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Saturday, February 22, 2025

Econ­o­mist Vanus James:

TTRA could result in executive dictatorship

by

GEISHA KOWLESSAR-ALONZO
226 days ago
20240710

Is the much tout­ed T&T Rev­enue Au­thor­i­ty (TTRA) in To­ba­go’s best in­ter­est, viewed from the per­spec­tive of eco­nom­ic de­vel­op­ment?

Econ­o­mist Dr Vanus James said to con­struct a rea­son­able an­swer, it is nec­es­sary to gauge prop­er­ly both the eco­nom­ic and con­sti­tu­tion­al sit­u­a­tion of To­ba­go, set in the na­tion­al con­text.

He ex­plained to the Busi­ness Guardian that af­ter 44 years of in­ter­nal self-gov­ern­ment, the To­ba­go econ­o­my is still in des­per­ate need of de­vel­op­ment.

“Gov­ern­ment in To­ba­go dom­i­nates the econ­o­my, ac­count­ing for near­ly half of all eco­nom­ic ac­tiv­i­ty and most jobs. This makes wages, not prof­its, by far the largest share of claims on all To­ba­go in­come, and Gov­ern­ment spend­ing, con­sump­tion and im­ports, not in­vest­ment and ex­ports, the main forms of ag­gre­gate de­mand dri­ving the econ­o­my. Gov­ern­ment is the em­ploy­er of large num­bers of un­der­em­ployed work­ers, and Gov­ern­ment pro­duc­tiv­i­ty is well be­low 80 per cent of pro­duc­tiv­i­ty in the To­ba­go econ­o­my,” James said, not­ing that To­ba­go usu­al­ly col­lects around $214 mil­lion in tax rev­enue.

He added that To­ba­go’s re­source-based tourism ex­ports, for their part, ac­count for a very min­i­mal six per cent or so of GDP, not­ing that this is the kind of im­port-de­pen­dent and mod­est in­come-elas­tic­i­ty tourism ser­vices pro­duced in places like Ja­maica that yield low GDP per capi­ta.

That kind of tourism, he said, con­trasts sharply with the high in­come-elas­tic­i­ty in­dus­tri­alised tourism ser­vices ex­port­ed by places such as Britain, France, the USA, Cay­man and Bermu­da.

James fur­ther not­ed that the sig­nif­i­cance of the high in­come-elas­tic­i­ty is that peo­ple spend a grow­ing share of their in­come and wealth on such ser­vices as their in­come and wealth grow.

“When an im­port-de­pen­dent econ­o­my finds it­self in a po­si­tion where its ex­ports are mod­est to low in­come-elas­tic­i­ty prod­ucts, it usu­al­ly needs sub­stan­tial un­re­quit­ed trans­fers from out­siders to fi­nance its im­ports. In the case of Ja­maica, re­mit­tances from its di­as­po­ra do that job. In the case of To­ba­go, those un­re­quit­ed trans­fers are pro­vid­ed by Trinidad through the Gov­ern­ment,” James said.

He added that Gov­ern­ment spends an­nu­al­ly about $3.4 bil­lion in To­ba­go, with about $2.4 bil­lion spent by the THA and the oth­er $1 bil­lion spent by the Gov­ern­ment and the agen­cies it con­trols.

Ac­cord­ing to James, To­ba­go’s econ­o­my now can yield about $500 mil­lion of tax­es, as he ex­plained, “This is be­cause the econ­o­my now pro­duces about $1.66 bil­lion, if we are to go by the fig­ures re­cent­ly pub­lished by Chief Sec­re­tary Far­ley in his lat­est bud­get state­ment. At a gen­er­al tax rate of 29 per cent, that gives tax­able ca­pac­i­ty of just un­der $500 mil­lion.

“It should be not­ed that about $214 mil­lion of those tax­es are cur­rent­ly col­lect­ed in To­ba­go. So, about $286 mil­lion is col­lect­ed by the agen­cies of the Gov­ern­ment in Trinidad.”

These fig­ures, James added, in­di­cat­ed that near 80 per cent of the mon­ey spent by the THA in To­ba­go is a trans­fer from Trinidad.

“When you add in the near­ly $1 bil­lion spent on oth­er Gov­ern­ment ser­vices by the Gov­ern­ment, the lev­el of de­pen­dence of To­ba­go on Trinidad in­creas­es to about 86 per cent of Gov­ern­ment spend­ing,” James said.

He ad­vised that this sit­u­a­tion can on­ly be ad­dressed by a sound pro­gramme of eco­nom­ic de­vel­op­ment in To­ba­go, com­ple­ment­ed by a na­tion­al di­ver­si­fi­ca­tion pro­gramme that in­cludes an up­grad­ed de­sign of the in­sti­tu­tions of Gov­ern­ment for joint de­ci­sion-mak­ing.

“The con­fig­u­ra­tion of that de­vel­op­ment pro­gramme is now well un­der­stood. At some cho­sen pace, steps must be tak­en to grow GDP per capi­ta, un­der­pinned by econ­o­my-wide pro­duc­tiv­i­ty growth. For that, To­ba­go must grow its ex­ports per work­er and cap­i­tal per work­er, and there­fore its val­i­dat­ing sav­ings rate and un­der­ly­ing rate of prof­it from in­vest­ment,” James said as he fur­ther rec­om­mend­ed that cru­cial­ly, pro­duc­tiv­i­ty in, and ex­ports by, the sec­tor that can pro­duce cap­i­tal (ser­vices) must there­fore grow to sup­port the process.

James added that a ma­jor byprod­uct of all these changes will tend to be a re­duced in­fla­tion rate, or even a falling price lev­el.

Ad­di­tion­al­ly, he said for an un­der­cap­i­talised econ­o­my like To­ba­go, and T&T for that mat­ter, none of this can hap­pen with­out sound Gov­ern­ment pol­i­cy and there­fore, ap­pro­pri­ate­ly up­grad­ed pol­i­cy-mak­ing in­sti­tu­tions, in­clud­ing Gov­ern­ment it­self, viewed as part of the econ­o­my.

“It is not cost-free when politi­cians make the wrong poli­cies or make them the wrong way. Poor pol­i­cy-mak­ing arrange­ments, typ­i­cal­ly dic­ta­to­r­i­al, al­so lead typ­i­cal­ly to poor de­vel­op­ment out­comes.

“Both na­tion­al and To­ba­go de­vel­op­ment de­pend heav­i­ly on the do­mes­tic ca­pac­i­ty to fund de­vel­op­ment spend­ing by gov­ern­ment com­ple­ment­ed by for­eign cap­i­tal in­flows,” James said, adding that Gov­ern­ment rev­enues that flow from a de­vel­op­ing econ­o­my to re­ward sound pol­i­cy-mak­ing is by far the more im­por­tant of the two flows. “If it is pos­si­ble to set up a rev­enue-col­lect­ing in­stru­ment that is prop­er­ly over­seen by an ef­fec­tive leg­is­la­ture, that would con­sti­tute progress,” James said, as he stressed this is the con­text in which the TTRA must be viewed.

Just as im­por­tant, he not­ed the TTRA al­so ad­vis­es the Min­is­ter of Fi­nance as it re­lates to all forms of tax­a­tion, cus­toms and ex­cise du­ties, rev­enue col­lec­tion and bor­der con­trols.

How does To­ba­go fit in­to all this as it too pur­sues de­vel­op­ment through a process of sound de­ci­sion-mak­ing?

James cit­ed that un­der the fifth sched­ule of the cur­rent THA Act, the THA is as­signed re­spon­si­bil­i­ty for “Fi­nance, that is to say the col­lec­tion of rev­enue and the meet­ing of ex­pen­di­ture in­curred in the car­ry­ing out of the func­tions of the as­sem­bly.”

Sec­tion 26(2) of the Act pro­vides that “The Gov­ern­ment or any statu­to­ry au­thor­i­ty or state en­ter­prise may, by way of Mem­o­ran­dum of Un­der­stand­ing, au­tho­rise the as­sem­bly to act as agent of the Gov­ern­ment, statu­to­ry au­thor­i­ty or state en­ter­prise, as the case may be, in re­spect of any of its re­spon­si­bil­i­ties in To­ba­go.”

Sec­tion 29(4) in­di­cates that “A Bill adopt­ed by the As­sem­bly shall not seek to ab­ro­gate, sus­pend, re­peal, al­ter, over­ride or be con­trary to any writ­ten law of the Re­pub­lic of T&T or im­pose any di­rect or in­di­rect tax­a­tion what­so­ev­er.”

James not­ed that giv­en its broad terms of ref­er­ence one must sure­ly pon­der whether ad­e­quate pro­vi­sions have been made for the over­sight of its op­er­a­tions to en­sure sound pol­i­cy-mak­ing.

“Giv­en the laws gov­ern­ing To­ba­go, the TTRA could be in To­ba­go’s best in­ter­est, even as­sist­ing with its rev­enue col­lec­tion on the is­land and with cal­i­bra­tion of rev­enue pol­i­cy as part of the wider na­tion­al agen­da. How­ev­er, for this it would have to come with prop­er pro­vi­sions for pop­u­lar over­sight in both To­ba­go and Trinidad, and sig­nif­i­cant con­cur­rence by To­ba­go when it comes to law­mak­ing,” James said.

He added that even if it is rea­son­able to be­lieve that the TTRA could man­age rev­enue col­lec­tion and bor­der con­trols, un­der its cur­rent gov­er­nance arrange­ment, the TTRA can­not be ex­pect­ed to ad­e­quate­ly guide “all forms of tax­a­tion, cus­toms and ex­cise du­ties” if the in­tent is sound pol­i­cy.

“In an econ­o­my pur­su­ing eco­nom­ic di­ver­si­fi­ca­tion and de­vel­op­ment, sound guid­ance must come from a process in which the TTRA it­self can be held to ac­count by the peo­ple through the func­tions as­signed to their elect­ed non-ex­ec­u­tive rep­re­sen­ta­tives in both the House of Rep­re­sen­ta­tives and the Sen­ate.

“The prob­lem with the TTRA, as cur­rent­ly leg­is­lat­ed, is that there is no way for the ex­ist­ing leg­is­la­ture, and there­fore the peo­ple of the coun­try, to over­see its ac­tiv­i­ties,” James main­tained, adding that it would sim­ply be run by the ex­ec­u­tive and ac­cord­ing­ly be a con­duit for lim­it­ed in­for­ma­tion and thus in­ef­fec­tive ex­ec­u­tive dic­ta­tor­ship.

This, he said, is the un­der­ly­ing rea­son peo­ple are ner­vous about it and it is al­so a ma­jor rea­son the cur­rent push for con­sti­tu­tion re­form is so im­por­tant for both To­ba­go and Trinidad.

Mean­while, for­mer Head of the To­ba­go Di­vi­sion of the Cham­ber of In­dus­try and Com­merce and busi­ness­woman Di­ane Hadad said there needs to be some “prop­er link­age” in terms of To­ba­go be­ing able to col­lect tax­es.

“For the prop­er­ties in To­ba­go, we shouldn’t have to go to Trinidad to pay any of those tax­es...but we are one coun­try and we al­ways need to re­mem­ber that,” she ad­vised.

From a gen­er­al per­spec­tive, she said she did not be­lieve that enough con­sul­ta­tion was done on the TTRA.

“I don’t know the tim­ing is right for the busi­ness com­mu­ni­ty in terms of what has hap­pened from the pan­dem­ic. I do not know whether the ap­proach was done in terms of con­sul­ta­tions...I think peo­ple were just on their dri­ve and ‘we go­ing and im­ple­ment it like it or not’ be­cause un­for­tu­nate­ly the peo­ple who make those de­ci­sions are pro­tect­ed by salaries so they are not in­ter­est­ed in how the world is re­al­ly func­tion­ing from an eco­nom­ic stand­point,” Hadad added.


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