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Tuesday, September 22, 2020

Letters : Re: Finance PS speaks on controversial tax hike

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Dear editor,

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Please allow me to add my view to the above article published on The Standard newspaper edition of Friday 3 May 2019.
First and foremost, I am disappointed with the lame excuses the Finance PS provided on the way and manner this whole issue has been handled. Granted, he is a new man in the job but there must be processes in place which ensure continuity of service provision are maintained.

The PS in his response said: “Inasmuch as the government is concerned with the socio-economic growth of the citizens, it also has a responsibility to ensure its policies are consistent.” In my view, this is why the government is elected into office, doing anything different is an insult to the electorate. However, the PS must also understand that with responsibility comes accountability so the fact that he is new in the job does not absolve him from criticism.

I would expect the PS to come up with justifiable reasons leading to the hike from 10% to 75% in the first place. I would expect him to come up with reasons why that big jump other than saying the “new tax measure was publicly announced during the Finance minister’s budget speech in parliament through a line of engagement.”

A man of his standing should be able to say the tax increase is as a result of increasing government spending, addressing an inherited budget deficit and so forth, for example. I believe if this is the case, the government should consider instituting austerity measures to curb spending and reduce taxes to stimulate macro and micro economic activity. I would expect the finance PS to learn from the assertion of Romer and Romer that a tax increase of 1% of GDP goes to lower real GDP by about 3%.

You might think that increasing excise from 10% to 75% will maximise consolidated revenue. Superficially, this is possible but what you are not taking into account is the overriding effect on the economy. Mr Secka, what you are blind to is the effect on income tax, corporation tax, value added tax and the social responsibility benefits to society. In case you do not know, research has shown that investment falls sharply in response to exogenous tax increases.

To help you understand what I mean here, already, BBL has laid off 18 people as a direct result of the increase in excise duties. Do you realise that this is lost income tax for the GRA? Do you also realise that this is lost National Provident Fund income for the Social Security? Do you realise that allowing BBL to scale down production means that the corporation tax they would pay will be lower? Finally, do you realise that scaling down of operation by BBL means less purchase of taxable supplies, which means lower input vat and ultimately lower output vat because sales will be lower?
It is about time the government implements institutional reforms which will see competent people in positions of authority. The Gambia needs a civil service that thinks outside of the box, able to analyse policy before implementation and offer consultation with stakeholders where issues are tabled and discussed leaving sentiments out of decision-making.

Mr Secka, I do not want you to see this article as an attack on your person. I would not ordinarily engage you if you were a private citizen, so it is because of your position as a senior civil servant that I refer this article to you.
I am disappointed to hear you say: “Our doors are available for dialogue, but the conclusion and what decision government is going to take would not be subject to any pressure.” Have you wondered why there are pressure groups in governance? As a policy-maker, I expect you to be flexible and reasonable without resorting to bully tactics. What I read from your above statement is that you are implying that you are the government, what you decide is final and nobody can do anything about it. Again, read this with an open mind as I am expressing my views on your statements; other people may understand it differently.

In all honesty Mr Secka, I believe you should go back to the drawing board and review the effect of this tax policy on not only BBL but society as a whole. The people who lost their jobs are family men and women, how will they make ends meet after spending their severances? I expect you and your team to perform a sensitivity analysis on the impact of excise duty increase on the economy and society. Remember that making decisions on only financial considerations will only complicate matters.

Open a line of communication with all stakeholders to look at this issue as soon as practically possible and I would expect the Finance minister, Mr Njie to hold every one of you accountable for this issue. You are expected to advise the minister on issues like this and get the technicians in your ministry to perform an impact analysis of policies like this. I hope this issue will be resolved as soon as practically possible.

Nuha Ceesay
FCCA, MSc
Leeds, United Kingdom

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