A significant reduction in the volume of tax waivers and incentives allocated to the business community is one of the moves being made by Jamaica in order to reduce its spiraling budget deficit and to jumpstart the country’s ailing economy. Prime Minister Bruce Golding announced recently that his Cabinet has taken a decision to place a freeze on all new waivers and incentives pending the year end outcome of a study that will inform his administration of those concessions that ought to be retained and those that should be abolished.
The disclosure that the volume of waivers and concessions had pushed the country’s Gross Domestic Product down by 14 per cent has galvanized the Jamaican Prime Minister into action, apparently to the chagrin of sections of the local business community. However, Golding reportedly told the audience at a recent Agricultural and Industrial Show in Clarendon that the country cannot afford to give away revenue at a time when it is unable to fix farm roads and provide additional extension officers to aid farmers. The study, Golding told his audience, “will tell us where to grant waivers and where not to grant waivers,”
The granting of tax waivers and duty free concessions is commonly regarded in the Caribbean and elsewhere in the developing world as mechanisms to stimulate local private sector growth and attract foreign investment. However, critics of a policy that provide governments with the sole prerogative to grant such concessions have argued that they have, in many instances, come to represent tools with which to orchestrate political favors and to attract corruption-driven reciprocity from the beneficiaries of such concessions. While Jamaica has been compelled to disclose the staggering extent of the cost of concessions to the country’s GDP other countries in the Caribbean where the practice of granting such concessions is common do not usually disclose the cost of such waivers.
“If the issuing of waivers is not achieving the desired effects, then it is time to revisit it. The country is wrestling with a fiscal deficit of seven to eight per cent of GDP for this year. It will take us four years to get it down to zero. The waivers and incentives that we are granting amount to 14 percent of GDP. That cannot continue. That 14 percent of GDP must come down. We cannot continue to give away waivers and incentives, when we want to fix farm roads,” Golding said.
Jamaica, Golding said, has had to deal constantly with local distributors seeking waivers on imports. “We are under pressure to grant licenses to import products on the one hand, because some business people will say to you, we can’t get enough tomatoes, for example. The JAS, on the other hand, will say to you, don’t ‘leggo’ no licences or waivers, and (agriculture) Minister Chris Tufton has not been unwilling to say to some of the most powerful, no, you not getting any waiver,” Golding said.
The Jamaican Prime Minister’s tough stance on waivers has been accompanied by a simultaneous call to the private sector to become involved in agriculture. Asserting that agriculture was “the new frontier,” Golding urged local businessmen to “look at investing more in agriculture, while looking at agriculture in a broad framework. Interest rates have been coming down from 18 per cent and are now at 8.7 per cent and we not finished yet. If you think big, we can make agriculture grow and if agriculture grows, Jamaica grows as well,” Golding said.
