Economic Devastation

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Opinion Pieces

Sunday, 16 February 2014 04:00

Kwame Nkosi Romeo

Brian Stevensons' insight that "The opposite of poor is not wealth, the opposite of poor is justice " couldn't be more descriptive of how the previous Antigua Labour Party (ALP) and the present United Progressive Party (UPP) administrations stole democracy from the good people of Antigua and Barbuda.

The preceding was actually corroborated in Oxfam report 'Owning Development: Taxation to fight poverty' and Tax Justice Network (TJN) ' Failed Tax Policy ' collective view that International Monetary Fund (IMF) policy of levying taxes on consumption rather than personal income results in uncontrollable greed and "potentially very negative results on the strength of governance and the quality of institutions" So Oxfam outlined a four point solution to counter such under-development and greed [Oxfam Owning Development page 8 (1) ]

This uncontrollable greed was evident with Corporate Income Tax (CIT) and former Antigua Labour Party (ALP) inability to collect such taxes. Inevitably the poor suffers most from the economic devastation, selfishness and collective greed exploits. For instance ALP Prime Minister Lester Bird reflection five years before losing the 2004 election to the UPP underlines these accountability concerns of Corporate Income Tax [CIT], and the tiny amount of only 0.5% collected in 1999: '" Mr. Bird said that in 1999 only $1.5 million in taxes was paid by more than 2,000 companies." Tax revenue in 2003 as a percent of GDP was 17.9% of which 3.7% were direct taxes and 14.2% indirect taxes. Hotel accommodation tax revenue represented only 1.0% of GDP.

 
Once again pessimism reigned, earlier percent of total FDI re-investment confirm these concerns: 1990 - 1999 17.1 percent and 9.3 percent 2000 - 2003 Antigua & Barbuda had some of the lowest figures in the OECS leading up to 2004.( Foreign Direct Investment and Employment in the English and Dutch - Speaking Caribbean - Dr. Roland Craigwell )

Consequently, UPP Minister of Finance Dr. Errol Cort's 2005 Budget presentation declared government payroll represented "74 percent of recurrent revenue" and with only 26 percent of recurrent revenue remaining after provision for payroll "Public infrastructure, essential service and social program suffered"

Despite clear historical empirical evidence, ALP Opposition Leader Gaston Browne and Antigua Employer Federation (AEF) curiously advocate that abolishing PIT 'stimulates business in the island..through increase consumer spending'. But this is not true! The genesis of ultimate poverty was due to the elimination PIT! How could that be? Under the former ALP government the minimum wage remained constant for more than 23 years, business stimulation was non-existent, agriculture and tourism struggled, import records confirm there was a lack of buoyancy within the service sector. In January 2008 the minimum wage was increased by 25% to EC$7.50 by the UPP, still not minimum wage adequate.

Additionally, the Inter-.American Development Bank (IDB) reiterate income tax should be the pillars of any society for improving income distribution or raising public funds; "Income tax should be progressive, either directly improving income distribution, or raising funds for public spending that would redistributive and ultimately help the poor" ( Inter-American Development Bank - More than Revenue: Taxation as a Development Tool)

However since Browne is bent on dismissing the science of economic for sounding good politics, his approach to economic recovery  is theoretically flawed. Why?  Abolishing PIT from 1977 up until it's reintroduction in April 2005 economic activity remained minimal. In reality, import records indicate the level of economic activity was insignificant up until March 24th 2004, domestically the agriculture sector was non-productive. From 1983 to 2001 Agriculture declined from 6.1 percent to 3.9, manufacturing 5.0 to 2.3 percent and services 79.6 to 74.6 percent. Another example is the U.S.A., export trade figures to Antigua and Barbuda from 1992-2004.
 
Nonetheless, both political parties share similar views relating to the tax system, ALP for eliminating PIT and taxing consumption, UPP for reducing PIT, and incrasing the Antigua & Barbuda Service Tax (ABST). Generally, both agree it would not be in the interest of business to advocate a minimum wage increase. Yet, neither administration created the right mix of fair compensation with macro economics policy that produce a thriving economy for locals to live beyond hand-to-mouth jobs.

 
IGNORING THE POOR'S VULNERABILITY

In April 2011 Minister of Labour Dr. Errol Cort stressed  'the country cannot afford an increase at this time given the economic downturn' (Daily Observer, April 29, 2011).

Two years later in April 2013, another review, and the propose setting up of a "tripartite group" to review the minimum wage. However, Dr. Cort's remark being 'cognizant of the impact on the business sector' left many lower wage workers more pessimistic.  Since during Antigua & Barbuda season of plenty there was not much to celebrate, government overlooked the International Labour Organisation [ILO]  directive Session 11:"As countries grow and develop, labour markets,employment and livelihoods change. The way they change affects the speed and extent of poverty alleviation, the inclusiveness of growth and its sustainability"
 
This inclusiveness of growth benefited the business sector, CIT was reduced more than three times, the basket of essentials decreased adding more poverty to poor and working people! Now Minister of Labour Dr. Cort's Tax Reform Task Force (TRTF) recommends increasing ABST!

Obviously Dr. Cort's suggestion to increase the ABST will be compensation for CIT revenue losses! At any cost the business sectors wins, the poor loses. Furthermore, that's one reason MP Gaston Browne should dismiss ALPs idea of a tax amnesty for businesses. Enough is too much! Should MP Browne implement this policy, he would have further driven the nail of poverty into the hearts of our people. But the mindset of Browne and most Antiguans and Barbudans politicians is to make outsiders rich while keeping locals economically poor and socially dependent. Of course, MP Browne like others before him speak eloquently but outcomes of widespread poverty remains the same.


Correspondingly the IMF indicates that MP Browne is on the wrong economic track. According to the IMF Antigua & Barbuda: Customs' Revenue Losses From Concessions, 1991-2003 (In percent of GDP) 5.1% 1991-93, and 9.2% 2001-03. Also, Corporate Income Tax (CIT) in percent of GDP was abysmal 2.1% 1990-1994, and 2.5% 1999-2003. These are contributing factors that pushed Antigua & Barbuda near the precipice of default and economic disaster in 2003. Whereas removal of all these concession would have resulted in an overall 10.4% GDP growth! [IMF..] 
 
'Clandestinely, elite businesses responsible for these major revenue losses pay-off government ministers instead of depositing their payments into the Government Treasury. Notable businessman Aziz Hadeed handed over several 'envelope of happiness' totaling EC$20 million to MP Asot Michael: "I guess we have given around EC$15 - EC$20 million (Us$5.5 - US$7.5m) to Adot Michael" (Caribarena -Asot Michael Extortion of Aziz Hadeed and Family Tuesday November 26, 2013)

On the other hand, Dr. Cort legitimized Devcon International Corporation non-payment of taxes by offering a tax credit of US$7.5 million for the $5.1 million Devcon owed the government. In specialized covert language the government was in fact paying the government, all to Devcon's benefit, since the $5.1 million was recognized as a savings to Devcon: "During 2005, the Corporation repatriated $20.4 million of previously un-remitted earnings from Antigua, of which $5.1 million was withheld for Antiguan withholding taxes, which were deemed paid by utilization of a portion of the $7.5 million tax credit received as part of an agreement with the Antiguan Government."

Simultaneously, Dr. Cort ignored the economic consequences of previous CIT reductions, increasing oil prices, increasing food prices by decreasing the basket of essentials. These cuts deeply affect poor and working people, therefore, I agree with former Minister of Finance Molwyn Joseph assessment "....the government should not be taxing the poorest in the society," (Tax Proposal Wicked and Diabolical -Caribarena Wednesday 27, 2013)
 
Rather than increasing the ABST, Government should endeavor to look for others escaping the tax net, particularly the off-shore American University of Antigua (AUA). U.S. Senator Richard Durbin alleges Ross and American University of the Caribbean, owned by Devry are part of a small number of Caribbean school that received more than US$450 million in U.S. Department of Education Title 1V money. If confirmed, funds are liable to be taxed!
 
Earlier last year Opposition Leader Gaston Browne suggest taxing offshore companies which is a more improved reasoning for future growth "....offshore companies with an estimated three billion US dollars in assets should be made to invest an average five per cent of their deposits in Antigua and Barbuda."  (Dick Durbin US SENATOR FOR ILLINOIS ASSISTANT MAJORITY LEADER)


NO POVERTY ALLEVIATION
 
Growth was obvious under the UPP, but neither poverty alleviation nor inclusiveness of growth were realized. For instance FDI and strong growth were recorded from 2005 to 2007, pellucidly in the tourism analysis of Stock Taking RIO+2010 "........in 2007 estimated to account for 40 % of all employment, 85 % of foreign exchange earnings, 52 % of total investment and 70 % of GDP (directly and indirectly). Total earnings, and tourist arrivals saw a strong growth in 2007 (up 26.5% from 2006)" Also, UNCTADSTATS recorded FDI inflow: US$238 million in 2005, USD$361 million in 2006 and US$341 million in 2007.
 
During Dr. Cort tenure as Minister of Finance 2004-2009 there was no concern about people's development only elite business interest. And indiscriminately using PIT, not necessarily for it's underlying purpose of livelihood changes, or for public spending to help the poor, but to offset businesses tax exemptions and building a Stadium in his community costing exorbitant sums of money. While mostly white foreigners and middle easterners get richer, the poor Antiguan and Barbudan blacks are consumed by the business of politics.

IMF Completes First Post-Program Monitoring for Antigua Antigua St. John's - On April 21, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the first Post Program Monitoring discu... read more

Today, the  reality of a minimum wage increase is far-fetched, workers anguish is the only increase as inflation rises, the GDP contracts!  From 2008 Antigua & Barbuda GDP contracted by 25%, three years of negative growth from 2009-2011. The outcome was predictable inflation was -0.55 in  2009. Yet, government mandated CIT tax and basket of essential reductions only benefited the business sector. Earlier indiscretion of  tax exemptions and selling of state assets for pennies are now a costly payback.These pennies have a costs usually accompanied by escalating crime and poverty. Sufficient has not been done, more needs to be done, perhaps lowering the ABST, while at the same time  increasing the basket of essentials. What next?
 
The detrimental policy of the Government of Antigua is traditional, created from pre-colonial times, the mindset towards empowerment remains the same, uplift the few, pauperize the majority. Let us ask ourselves some serious questions: Who benefited from the privatization of the Royal Antiguan Hotel, handing over Admirals Inn to Peter Deeth, liberalizing APUA telephone, privatizing APUA  Water, giving away Crown Lands, and IHI Grand Corruption! These are several of the many reasons why Antigua & Barbuda is in such a dreadful dilemma.

Also, will PIT  be  cancelled , ABST lowered, minimum wage and basket of essentials increase, locals empowered, procurement be more equitable, national land  and food policy realized? These are all relevant issues, instead of promoting 'mockumay' politics, debate the issues responsible for disempowering your rights! So which way Antigua & Barbuda? Actually, changes will only come when it's too expensive to resist!

"That men do not learn very much from the lessons of history is the most important of all the lessons that History has to teach"  -Aldous Huxley

Kwame Nkosi Romeo


Reporting by Caribarena news, publishing by Ofer Shaked.

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