Stop Impoverishing Economy For The Benefit Of Government!
This is my first opportunity to address this honourable House and so I should go on record by acknowledging the good faith that Her Excellency has demonstrated in me by asking me to serve in this capacity. Mr. President, specifically on the VAT reduction—which in fact is not 2 percent but 16 percent. If you take 2.5 percent off 15 percent it is actually a 16 percent reduction—which I think is a significant matter in the economic life of any country. I find the debate very interesting and feel privileged to witness it. It is particularly interesting because, if memory serves, the matter of VAT spans at least three administrations and it is interesting to hear the opinions vary on both sides. But the point is, Mr. President, that when we first contemplated VAT for this country, the economy was on a growth path and it was not entirely unrealistic to contemplate VAT, as many other Caribbean countries did with some endorsement from the multilateral financial institutions, at 15 percent.
What happened is that we waited quite some time before actually implementing it. By that time economic circumstances in the country and the region had changed dramatically. What we actually got when we implemented the VAT was an inflationary tax in a recessionary economy. That is not opinion; it is clearly objective fact and the impact that this well-intentioned measure had on the Saint Lucian economy was significant. Fortunately, we are at a point where we are big enough to think about the implications of that measure. I would like to hope that it is part of a wider strategy to review the entire fiscal regime currently facing the economy and that is to say, as was recently revealed by studies and various government officials and authorities, we do have a very onerous tax regime in Saint Lucia and in much of the Caribbean as a matter of fact where we have seen Government grow, I would submit, at the expense of the private sector. Where successive administrations have felt that it was necessary for government to be the engine of growth, and for government to be the employer of first and last resort and constantly to be seeking additional revenue to make that possible.
I think we sometimes forget the old adage, Mr. President, that poor pauper poor king and one of the reasons that we have the kind of growth rates that we have seen over the last several years crossing more than one administration is because the country is in fact over-taxed and growth has been the victim. Growth emanation from the private sector, from individuals, from government itself. We have seen what I consider to be overtaxation of the entire economy. What we have not seen is a commensurate increase in productivity or an increase in efficiency. So we keep sucking the life out of the economy in order to support larger and larger government. This is not a criticism that is handed to one of the other; this is something that has been going on not only in St Lucia but across the Caribbean.
And when the managing director of the IMF comments on the parlous state of our economies, which are trapped in growth rates of less than one or less than two percent, and knowing the population growth that we have, we can see that this is not the best situation to be in. So first of all I think it is very useful that we are doing a study of the tax regime in Saint Lucia. I think that we need to compare ourselves with the other countries with whom we are competing, not only like economies in the Caribbean, but across the spectrum of investment destinations, of which we are only one.
It is true that a number of persons have expressed a number of concerns about the tax regime; we are heavily taxed in Saint Lucia and in the Caribbean and that just speaks to the inefficiency of the productive sector. So the fundamental point here is that I hope there is going to be a comprehensive review of the fiscal regime to bring relief to not just one set or another set of the population but across the entire economy, so that we can have a resumption of growth. Government cannot grow at the expense of the rest of the economy. You need to have growth coming up from the grassroots; from the private sector big and small; from the middle class big and small so the whole country can be prosperous and not one sector at the expense of the other.
We should consider in context the fact that the over taxation has created a certain fragility in businesses across the economy. Most businesses, except for the very big and the very exempt and the very favoured, are generally highly leveraged. We are in debt to the banking system, which is itself fragile. A lot of businesses are highly leveraged, which means they cannot borrow; they cannot grow; they cannot invest. This has a dampening effect on employment, investment and all the good things we want to see happen in Saint Lucia. The result: business closures, loss of jobs, shrinkage, cutbacks in employment, cutbacks in investment.
It has been some time since some of us have been asking for a renewed interest in domestic investment. What has been happening for a long time is we have a whole apparatus of government devoted to foreign direct investment, as if foreign direct investment is not a process of reducing ownership of critical national assets by Saint Lucians and handing them over to other persons who do not look like us. We need an emphasis on domestic investment, Mr. president, so that both sectors can grow in partnership rather than this emphasis on Messiahs from abroad who are going to rescue us from 0 and 1 percent and negative percent growth.
I would like to make an appeal for us to concentrate on realigning our investment policy, so that we are thinking about partnerships; we are thinking about business across the board; large, small, foreign, local, joint partnerships and ventures which speak about the efficiency of Saint Lucia as a place to produce and as a place to do business. Somewhere that people come to and enter into partnerships with us as Saint Lucians; whether as employers, as employees, whether as business partners, whether as investors and co-investors. Let us try to look at the entire spectrum of the economy and how we can generate growth, irrespective of who happens to be in power.
The Government alone cannot be the sole provider of all things. We need to stop impoverishing the rest of the economy so that government can grow and grow and grow. That is not sustainable. We note also Sir, and somebody mentioned it earlier, that there is VAT on imports. This is contrary to previously expressed government fiscal policy. We in fact have incidents of double taxation—where people are paying consumption tax twice; or VAT twice. And that is an expense to the profitability and the productivity of any business. So that you have not seen people expanding their businesses, you have not seen people expanding their workforce; you have not seen people even painting their premises.
If you go around Castries and the environs and beyond, you will observe that most businesses are in a deplorable condition, even in high streets in the middle of towns and villages across this country. The private, sector large and small, has not had the ability to grow for some time now and I think that needs to be reversed if we are going to see any serious improvement in the economic conditions of regular everyday Saint Lucians in this country.
I would like to paraphrase a slogan made popular by the President-Elect of the United States: “Make American Great Again.” I would like us to Make Saint Lucia Grow Again! If we put an emphasis on growth, as opposed to rhetoric, I think we will find ourselves doing a lot better, because we will examine what might be the impediments to growth and try to remove them so that we also devolve responsibility and power from this over-centralized form of government that we have to every citizen of the country and let them be responsible for their own advancement, assisted by the apparatus of the public sector of government.
I am currently mentoring a young man who has been trying to get a grant to open a small business and you would not believe the hurdles and disincentives that have been thrown at him—including from people who are supposed to be looking out for our young entrepreneurs. They do not respond to him, they seem not to care. All of this time the young man’s frustration is mounting and mounting and mounting. I am sure he is typical of young people in this country whose future is in the hands of people like us in this room.
So let us try and empower our people; let us try and get government out of the way, every now and then, because government can sometimes be a huge boulder blocking the highway of progress.
Let us try not to think of ourselves as the be all and end all of everything. Let us unite to remove the obstacles to growth. I believe that a 16 percent reduction which is what it is; a 16 percent reduction on the incidence of VAT is in fact an important milestone in the life of the country. As I said earlier, I hope it is part of a comprehensive review of fiscal policy and let us generally try to reduce the instances of taxation on citizens and businesses alike.
Independent Senator Adrian Augier delivered his address in the Senate which primarily focused on the much talked about changes to the Value Added Tax.