Beyond Borrow- Tax and Spend

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The Scarlet Pimpernel Blog

Sunday, 03 October 2010 06:55

By The Scarlet Pimpernel

Grasping at Straws- The nations of the world are currently grappling with the seemingly irrepressible effects of the global financial crisis, with varied disappointing levels of success.

Governments of countries large and small have had to undertake austerity measures and adopt policies and programs aimed at reviving their economies and alleviating suffering, while avoiding the appearance of incompetent crisis management. It is fair to say that we are living at a time when governments throughout the world are seeking relevant, twenty-first century “SOLUTIONS”, and Antigua & Barbuda is no exception in that connection.  

Amidst a deafening cry for HELP from a populace petrified by the preview of impending poverty, exists the stark realization of the paucity of genuine solutions in the words coming from our political gentry and brilliant “speech readers,” who are losing the confidence of the electorate at an alarming rate. The challenge of articulating recovery strategies, born of native intelligence and cultural ingenuity is steadily deflating the stature of political personalities, who have long been accustomed to eloquently expounding scrounged ideas and delighting in elixir of self congratulation.  

Among this political cult of mediocrity, criticisms, blame and gamesmanship are aplenty, while prudent, progressive plans (solutions) appear beyond their reach; meanwhile, the People continue to seek salvation from sources dedicated only to selling “The Emperor’s New Clothes”. In this climate of desperation, any reference to “fixing the economy” by political speakers is readily labeled “solution.” In fact, bungling opinions, suggestions, recommendations and even educated guesses have recently attained the status of “solution” in our island paradise, where an abundant indigenous brain trust have blindfolded themselves in apathetic cowardice and mortgaged their children’s future to a visionless group of charlatans, dutifully engaged in a comedy of errors.

It serves no constructive purpose at this juncture, to address the numerous policy oversights, programming blunders and missed opportunities which led to the galaxy of problems that abound in Antigua and Barbuda, with which we are all too familiar. With the best interest of the nation at heart, the following missive is part of a series, intended to outline a vision for social, political and economic reconstruction, and to stimulate meaningful, discourse among the nation’s formal and informal “intelegencia” with the ultimate goal of synthesizing workable, homegrown recovery strategies (roadmap), intended to effectively elevate our beloved nation from its current quagmire, and illuminate the path to resurgence and future prosperity.  

Living Above Our Means - More Expenditure than Revenue

The Minister of Finance, the Economy and Public Administration, the Hon. Harold Lovell, reported to the nation that “[d]ata on the fiscal performance of Antigua and Barbuda from 1973 to 2008 show that over a thirty-five (35) year period not once did the government record an overall surplus. Thirty five years where total expenditure outstripped total revenue on an annual basis … not once did the government record an overall surplus” In fact, the Minister is of the view that “… major categories of expenditure have been structured and cemented to make such an outcome virtually impossible without fundamental realignment.”


In simple terms, successive governments of Antigua & Barbuda have had the same problem as the majority of citizens and residents on the island; the propensity to live above their means. There is no need to point out that spending more than you intake is unsustainable for individuals and families, but catastrophic for governments. The gravamen of this predicament is best observed during the tenure of the current administration, which has proven beyond all possible doubt that no matter how much taxes are extracted, pet projects with obligatory “campaign contributions” attached create ample rationale to continue to operate above limited means. Moreover, our government’s predilection for borrowing money to maintain unsustainable policies and programs to mask corrupt practices significantly exacerbates our economic failures.  

It is interesting to note how the finance minister, who has made a career out of blaming the past administration for the nation’s economic woes, is curtailed by his explicit inability to take responsibility, and thus, resorts to stating that a solution to the nation’s 35 year old problem is “virtually impossible.”I beg to differ. In the spirit of exposing practical solutions, I maintain that a constitutional amendment mandating a balanced budget must be acknowledged as a necessary first step in the direction of legislating sustainable fiscal responsibility, characteristic of the mature, accountable governance that we desperately need to guide our recovery and keep us on the right track.  

Antigua Culture under Threat - Laudat Antigua, St. John’s - One of the lead figures in the fight to protect the country’s culture has said the Antiguan identity is under direct threat... read more

I would go even further to add the need for further austerity legislation which caps government’s annual budget expenditure for the next five years (at about 500 Million EC dollars). No more than 220 million EC dollars of that budget should be allocated to the wage bill, which must be rationalized to accomplish public sector reform within the context of a locally engineered “Pay for Performance” model, which strongly emphasizes retraining and retooling for the creation of a productive, competitive public sector workforce. Indeed, removing hundreds of millions of dollars of unnecessary spending from the budget provides the platform from which taxes may be lowered without affecting government’s ability to perform its core, required functions. I implore you not to dwell on the specific numbers proffered, but focus instead on the practicability of mandating appropriate caps on expenditures.    

No New Taxes Needed

While the need for our government to impose taxes will not be disputed here, there is something awfully dim about a political mindset that recognized the need to create and impose a new system of taxation on the People, went ahead and crafted the legal framework, but failed to recruit and assemble the required human resources, infrastructure and computerization necessary to ensure efficient and effective tax collection and revenue administration. Considering that taxes are basically the government’s only source of revenue, I find it hard to fathom that nobody at the helm recognized the immediate need to have a well organized tax system ab inicio.

In Antigua & Barbuda there are much more “net tax consumers” than “net tax-payers”; direct and indirect taxes account for about ninety-four per cent of government’s revenues, albeit, the collection of ABST is at an abysmal fifty per cent level. Consequently, the lawyer in charge of managing the nation’s finance & economy was frustrated into castigating tax-payers for illegal tax practices thusly, “[f]or too long now, Antiguans and Barbudans have insisted that the Government … provide a number of goods and service, but in many instances, these very citizens fail to meet their legal tax obligations to the State. In fact, tax evasion is endemic and has become so ingrained that it will require considerable effort to reform the system.”

Lovell Says No More Late Payments Antigua St. John's - Minister of Finance, the Economy and Public Administration Harold Lovell, on Friday, told public servants and Social Security pe... read more

The lawyer in me will not succumb to the temptation of pointing out the legal differences between “tax delinquency”, “tax avoidance” and “tax evasion,” and I proceed to say that a good solution to borrow from the United States when undertaking the necessary reforms to improve the efficiency and effectiveness of the tax system, involves the issuance of “tax liens” against all forms of delinquent tax-payers.  The regular online auctioning of these tax liens in the form of “tax lien certificates” with compulsory interest attached as a penalty for late payment, ensures a tax collection rate near one hundred per cent, because delinquent taxes can be paid by any person interested in the object of the lien. This has the added advantages of providing a source of local, high-yield investment for the ordinary People of Antigua & Barbuda, and avoids the government having to impose higher taxes to address tax collection inadequacies.  

It would be remiss of me not to mention the countless millions in revenues available to the government if it elects to judiciously enforce section 6 of the Non-Citizens Undeveloped Land Tax Act and its ancillary Regulations. Immediately prior to Independence, legislators apparently understood that the free, independent posterity of former slaves should not have to tolerate the kind of absentee land ownership that was prevalent during the slavery epoch, and passed the Non-Citizens Undeveloped Land Tax Act to ensure that non-citizens could only acquire land in Antigua for development purposes. The level of political commitment to this idea is evidenced by the hefty taxes and forfeiture provisions attached to non-compliance with this law, yet, for obvious tactical, political reasons, which the keen minds among you will immediately grasp, this particular law has never been enforced. The issue of selective tax collection will not be addressed further here; nuff said.

The Scarlet Pimpernel is the nom de plume of an Antiguan born “knowledge broker” whose intercontinental exploits involve work as a university founder and educator, military strategist, international legal consultant, United States prosecutor, published author, trade advisor in Latin America and international investment counselor. The inimitable acuity of the “Pimpernel” is sought after by entrepreneurs, investors and governments from Dubai to Brazil. Recent work, created for Latin America, which speaks to the conjunction of technology and education to reduce cost, motivate students and improve testing results will be translated and introduced to school systems across the Caribbean later this year. “Employing anonymity to domesticate the ego ...”

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