Dear Santa Clarke: Forget trickle down, This is how you bubble up the economy..



Micro, small and medium businesses account for the majority of economic activity in the Jamaican economy. Unfortunately, many micro and small businesses are still operating informally which prevents us from fully appreciating the social and economic impact they are having on our gross domestic product (GDP). But there is a view, shared by most social, economic and development practitioners, that we must find more creative ways of encouraging their participation in the formal economy.

Former Senator, Ms. Imani Duncan-Price penciled an article a week ago, titled ‘Trickle down’ disguised as ‘bubble up’? that sought to challenge the Finance Minister, Dr. Nigel Clarke’s aspersions that his recently tabled budget presents policies that will ensure an economy that works for all.

Duncan-Price finds it hard to appreciate Clarke’s high hopes for growth from this budget when she says “Clarke himself projects only 1.5 percent growth [for the economy]”. She presents several points to support her position, but the one that has caught my eye is when she posits that, “Forty-one percent of the economy is informal. That means that most of them don’t even deal with formal banks or pay taxes (except maybe General Consumption Tax [GCT]).”

What I want to pay special attention to, and endorse, is Duncan-Price’s criticism that this budget will not benefit the micro and small entrepreneurs of the business class in the way it is being sold to the public. The budget gives me reason to believe that Minister Clarke was not very mindful, in his orchestration of the budget, that the majority of the micro and small business operators in Jamaica operate informally.

His $14-billion stimulus package seems to benefit one class of the business community, which are the registered Jamaican companies. I make my claim based on the following benefits Clarke laid out in his presentation (as taken from, Pursuing growth with equity: A preliminary analysis of Jamaica budget 2019/20 by pwc Jamaica):

(i) elimination of ad valorem stamp duty on financing security documents and property transfer with a specific flat rate of stamp duty of JA$5,000 per stampable instrument.

(ii) reduction of transfer tax (from 5% to 2%) on transfers of real estate, shares, and other securities – but the average micro and small business operator does not own commercial real estate, shares or other securities

(iii) the abolition of minimum business tax ($60,000) on registered companies

(iv) Abolition of Asset Tax imposed annually on companies, excluding specified regulated entities. 

(v) Increase in General Consumption Tax (GCT) Turnover Threshold for registration from
JA$3 million to JA$10 million per annum – again, applicable only to registered companies

(vi) Increase in minimum estate value on which transfer tax is levied on the value of a deceased person’s estate from JA$100,000 to JA$10 million. 

While the statistics she presents are deductive at best, I believe Duncan-Price’s position that around forty percent of our economy is informal. I also believe that the vast majority of the sixty percent of businesses that are formal, and the vast majority of the forty percent of businesses that are informal are micro and small business operators.

Therefore it would profit the government tremendously if they could figure out ways to incentivize active participation from this base of micro and small business operators; particularly those operating informally. Clarke needs to present creative strategies to get micro and small business operators excited about joining the formal economy.

‘Tax concessions for the majority’

Abolishing the minimum business tax of $60,000 was a good move, but it hardly benefits the base of micro and small business operators. In the case of a sole proprietorship (which most micro and small businesses operate as), this tax would be applicable only if they make a gross annual revenue of $3 million and over. Most of these entrepreneurs are earning below this threshold, so the tax never mattered, to begin with.

What matters to them, from my assessment, are the opportunities for growth through debt, equity and grant financing; which they know they will be unable to access if they continue operating informally. A lot of these entrepreneurs would want to register and start paying taxes but are afraid to do so because of the penalties that they would be obliged to pay since they started operations.

A good show of faith would be to create a tax concessionary period for micro and small businesses operating informally to encourage them to get registered. For this to work, there should also be some type of debt forgiveness program for micro and small businesses operating formally who have accrued penalties since registration for failing to file their annual returns. Clarke must be mindful that the vast amount of Jamaicans, inclusive of micro and small business operators, were not formally educated on Jamaican tax laws and policies. To date, our primary and secondary level school curriculums are absent of tax education. Even at the tertiary level, foundation courses address it minimally at best. So, we can’t keep faulting the people for not doing what we failed to properly teach them.

‘Grants for good behavior’

To support the implementation of the tax concessionary period, I would like to see Clarke Introduce a grant scheme that directly benefits micro and small business operators who accept the gov’t’s invitation to join the formal economy. However, to avoid this looking like a handout, it would have to be fashioned as a development grant, similar to the Voucher for Technical Assistance – Development Bank of Jamaica. One critical requirement to access this grant should be the applicant’s ability to provide evidence of tax compliance over the period of the tax concession.

‘Building Santa’s helpers’

Thirdly, and what is probably most important, is the government finding a way to strengthen the capacity of business support organizations (BSOs) that help micro and small business operators.

In both the public and private sector, there is an array of BSOs available to give assistance in this regard, but many are stretched in their capacity to do so. A multi-agency approach must be taken, through the pooling of resources and talents, to provide affordable, convenient options to micro and small businesses for development, incubation, and guidance into the formal sector.

Particularly, I would love to see a policy that mandates all financial institutions to have a business advisory unit that offers support to their business customers. I would suggest a public-private partnership between the Companies Office of Jamaica (COJ) and all financial institutions to run a national sensitization campaign encouraging their customers to take up the advantages that exist when they join the formal economy.

These ideas are not perfect, and I am inviting you to challenge me with your disagreements (if any at all). However, despite its shortcomings, this budget is by far one of the most ambitious and inclusive presentations I have seen in a long time. The Andrew Holness-led government must be commended for a valiant effort. But we must be careful how we label this budget as one designed to pursue growth with equity. Equity implies equality, and as you can see the benefits here are unequally yoked.





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