Despite friendly advice from numerous people close to the process, it appears that the government is proceeding with its draft revenue review plan much as it has with past policies. Doing things the ordinary way wouldn’t be a problem if it weren’t for the fact that this particular policy will have an extraordinary impact on the economic landscape.
Extraordinary policies require extraordinary efforts.
We accept in good faith the government’s promise to deliver a number of important briefing documents, explainers on key topics, and basic information about taxes and how they work. Good information is essential to any discussion.
And we have no reason to doubt the government’s promise to conduct public awareness events, either. They have committed themselves to holding public meetings at least in the municipal centres, and possibly elsewhere.
Some people have voiced alarm at the fact that draft legislation had been prepared even in advance of the CoM decision to proceed with the revenue review plan. This is common practice.
The mere existence of draft legislation doesn’t imply that a fix is in. The Family Protection Act existed in draft format for nearly a decade before it was finally enacted. The draft Cybercrime Bill is still—rightly—getting kicked back and forth. The Right to Information Bill has yet to see the Parliamentary floor, too, in spite of being in an advanced state of completion for some time.
No, the issue that is raising peoples’ hackles, in the private sector and at the grassroots, is the sense that a plan is being prepared, and that the only chance they will have to weigh in on it will be in an up/down vote.
Taxation is one of the most fundamental aspects of any democracy. Along with the ballot box, it’s one of the few ways that a citizen interacts directly in the administration of the country. And that’s why the people need to be presented with alternatives, rather than a simple yes-or-no decision.
Any changes to Vanuatu’s tax system should be the result of a negotiation that gives everyone a stake. After all, we are all going to share the burden it lays on our shoulders. The process with which the National Strategic Development Plan was put together is a good guide.
Nobody seriously doubts the good intentions of this government, nor their belief that they are acting for the good of the nation. But the bottom line is this: An economy lives or dies by the confidence that people place in it.
Over the last ten years, foreign direct investment has ebbed and flowed, but the general trend has been downward. In 2014, World Bank figure show that foreign investment dropped off a cliff, from 7.41% of GDP in 2013 to 1.63% in 2014. In practical terms, that meant a loss of about US$ 50 million from one year to the next.
How much of this is due to loss of investor confidence?
Today, we stand poised to benefit from a number of private investments of unprecedented size. They could transform the national economy. While nobody would suggest that we put ourselves utterly at the beck and call of outside interests, we still need to inspire a degree of confidence in our economy sufficient to win their trust.
If we fail in this, we could lose many times more than we’ve lost so far.
In most respects, this government has only built our confidence. It’s proven on several occasions that it listens to input from the Opposition and from constituents. It has shown a determination unseen in previous administrations to get things done, and to do the job properly.
That’s why we feel it’s critically important to stay on the front foot. Now more than ever, they need to set clear expectations about how they can best protect the national interest, and encourage everyone to bear their fare share of the tax burden.
First off, as one private sector leader said in a recent edition of 96 FM’s Coffee & Controversy radio show, ‘an email address isn’t a consultation; it’s a suggestion box.’ He had earlier lamented the fact that the one private sector representative on the revenue review committee was required to sign the Official Secrets Act, and to maintain complete confidentiality on the proceedings of the committee.
The more we talk with businesspeople here in Vanuatu, the more we get the sense that what the majority want is a genuine brass-tacks discussion in which they can participate as peers in the discussion concerning taxation rates and mechanisms.
Round-table discussions, or public forums in which people could present their views directly to the Minister of Finance and his colleagues might prove heated at times, but they would provide an important opportunity to listen.
Note that we said ‘listen’. To present a more or less fully formed plan, then to ask for opinions, would be seen by many—if not most—as loading the discussion with assumptions that they might not share.
Our advice: Listen first, refine the plan as necessary, then present.
At the grassroots level, two challenges rise above the others:
First, there is an immediate need to convey that there’s no such thing as a free lunch. Economics isn’t quite zero-sum, but you can’t cut school fees without finding another way to pay for them. Roads, wharves and government services all come with a bill attached. A living wage is only possible when there’s enough prosperity to sustain it.
Secondly, and even more importantly, the government needs to demonstrate in no uncertain terms that the money it gathers as a result of these reforms will not be wasted. We’re not questioning the current administration’s commitment to raising professional standards across the board. But we do feel that further assurances are needed.
It would serve the government well to begin the conversation with reassurance that any changes will make it easier, not harder, to do business in Vanuatu, that the money will be well-spent, and that it has a deep and sympathetic understanding of the importance of the our continuing confidence in the future of this nation.
That requires that we all sit down and solve this problem together. Not as adversaries but as equals.