Friday, 1 July 2011
I must again thank the Honourable Minister for the Overseas Territories, Mr. Bellingham for his letter of June 10th, 2011 in which he responded to a letter from the Leader of the Opposition, the Honourable Evans McNiel Rogers regarding the Interim Stabilization Levy. In the final paragraph of that letter he said: “I hope that you will be pleased to hear that the British Government has offered technical assistance to the Government of Anguilla to follow up on the recommendations in the recent Ghandi/Wiggins report.” That particular statement from the Minister’s letter was the first time that we in the Opposition Party had any information regarding the existence of such a report being presented to the Government of Anguilla. As a consequence of that information, we inquired diligently until we were able to obtain a copy of the final version of that report and I dare say not through the normal channels. I have read the report in its entirety and we have put together a team within our party organization to review it even more comprehensively.
As a responsible Opposition Party, that demitted office just over sixteen months ago, we understand the importance of keeping a certain level of confidentiality in the handling of reports by independent consultants as well as internally generated reports by technical officers within the various ministries. Their recommendations do not necessarily reflect the views of the Government of the day and may not eventually receive their support or approval. In this sense it is not my intention to discuss the details of the reports, particularly the recommendations, lest they be unfairly construed as the views of the Government. I will, however, criticize the Government for its “selective transparency” approach to dealing with the entire issue of taxation and its ongoing attempts to remove itself from taking responsibility for the process. This fact has been most obvious in every single comment the Chief Minister has made on this issue since ascending to office.
I was most please to read the opening paragraph of the Report that describes the background of the situation in which the consultancy was conducted. It is instructive so I must quote it as follows:
“Anguilla, in common with the other islands in the Caribbean, has been seriously affected by the fall-out from the global recession which began in 2008. The economy of Anguilla is fundamentally dependent on tourism and investment mainly originating in the USA and Canada. The reduction in disposable incomes in these countries led to a sharp reduction in both tourism and investment, resulting in a contraction in the Anguillian economy in 2009 of the order of 20 percent. This in turn meant that revenue fell far short of the budgeted amount. Although the then government took action to contain expenditure well below the budgeted amount, particularly through reducing civil service pay and numbers employed, the resulting overall deficit caused the exhaustion of Anguilla’s fiscal reserves and significant recourse to short term bank borrowing.”
This statement from the report accurately describes why Anguilla has been facing challenges since 2008. It is not, as the Chief Minister and his colleagues have been promulgating during their campaign and after ascending to Office, the fault of the last Government. It has been a systemic reaction to the global recession. The point that I must make here quite forcefully is that if the Government continues to make this flawed diagnosis of the situation in Anguilla it will continue to prescribe the wrong solutions and adopt the wrong approaches to handling it. This is clearly seen from the time spent on apportioning blame for our plight while holding up the process of responding to the important issues related to the budget. This stubbornness to accept the reality of the situation and to follow through on its own commitments in a timely fashion led to considerable delay in reaching agreement on a budget for 2011.
The report also reinforces the points of evidence raised by the Leader of the Opposition in his recent national address regarding the fact that the timetable for balancing the budget is Chief Minister’s own timetable. The report states:
“…. the commitment made by the Hon. Hubert Hughes, Anguilla’s Chief Minister and Minister of Finance, Economic Development, Investment, Commerce and Tourism to the Hon. Henry Bellingham in his letter of 21 June 2010 is also worthy of note. In that letter, the Chief Minister said: ‘Let me reiterate the fact that my government has an unwavering commitment to restoring the current budget to a balanced position by the end of 2011 and an overall budget by 2013”
I have a number of criticisms of the assumptions made by the consultants in their report regarding their recommendations. But as I said earlier I believe it may create a wrong impression and perhaps cause unnecessary alarms within the community. The Government during its election campaign would have made a number of unfair statements about the motives of the past government based on a number of recommendations we received from our technical officers. However, they have achieved the objective of ascending to office and should now understand the significance of putting in place a more appropriate tax regime to fit our circumstances. We in the United Front will not adopt a similar approach and oppose simply for the purpose of enhancing our political fortunes. On the contrary, we fully accept as we did in the past the critical importance of taxation to sustainable development but will not support tax measures that are inherently unfair to a significant number of taxpayers in this community. In this context, our position on the Interim Stabilization Levy is clear. We consider it a bad tax.
Within the body of the report there are also a number of recommendations that we oppose for different reasons. However, it would be patently unfair to discuss them through this medium given the fact that Government has not given its approval for any of them. And furthermore I expect that the Minister of Finance will direct his Ministry to prepare a critical response to the report. Such a response, I expect, would then form the basis for discussions in Executive Council on the substantive recommendations. This is normal procedure and we look forward to such information. However, if the approach of “selective transparency” holds, we may then simply have some more “mock consultations” where the decision has already been made.
Another general observation on the report has to do with the methodology for their consultative process as consultants. I am not referring to the wider public consultations but rather the stakeholder consultations that are critical to getting a fair balance of ideas and opinions. Let me at the outset make the point that this is not necessarily the consultant’s fault. It is normal practice that the terms of reference as well as the methodology for a consultancy is approved by Executive Council, including the lists of persons to be consulted. I have noted that whereas Members of the House of Assembly were listed as a group that was consulted the Leader of the Opposition, his colleagues and advisors did not receive such an opportunity. Again having said that it may very well be the case that it was expected that they would participate as a part of the general body of the House of Assembly. However, from my experience of approving groups for consultations on such important issues --- it is more appropriate as well as more effective to have a dedicated consultation for Opposition Members alone.
In our discussions on the Levy we suggested the establishment of a broad based Tax Commission to review the situation in Anguilla and come up with a system of taxation that would be robust and appropriate to our needs. This suggestion is not far removed from what was recommended in this report and which appears to be happening now. However, while there seems to be a great deal of attention on the Tax Reform Working Group, there does not appear to be sufficient focus on the other side of the equation, which is, enhancing revenue in the private sector. This is imperative, given the fact that the private sector is the source of most of the public sector revenue.
The Chief Minister continues to make the broad statement that: “You cannot tax a dead economy!” While this may ring true ---- it bears no value if that is exactly what he proceeds to do. And furthermore, there are no focused discussions on how to generate more economic activity. The main discussion appears to be how to get more tax dollars for Government to spend and to balance its budget by the end of 2012.
There seems to be a general acceptance by the Anguillian taxpayer that the time has come to put in place a more sustainable system of taxes. It is therefore an excellent opportunity to make the discussion more broad-based. The report quotes ECCB data for 2009 as indicating that Anguilla has the lowest tax to Gross Domestic Product (GDP) in the OECS region. While this should not be a reason for increased taxation it does suggest that we can still be competitive as a jurisdiction even if we increased that ratio marginally. But it also shows that Anguilla’s success was not necessarily based on the efficiency of its tax regime but rather on the level of economic activity in the country. Obviously, any solution to our present challenges cannot only be focused on taxation but growing the economy as well.
It is the AUF’s intention to write a response to the Gandhi/Wiggins report. Since the Report has not yet been published it gives us an excellent chance to respond to some of the assumptions made and the arguments put forward. The next step would be to present that response at a meeting with the Consultants arranged exclusively for the Leader of the Opposition, his colleagues and advisors. The idea being to ensure that these discussions would not be affected by political posturing and grandstanding. It is our belief that an important matter such as this should not exclude the views of Her Majesty’s Loyal Opposition.
Over the next few days there will be a number of graduation exercises throughout the island. Whenever possible I have always found them very useful to attend. As adults it gives us the opportunity to witness the young people we are making decisions and sacrifices for in our several capacities as parents and community leaders. The very tax measures we have been discussing will determine our capacity to provide for the critical services these youngsters need in a sustainable manner. I usually find myself at the graduation ceremonies for the Comprehensive School or Sixth Form. It is at those events that you see first hand the young people that, in a matter of days, will be requiring employment and training --- the potential leaders of tomorrow in all aspects of endeavour.
Last week, however, I had occasion to attend my grandson’s graduation from kindergarten. It was a very animated ceremony. The graduants were not the least bit impressed with the fact that an audience was present. It was their day and they were doing it their way. Inhibitions for the most part went out of the window and any hint of shyness seemed only as a means of getting attention. When they were interviewed regarding what they wanted to be when they grew up many of the responses were traditional --- a nurse, a lawyer, a pilot; a ballerina; etc. One of the youngsters however, who happens to be my great nephew, shocked everyone when he proudly exclaimed: “I want to be a Ninja!” The audience had a laugh. But he was serious. He did not crack a smile. One of the more senior citizens present asked me: “What is a Ninja!” While I could only give her a vague answer I had the chance to “google” it later. One of the definitions I found was: “mythical Japanese warriors believed to have supernatural powers including invisibility, ability to walk on water and control over the natural elements”. Sounds like some members of the past Government to me! That kid obviously wants to be a politician!
Victor F. Banks
June 29, 2011
Posted by Realist Spikenice at 00:04