Will ‘anti-poor’ VAT also prove anti-business?

Tourism, manufacturing, commerce: How will these hurting sectors be affected by the implementation of VAT at this particular time?

Finally Saint Lucia has an official Labor Code. And if it might be argued that its arrival on our statute books coincides with the worst of times, when the majority of workers are unemployed or in imminent danger of losing their jobs, still it cannot be said this law was hurriedly enacted, as had been the case with so many that preceded it. For more than a decade there had been heated debate about the Code, with largely uninformed workers clamoring for its implementation while nervous employers complained about several clauses that seemed to place them at a disadvantage.
Before long the doubtless well-intentioned Code had become a counterproductive them-against-us tug-of-war. But just days before the 2006 general elections it received parliamentary approval, a fact that curiously did not assist Labour at the polls. At any rate, devastated supporters took comfort from the fact that before it was relegated to the opposition benches their party had done well by the nation’s workers. They soon had reason to think again: after all the wrangling, after all the good, the bad and the ugly related arguments, what a bummer, then, to discover Saint Lucia still did not have a Labor Code after all, that for undisclosed reasons the Kenny Anthony government had failed in the last analysis to do what was necessary to make the parliament-approved Code the law of the land.
No surprise that the Stephenson King administration proved in no hurry to make up for the unbelievable lapse. While in opposition the United Workers Party had campaigned vigorously against the Labor Code as initially proposed by the Anthony government. But all of that is now water under the bridge. I bring it up only to remind readers that, whether or not inadvertently, Saint Lucians had debated for years the pros and cons of the all-important Code in advance of its enactment. If only the same could be said about the far, far more ominous implementation of VAT in our present economic circumstances.
Oh, I know, most us have heard or read in our newspapers the VAT promotions whose only apparent purpose is to let consumers know what is about to befall them, like it or not. Proffered advice to the private sector on how to fill out the related forms is not nearly the same as debating the pros and cons of the proposition. The few meetings with private sector groups hardly touched on the nitty-gritty: how VAT will impact an already reeling private sector, how VAT will affect commodity prices and already dismal sales, how it will affect such incentives as local manufacturers and other sectors need if they are to have a fighting chance at survival in these unprecedented times.
Recently I chanced upon a discussion on NTN that featured VAT office personnel and a businessman-moderator not necessarily best known for openly confronting discomfiting government decisions. I could hardly believe my ears when in answer to one of his full-toss questions a panelist said: “Well, we have it on good authority that the best time to implement VAT is when the economy is ticking over as it is now.”
Surely, I thought, the moderator will in the public interest ask the panelist to explain “ticking over.” Alas, no such luck.
No surprise that private sector representatives have been reluctant to express their VAT-related concerns. As had been the case with the Labor Code, VAT has been made into another vexing them-versus-us proposition. Cyclopean political activists have treated those bold enough to speak up on this matter of obvious public interest as the enemy, meaning the enemy of the government.
I remember only too well Paula Calderon’s last TV appearance with another member of the local manufacturers’ association, curiously now attached to the prime minister’s office.  It didn’t take long before Calderon found herself under siege. Incredibly, one irate caller actually accused her of “complaining only because your business is not doing well. You were among those who opposed the Labor Code.”
As Panasonic CEO Joe Taylor revealed during a recent interview with CNN’s Piers Morgan, ten years ago America attracted some 40 percent of all foreign-direct investment. Now it attracts just 17 percent. The U.S. had become less attractive to investors, said Taylor, “among other things because of its corporate-tax rate, at 35 percent the world’s highest at this time.”
In the late 80s and 90s, the CEO recalled, Panasonic had 24 manufacturing sites in North America. That has been reduced by 80 percent as a result of competition around the world. “Simply put,” said Taylor, “the U.S. no longer attracts foreign-direct investment.”
“Business is not the enemy,” he went on. “The people need work. Business, large, small and medium provides the jobs. Politicians don’t.” When businesses in the name of survival are forced to move to friendlier environments, said Taylor, “so jobs on the home front disappear. Unemployment figures rise and well, we’ve seen the result.”
Now let us consider Jack Welch’s answer to what’s stifling job creation in America today. On CNBC last Wednesday, the General Electric CEO blamed an array of government agencies for “cooking up more and more nitpicking rules that have little or no benefit but hamper business owners and suppress job creation.”
Several surveyed business owners later added their concerns to Welch’s list. Like Welch, they see increasing government regulation as a hindrance and are worried about “the fiscal cliff of what Congress will or will not do about it.”
So, to return to home and the imminent implementation of VAT: The government has been upfront in acknowledging the nature of the tax-collection system. The sane might well ask: “Why force on an already hurting population a law that has been described as “oppressive and anti-poor?”
This government, like its predecessor, has a three-word answer: “VAT is inevitable.” But is it really? What exactly does “inevitable” mean, anyway? By my dictionary: Something inevitable is unavoidable, cannot be evaded or escaped. What is it that makes VAT unavoidable and inescapable?
Perhaps the more useful question might be: If VAT is inevitable, then what is it that makes it so? Again the government has offered an answer, sort of. The current system of tax collection does not yield nearly enough to pay its bills.
So what’s a broke and deeply indebted government to do?
Certainly not what the rest of us do when we discover ourselves with expenses far in excess of our earnings: cut back on our spending. But then we the people don’t have unrestricted access to the jugular of the golden goose known as the taxpayer. The government does.
Alas, even golden geese have their limits, evinced by the situation in the United States, to say nothing of Greece, Spain, Portugal, Italy and of course our own region. Inevitably, total collapse awaits countries whose governments see taxpayers as their only way out of debt while refusing for political considerations to curtail no-returns public spending. As wonderful as is the idea of a free lunch for many, it remains irrevocably true that there really is no such thing. Stimulus packages are intended, though never guaranteed, to generate returns. Stimulus packages are not the same as borrowed-money handouts to the alleged most vulnerable.
While VAT personnel claim to be accessible to business people in need of information, it turns out that they are themselves in even greater need of advice. Some of the questions most important to business people remain unanswered. Few know for certain which taxes will be discarded upon the arrival of VAT, which retained or introduced. Meanwhile, corporate tax equals that currently crippling foreign-direct investment in America, while individual tax varies. Then there are the other several taxes to be considered, including NIC, PAYE and import duties. By all I’ve heard it’s bye-bye to government concessions. Will it also be bye-bye to hard-pressed local manufacturers and foreign investors on the lookout for friendly business environments?
This week the commerce minister was on TV acknowledging the rising cost of imported food and the imminent possibility of further price increases inspired by drought in the U.S. Her advice to consumers: buy fewer imported food items at the supermarket (doubtless Michael Chastanet will relish that!) and more of the home- grow variety.  Obviously Ms Hippolyte has recently been too busy to go shopping for food. Otherwise, she would know local sweet potatoes are appreciably more expensive than those brought in from outside!
As I write, someone from the Chamber of Commerce is on my radio promoting a weekend workshop and inviting the en-masse participation of the public. The workshop promises answers to all VAT-related questions—alas, at a price.
Still more proof that there really is no such thing as a free lunch!

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