Remember when the worst VAT could do was make you drunk & disorderly?

Assuming they are correct that have divined the public need to be better informed about the VAT in advance of its scheduled adoption on September 1, I dare to suggest the first lesson should explain what had been expected from the current tax system, if and why it fell out of favor, and why—as unpersuasive government agents tell us—the still undeclared changes are—“inevitable.”
I further suggest the all-encompassing response might be that the soon to be overhauled current system has failed to deliver into the kitties of successive governments sufficient funds to pay for their impossible election-time promises: roadways comparable to the streets of San Francisco and Miami, a police department with crime detection systems the equal of what is portrayed on NCIS, free hospital services, free education, free computers for every student, free school transportation and Third World work for First World wages!
With our three industries dead, dying and deserted, successive administrations had taken what to them was the only way to service mounting public debt: loans and more loans. Alas, with the local tax base admittedly shrinking ever smaller and our banana and tourism industries, like their poorer sister manufacturing, costing more than they are worth, larger and larger bank loans were required to pay for such vote-catching innovations as STEP, not to mention an ever-expanding, increasingly expensive out of control public service. Never mind our delusionary speeches and the other costumed rituals associated with our annual Independence celebrations, hardly surprising was the intervention of the IMF, WTO, the World Bank and those other foreign institutions that, one way or another, shape our reality.
The not-so-subtle threats from the mentioned agencies reminded of the largely ignored writings on the wall during our pre-independence years—from colonial times through associated statehood. In effect: Either you beggars start cutting your short-sleeves to suit your cloth or we’ll quit being your unappreciated security blanket! There had also been the repeated warnings that preferential treatment for our bananas could not be eternal, that it was by WTO measure not only unfair but also downright illegal. Still we carried on as if hell-bent on stuffing the goose that laid our green gold!
No surprise that finally our seldom pro-active leaders had to be told how to improve their fiscal circumstances, as evinced in Volume One of the Tax Reform and Administration Commission’s New Approaches to Taxation in the ECCU: “Fiscal policy in the Eastern Caribbean Currency Union should emphasize fiscal discipline and prudence, directed to supporting the developmental and growth targets by generating surpluses for investment and emergencies.”
Yes, dear reader, you can’t help wondering why our leaders of government, with the nation’s “best brains” at their beck and call, needed to be specially advised on fiscal policy designed to achieve “the revenue, resource, and administrative efficiencies and effectiveness that derive from economies of scale and improve the region’s readiness for participation in the new international trading arrangements”—let alone “government’s role as the major facilitator in economic development.”
Then there is this, also from the earlier cited TRAC document, dated July 2004, yes, almost a decade ago: “The role of OECS governments in the economic transformation is central. In support of this goal they should conceive of themselves as institutional innovators, finding new organizational and management structures to develop the potential for new economic activities. Governments will be required to take the initiative, provide the initial thrust of innovation, supply some of the start-up finance, and assist with the mobilization of the different partners required for developing projects. However, governments must ensure that adequate due diligence is undertaken on potential investors and, whenever appropriate should seek assistance from regional and international institutions.”
Now, dear reader, you may well ask: how innovative have been successive governments of this fair isle of ours? How successful at discovering “new organizational and management structures to develop the potential for new economic activities?” What new economic activities have we seen in Saint Lucia in, say, the last three decades?
Consider this: “I have already referred to the effect of the Gulf war on our economy. Since the last quarter of 1988, there have been signs of a recession in all the major industrialized countries except Germany and Japan and now, with reunification, even Germany is under stress. These signs were officially accepted in the last quarter of 1990 as the onset of a recession. Unemployment in the developed countries rose and is rising, output has declined, trade has contracted and the flow of aid from the industrialized countries to the developing world has been reduced to a mere trickle.
“Many of the industrialized countries have been forced to take stringent measures to restore balance to the fiscal and international trade accounts, to stimulate investment and in general to rejuvenate their economies. One of the measures commonly used to curb inflation is the rate of interest, and in general this remains high. The lax lending policies pursued in the past by major banks, both domestic and international, and in particular the Savings & Loans associations of the USA, have undermined public confidence in the banking system. This in turn has impacted adversely upon countries such as Saint Lucia—which depend so heavily upon outside private capital for our development.                 The countries seeking investment are many, and with physical and natural resources many times in excess of what Saint Lucia has, are more likely to attract scarce investment and capital.”
All of that to drive home the following: “With as many as 3,000 young people each year entering the work force, Saint Lucia needs a private sector investment of some $75 million annually to accommodate them. And with a national savings ratio of not more than 4%, it is obvious that most of this investment capital must come from outside. To compete for this capital, Saint Lucia must offer a highly trained, highly productive and highly motivated work force or we will be trampled in the crush, attracting only the low pay, low tech, footloose industries with no stake in and no loyalty to our country or its workforce.”
What a time to have to acknowledge the perspicacity of John Compton, from whose 1991 Budget the preceding was lifted.  There is also this, from his Budget of June 1992: “In the next ten or so years, at the present rate of population increase, Saint Lucia’s economy must be developed and organized to support a population of approximately 175,000.” He added that between 1992 and 1996 the local economy would need to grow at “an average of 6% per annum to provide an extra 3000 jobs each year for those now between 15 and 19 . . . We cannot get out of the system more than we put in. Therefore our wage and salary demands, whether made against the government, industry or business, must be realistic and geared to the ability to meet these demands. The evidence of those who failed to heed this pragmatic demand is all around us. All of our Caricom partners have fallen into the cold embrace of the IMF, with thousands of public workers dismissed and the salaries of others either cut or frozen in the process of restructuring at the behest of the IMF. Hundreds of businesses, large and small, have retrenched thousands of workers, and this is not confined to the Caribbean. There are similar manifestations in the countries to whose governments we traditionally looked for aid.”
In 1992, by the way, recurrent expenditure was $271,479,259 and capital expenditure $219,275,695. Public sector salaries and fixed wages amounted to $123.8 million. In 1995 public servants totaled to 5,345; in 1999 it had jumped to 7,431.                 In 2011, the cost of employing almost 12,000 public servants was $422 million.                        In 1996, while presenting his own $582,119,931 Budget, the new prime minister Vaughan Lewis expressed further concern about Saint Lucia’s work force with its inextricable links to the island’s education system.                 “There can be no doubt,” said Lewis, “that the state of a country’s economy is a reflection of the quality of its labor force.”
He noted that in East Asia “growth has reduced poverty through rising employment, increased labor productivity and higher wages.”                 Meanwhile, in Saint Lucia “a dispassionate look would reveal the labor force as bottom heavy, retail oriented, generally unskilled, with limited work ethic.”
He lamented that the local work force was too dependent on others for the creation of employment opportunities. And since the labor force that would take Saint Lucia comfortably into the 21st Century and beyond would have to be “highly skilled, adaptable, productive, creative and entrepreneurial,” the question to be answered was “how do we make the quantum leap?”
So again, I ask: how much has changed since John Compton’s 1991 Budget address? Then again, lest I digress too far, let us return to the crucial advice given our leaders via the earlier mentioned TRAC document in 2004, in particular that before investing public funds in foreign entrepreneur enterprises, they should always ensure “adequate due diligence is undertaken.” Even when our governments have placed millions at the disposal of foreign entrepreneurs, officials have failed to keep track of how they spend our money, if only to avoid disastrous repetitions. Did someone say Rochamel? Black Bay? Grynberg? NCA?
One may at this point well ask: Have we ever been a country remotely concerned with checks and balances and accountability? Is there not always a high price to pay for reckless spending of public funds? Has any government of Saint Lucia ever accounted at Budget time for the previous year’s Budget? Is it not imperative that public accounts be up to date? When last was a meeting convened of the Public Accounts Committee?
To quote from Kenny Anthony’s White Paper on Public Sector Reform: “Weaknesses in the accountability systems and processes have only served to facilitate a culture of poor service levels to customs; inertia and slow response to situations; insufficient attention to the delivery of output; irresponsibility; wastage or abuse of government’s resources.”                 Additionally, that “lack of accountability can easily lead to corruption among public officers or such other practices that are unacceptable!”
I recall several years ago when, based on an apparent throw away line by a campaigning prime minister John Compton about the deplorable state of the nation’s roads, I had set out to investigate what happened to an allocation of some $45 million to the Ministry of Communications and Works for road rehabilitation. Suffice it to say the works minister had little choice but to resign after several embarrassing breaches had been brought to light. Some 30 years later I continue to marvel at how easy it had been to blow millions of taxpayer dollars with next to nothing to show for it.
Rather than angrily demanding accountability, the prime minister—with tears streaming down his face—famously informed the nation via TV that the minister had been interrogated by the nation’s best cross-examiner (a lawyer who also just happened to be their party chairman!) and found to be innocent of any wrongdoing.                 Said the barely audible, emotional prime minister choking on his words, my several articles had rendered his Cabinet colleague untrustworthy in the public eye and so, out of his great love for Saint Lucia and his immeasurable respect for his fellow government ministers, he had chosen to resign. Of course, there was no word about the further millions to be borrowed to pay for the road repairs. Needless to say, the minister’s resignation ended the matter.
Then there was the famous inquiry into the so-called UN scandal that revealed one million dollars had without the knowledge of parliament, let alone its approval, been paid to a public servant masquerading as a UN consultant. Asked to explain the obvious irregularity, the then prime minister simply said—unchallenged!—that he had been duped. Again, that ended the matter. There was never a demand for the illicitly acquired money’s return.
Which brings us to the matter of unchecked corruption and its impact on the economies of nations especially deprived, such as Saint Lucia. This is a matter that has always been of great concern both to lending institutions and donor agencies. As if already it were not established fact, the Washington-based Management Systems International reminds us via a report entitled Corruption and Poverty that “popular belief suggests corruption and poverty are closely related in developing countries.”
Moreover, that “corruption in the public sector is often viewed as exacerbating conditions of poverty in countries already struggling with the strains of economic growth and democratic transition.” (Not that we’re likely to hear Caribbean governments acknowledging this fact as a major contributor to our fiscal problems!) In any case, this is how the World Bank’s World Development Report for 2000-01: Attacking Poverty summarized current thinking on the corruption-poverty linkage:
“The burden of petty corruption falls disproportionately on poor people . . . For those without money and connections, petty corruption in public health or police services can have debilitating consequences. Corruption affects the lives of poor people through many other channels as well. It biases government spending away from socially valuable goods, such as education. It diverts public resources from infrastructure investments that could benefit poor people, such as health clinics, and tends to increase public spending on capital-intensive investments that offer more opportunities for kickbacks. It lowers the quality of infrastructure, since kickbacks are more lucrative on equipment purchases. Corruption also undermines public service delivery.”
USAID, for its own part, describes the various forms that corruption can assume: It encompasses unilateral abuses by government officials such as embezzlement and nepotism [as were at the center of our famous NCA scandal, though no one was held accountable!] as well as abuses linking public and private sectors such as influence peddling and fraud. Corruption arises in both political and bureaucratic offices and can be petty or grand, organized or disorganized.
Just last week, a victim of this country’s rarest affliction—a social conscience— inadvertently reminded me that any deviation from the rules governing a system is effectively a corruption of that system, and always places heavy burdens on the affected populace—especially on the more deprived. He recalled a recent visit by some top tier British lawyers, one of whom had inquired about corruption in Saint Lucia.
My friend’s response was: “Oh, we’ve had more than our fair share in government.” By which he referred to the previous government, of course.
“And what about the judiciary?”
“Oh, no,” my friend assured him. “No corruption there.”
“And what would you call keeping a citizen in prison for two years without a trial?” asked the sly visitor, obviously more informed than he had pretended. “Wouldn’t you say that’s corruption?”
My friend had little choice but to nod affirmatively. Clearly he had forgotten the many forms that corruption can take. I reminded him of the man accused of the rape-murder of 13-year-old Verlinda Joseph and the sorry fact that he had been in prison for seven years without a hearing. (We will return to that at another time, count on it.) For now, let us return to the VAT. As its soon to be announced details will prove, the VAT is an efficient way of squeezing more blood out of stone. Some prefer to say it is more “equitable,” which is a cute way of saying people previously considered too poor to pay taxes will be required to cough up like the rest of us. Never mind the propaganda, de malaway must also shop for goods not included in the protected basket.
This was how the St. Kitts-Nevis prime minister justified the more “equitable” tax system to his countrymen two years ago: “There are too many indirect taxes at different rates that make the system complex and a VAT will replace several taxes. The current tax system
promotes cascading of taxes or double taxation on goods
. . . the VAT will streamline the tax system by replacing the consumption tax, hotel and restaurant tax, cable-TV tax, traders tax, vehicle rental levy, export and rum duty, telecommunications levy and parcel tax.”
Moreover: “It is highly anticipated that this measure will improve the efficiency in the tax system, add some degree of equality and fairness and also provide fiscal stability as an alternative source of revenue—away from its heavy dependence on taxes on international trade.” Not a word about official corruption and its impact on the cost of living, not one word about the unceasing reckless spending of public funds, nepotism, investments without due diligence, abuses of office—and the lack of public accountability that permits and sustains such corruption at ever rising cost to deprived environments such as ours.
If as the St Kitts prime minister and his OECS colleagues expect the VAT to have salutary impact on the government’s finances, if the official expectation is that it will deliver “surpluses for investment and emergencies,” then I fear we are yet again spinning tops in mud. For how can it be otherwise when the already discombobulating national debt is about to be further increased by another billion-dollar budget, when despite the worst of economic times the government—contrary to its prescribed role of “institutional innovator” and developer of ways by which to develop “the potential of new economic activities”—has reportedly decided on pay increases for the nation’s most pampered, least productive workers, and for itself, while many private sector operations are on the brink of disaster and their employees know not for how much longer they can hold on to their jobs?
Speaking of the expected surpluses from the VAT, to be used by the government for investment and emergencies, I am reminded of John Compton’s expressed hopes upon his introduction of the Common External Tariff that sought to “place a protective ring around the [Caricom] area so as to encourage industrialization and increase intra-regional trade.” Said Compton, the CET was “a welcome development to which Saint Lucia has shown her support by the passage of the necessary legislation and the revision of the consumption taxes to ensure that these measures are revenue neutral and the impact on prices minimal.” More proof of what the road to hell is paved with.
Obviously the IMF, the World Bank and the other institutions that in 2000 had counted on appropriate governmental adjustments in preparation for the implementation of the VAT golden goose had
not bargained for the dragon’s teeth now confronting us. So now,
will it be back to the drawing board? Or is it to be life by the rules of the jungle—where only the fittest survive?

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