4 million. Current expenditure rose marginally by 0.7 percent to $873.8 million in 2014/2015.
“At the end of the fiscal year, the stock of official public debt stood at $2,787.0 million, representing an increase in nominal terms of 4.9 per cent. The debt-to-GDP ratio now stands at 73.5 per cent, slightly lower than the 73.7 per cent observed in 2013.~ Budget Statement 2015
“Despite the improvement in the fiscal position, as will be articulated more precisely later, the borrowing requirement of the Government remains very high, above prudent and sustainable levels. The quantum of market debt which we have to accumulate to finance the budget remains elevated. We have to reduce this pace of borrowing and for this reason we have to continue to manage our finances carefully and prudently.
“In this cycle, the Government will seek to stimulate growth in our economy, attract new investment and ultimately reduce unemployment. The Government plans to do so by: (1) Encouraging new investments by the Private Sector; (2) Introducing new investment options; and (3) Increasing spending in public infrastructure. The Government plans to engage in these initiatives without seeking to compromise unduly our fiscal stability. This expenditure will nudge our deficit to increase to an estimated 5.8% of GDP but we expect that the deficit will fall to reasonable limits shortly thereafter as the economy stabilises.
“This year’s Budget includes revenue reforms geared towards increasing revenue, further titling the tax system towards indirect taxes, enhancing the operational efficiency of several government departments and engendering a greater degree of fairness in the tax system.”
The reforms are as follows:
“Changes to the VAT regime, including an increase in the VAT threshold to $400,000; This would mean that over six hundred (600) VAT registrants will not be required to collect VAT on behalf of the government. In order to ease some of the difficulties that have arisen, the Government plans to introduce what is called a Deferred Tax System for these capital goods. Under a Deferred Tax Payment System, registered and existing businesses can request a deferred payment to eliminate the possible cash flow problems resulting from investment in large capital goods. This new system will give rise to the following benefits: (1) Improved cash flow as companies will not be required to pay VAT upfront upon importation of capital goods; (2) The required funding and the cost of financing these capital goods will be lower; and (3) Better perception of the island as it pertains to the ‘Ease of Doing Business’.
“Raising the Customs Service Charge rate on imports from 5 percent to 6 percent; currently the Government of Saint Lucia requires $11 million annually to finance its regional obligations. It is estimated that this measure will yield an additional $10.2 million and be on par with two OECS peers, namely Grenada and St Kitts and Nevis.
“Raising the charge on fuel purchased by LUCELEC by fifty cents; this revenue measure is expected to yield an additional $9.5 million.
“Reform of the annual vehicle license fees regime; I propose an amendment to the motor vehicle and road traffic act of 2003 such that there will be ten(10) vehicle licensing classification. This proposal is expected to raise an additional $3.6 million.
“Overhaul of the Personal Income Tax system to increase the progressiveness of the system and reduce the tax burden of low and middle income earners: I proposed, inter alia, a reduction in our tax bands from four to three and an increase in the personal allowance threshold from $18,000.00 to $21,000.00. The changes would have allowed roughly 2,100 persons to be removed from the Tax Roll. In retrospect, we did not believe that those changes went far enough to modernise the tax system and to achieve the objective of shifting the tax system more in the direction of greater reliance on Indirect Taxes. Effectively, an individual must earn in excess of $2,084 per month (this figure is currently $1,533) to be subject to PAYE (Pay-As-You-Earn). Approximately 19,425 (or 91.3 percent) registered taxpayers will pay less tax or their tax status will remain unchanged due to the proposed changes.
“I am pleased to advise that approval has been given to the National Insurance Corporation to increase pension payments by 3 percent effective July 1, 2015. Increases in other lump sum benefits will also take effect on July 1, 2015. Among these would be an increase in the funeral grant from $1,750.00 to $2,500.00. The NIC has also accepted a proposal to allow persons to receive a pension on or after the age of 65 years, even if still in employment.” ~ Budget Statement 2015, Prime Minister and Minister for Finance Dr Kenny Anthony.
Clearly, the thinking behind this budget cycle is a profile of liberal hypocrisy with an infectious element of dementia.
All of these cheeky schemes as referenced in Why we don’t need cabinet doctors continually refine the art of bribing taxpayers with their own money.
Furthermore, poor fiscal performance continue to expose a bare cabinet and accompanying parliamentarians that exhibit chronic incompetence in revenue generation, who rely on fleecing more money from taxpayers, which will lead to increased costs that will have a negative impact on citizens’ lives and prolong hardship in the country.
This budget cycle continues to exposes the common arrogance of SLP governance that is nothing short of reckless and irresponsible in dealing with the vulnerability within the economy and providing a platform for sustainable growth.
Prime minister and minister for finance Dr Kenny Anthony can run but he cannot hide from playing out the common script of mishandling and mismanagement of the economy and to properly respond to national issues, most recently IMPACS and Lambirds.
The quasi delivery of reporting ratios, unattractive numbers and variances are equally that of a fantasy recovery that is hardly enough to convince a novice that the economy is showing signs of recovery. The performance of the finance minister is more comfortable as drama than the mastery of the details to get the country’s finances out of the recurrent nightmare it is in; kicking the can down the road for the next generation.
An immediate course correction is urgently needed to readjust fiscal policies that is committed to a swift reversal of the negative fiscal situation and moves towards stable and eventually declining debt ratios, thus preparing the economy for new investments to aid the recovery and begin a new growth cycle. This approach would be more beneficial to salvage lost credibility and embark on the journey to restore much needed confidence.
Issues that really matter remain exposed and unanswered, including whether there will be another attempt to cut public service wages and salaries, benefits and retirement income that consume roughly 47.5% of recurring revenue.
The premature end to debating the estimates has left a vacuum of distortion, strangulation of information, and even prejudice, as Saint Lucians were deprived from learning the details to outstanding settlements charged against the state.
Further, in an era of accountability and transparency, and well before the SLP government of Saint Lucia begins pointing to good fiscal management, albeit to what is a Chinese’s checkers budget, it would be interesting, with adequate reference from last year’s Kenny Anthony's kumbaya budget that the finance minister disclose the following:
• Government action plan to curb increases in consumer price index (CPI) that doubled from 1.5% in 2013 to 3.5% in 2014, causing considerable hardship in the price of food, building material, increase in rent, water and electricity and clothing;
• Interest payment increases from EC$145 million in 2014 to allocating EC$165 million in this fiscal year;
• A detail listing for projected principle repayment payments that make up EC$119.6 million:
• Why his government continue to fleece taxpayers with 15% VAT revenue, projected at EC$343.7 million and the recurring or capital expenditure allocated against this revenue:
• What are the financial instrument(s) that underpin the economy, and what strategies will government deploy to keep the IMF and rating institutions from taking control of the economy:
• Why the finance minister makes merry deficit reduction from 5.7% to 3.4% against the backdrop of persistent fiscal deficits and three years of stagnation (negative 1.7%, 2.3% and 2.7 % in 2014): and
• How government intends to distribute increases in development expenditures amounting to EC$414.2 million, to foster a diversified economic base in the short, medium and long term?
Good management requires both political and economic reform to keep the economy on an even keel within a budget cycle – although, most often described, as a strange mix of politics and fiscal policy. Indifferent to that, prime minister and minister for finance, Dr Kenny Anthony has rolled the dice to disadvantage political and economic reform that must go hand in hand to strengthen Saint Lucia’s credibility for future revenue forecasts.
When rational thinkers examine the solutions needed, the Chinese’s checkers budget cycle has done little to bolster budgetary improvements and once again seems a mental game to survive rather than deal with problems on hand.
Fiscal balance is a necessary condition for growth resumption, and Saint Lucia must look for new methods to finance its rising obligatory task and long neglected public good such as education, healthcare, infrastructure, and reform of the social system.
Policymakers must look towards measures that increase output of high quality, higher volumes of equitable tax revenue, and reduce the 15 percent VAT that squeezes taxpayers like lemons, while simultaneously working on an economic and monetary agenda to improve the business climate, lower personal and corporate taxes, and aggressively pursue long-term infrastructure investment, with the view to drive innovation and increase exports.
Diversifying the 41.8 percent unemployed youth labour force and the overall unemployment to 24.4 percent by means of entrepreneurship is most essential, through access to startups capital, alongside the business community. If “defining hope and destiny”, referencing the Governor General’s speech from the throne, is likely to succeed; accessibility to homeownership loans, human resource development and incentives for university graduates to work in the development of key priority sectors such as education, agriculture, healthcare, and national security can definitely create a more open and balance society.
Meanwhile, a resilient strategy that fosters long-term growth to intensify economic development and income generation for upcoming generations are critical priorities. The government needs to focus on strengthening foreign exchange and deposits, the loss of investment and the exodus of jobs, address fiscal misappropriation and corruption within an already thriving underground economy and a trivial political landscape, all of which contributes to permanent socio-economic damage, or risk losing the ability to finance the estimates of revenue and expenditure for financial year 2015/16 budgeted at $1.464 billion.
“Of this total budget, EC$984.2 million represents Recurrent Expenditure, which accounts for 72% of total expenditure, while Capital Expenditure is at $414.2 million, representing 28 % of total expenditure. Included in Recurrent Expenditure is Debt Principal Repayment of $119.6 million.
“Recurrent Revenue of $984.2 million comprising Tax Revenue of $900.7 million and Non-Tax Revenue of $83.5 million, representing 92 percent and 8 percent of total projected recurrent revenue respectively. Capital Revenue of $7.6 million comprising proceeds from sale of assets of $0.5 million and $7.1 million from two revolving funds established under Shelter Development Programme and PROUD. Grants of $125.99 million, which represents an 89% increase from the last year’s out turn. Government Instruments consisting of Bonds of $189.2 million and Treasury Bills of $65.9 million, for a total of $255.1million. Other Loans of $ 91.3 million.”
And how about: ”The current account surplus is at $53.7 million or 1.4 percent of GDP. However, an overall deficit of $227.2 million or 5.8 percent of GDP is projected.” ~ Prime minister and minister for finance Dr Kenny Anthony, Budget Statement 2015.
The twin disorder and the pattern of lack of trust and entitlement in this budget cycle, show signs of a special kind of political and fiscal hypocrisy that cannot hide from the reality, that dishonesty is a contagious disease. Once it gets started, it tends to spread like birds of a not true feather.
Saint Lucia deserves progressive change to navigate the scope and depth of political and economic reform to portray our democracy in positive radiance.
Melanius Alphonse is a management and development consultant. He is an advocate for community development, social justice, economic freedom and equality; the Lucian People’s Movement (LPM) www.lpmstlucia.com critic on youth initiative, infrastructure, economic and business development. He can be reached at malphonse@rogers.com
*************************
DISCLAIMER
This article was posted in its entirety as received by SKNVibes.com. This media house does not correct any spelling or grammatical error within press releases and commentaries. The views expressed therein are not necessarily those of SKNVibes.com, its sponsors or advertisers
St. Lucia News