By Melanius AlphonseSeptember 1st, 2012 and Saint Lucia is scheduled to be shackled to the core by the economic witches of two political parties.
One on the right and the other on the left, both trapped with incomplete reasoning, non–existent visions and ill-defined long-term solutions.
The economy continues to be weak, demand for goods and service has been slow to recover, and household wealth continues to decline. Continued high unemployment is the new norm, while government spending has been unchecked in a bureaucratic haze.
After so many wrangles in opposition and on the campaign trail, apparently commonsense economic theory is so alien to the chief policy makers that high unemployment will persist.
Contrast this with poor economic conditions, a VAT, low skill jobs, low wages and deflated consumer spending to the painting of a rosy picture of proposed robust job growth and the absence of a well thought-out blueprint for growth to better days.
How real can this be?
Oh yes, the economy is in retreat losing jobs faster than it can create? True or false – eh rouge, eh rouge.
Saint Lucia can no longer accept cumbersome drags on the economy, such as high corporate tax, none visionary leadership to alternative energy, technology, research and development (R&D), access to investment funding and policy guidelines that would propel the economy to spark growth and employment.
In a nutshell the economic recovery is poised to remain anemic and would be unable to break the witches spell with a VAT that is mixed with low job skills and low wages.
What’s more: up to this point, VAT represents an attempt by those producing largely confusing explanations and interpretations of what they themselves have not yet fully understood.
This quantum leap to VAT has failed to manifest the baby steps that are required before the implementation and must now match rhetoric to deliver on the blueprint to growth in light of the VAT.
Under this scenario, VAT is a no-win proposition without rationalization of both personal and corporate income tax yields.
It must replace other forms of taxations and facilitate a reduction in other taxes.
In its present form, a VAT will further slow economic growth and destroy jobs on the bases of production between pre-tax income and post tax consumption.
With the capacity of a VAT to generate large amounts of tax revenue, like the gas tax, a liberal government would easily expand the size and offer new ways to finance bigger government – and not necessarily smarter government.
This has already begun with the formation of new committees, consultants and advisors.
With VAT implementation, small business will have to painfully consider compliance costs, (act as a tax collector for the government), and keep it well below 2 percent of sales.
Or they may be forced into the underground economy or resort to barter.
Taking a VAT out of consumers’ pockets in the medium- to low-income brackets would reduce private savings and alter patterns of consumer spending, as well as personal investment options.
Once more – there is a need to streamline and prioritize the development model.
When VAT is enforced – a decline in real wages would be noticed leading to reduced spending power on consumption and luxury items.
As a consequence, sectors such as construction, new vehicle purchase, tourism (hotel, restaurant and bars) face uncertainties in an economy characterized by high unemployment, with stifled and constrained demand.
A VAT, low skill jobs and low wages will not grow business and speed up economic recovery to get Saint Lucia back on track.
At this time, with the current economic outlook, a VAT would hurt the economy, kill jobs, grow the size of a liberal government, push small business in the underground economy and permanently reduce family’s wealth and incomes.
The gap between theory and reality is a live spectacle, playing out free of charge in Europe – no consultant or advisors are required.
Therefore, if it is not suitable and sustainable for Europe, why take their advice and mimic them.