A lot of us watched the Oscar ceremony and we all saw how the devil came to get Will at the height of his career, his greatest moment. The Fresh Prince had a very public meltdown.
MinFic saw the whole incident in a positive light. She posted it took Will Smith to show all those who disrespect, no more. Her post was colloquial, but 36 people shared her gospel, 413 liked it and 106 commented, until last evening.
The best un-posted comment was by a GF: “MinFic approves of the slap, apparently. I wanted to add a comment so badly, because, she wants to do the same, I am sure, to all those who disagree with her!”
While Will suffered no circumstances, besides losing me as a fan, if MinFec decked all those who disagreed with her, she would be in trouble.
There are many who disagree with her.
The BIGGEST disagreement being, the focus on increased revenue instead of cost-cutting.
I sent some of my economists friends a DIMP press release from Friday, regarding the tax reform. It reported the conclusion of the first-phase of talks with stakeholders. As a response, I received excellent commentary. It was like opening the faucet, my economist friends all had brilliant things to say.
Paraphrased from a mail by Rendell de Kort:
To start, i have to mention that I have not participated in any of these sessions. But it’s obviously going to be a very consequential policy change for 2023, so I am looking at these developments with great interest.
It’s positive that discussions are moving towards HOW we are going to implement VAT. Aruba spent already too much time, since former minister Juan David Yrausquin, discussing IF we should/shouldn’t, but that shipped has long sailed. Especially in the current post-covid climate, all the attention needs to be on making sure that the HOW is worked out well, in a manner that ensures a successful implementation for everyone.
So, what is success?
It’s not a success if it raises the desired tax revenue for GOA, but kills the goose that lays the golden eggs. It is also not a success if it does raise the desired tax revenue for GOA, achieves high compliance from businesses at minimal disruptions, but then leads to inflation that erodes the purchasing power of households, threatening the livelihoods of the most vulnerable in our community. Or if it raises prices for tourists and makes the industry uncompetitive, thereby still killing the golden goose, though indirectly.
Consequently, achieving success means balancing all these considerations.
It’s no walk in the park
The only way, is to start early with crystal clear communication and full engagement with stakeholders. The DIMP article about the stakeholder sessions is a start. A LATE start, if it is to be introduced early 2023. But there is also a huge need for more detailed information.
I was googling for the famous IMF report on VAT for Aruba, but have not found it yet, so there are questions on a policy level, how does the current proposal differ from what the IMF had previously proposed, in its detailed recommendations?
There may be differences, but they need to be explained, why the choice was made to deviate? Why has GOA chosen to implement VAT at such high rate, that in comparison to the current system, raises more revenue for GOA. Why has GOA chosen to start with extracting MORE taxation from businesses?
Of course, because GOA needs more spending money.
OK, we know that, but it’s also important to introduce this new system well.
Why not keep it “neutral,” first?
Make sure the golden goose is still breathing first, and then in the following year extract higher taxes.
We shouldn’t levy such a high tax, at the get go, because the implementation holds the gravest risks to our economy.
GOA reports that the inflationary effect will be very minimal. Huh. Really? I would love to see the assumptions underlying the calculations for that. it’s one thing to sit in front of an excel sheet and calculate minimal inflation, and it is another thing in the real world.
It often gets complicated, let’s say for whatever reason. Let’s say the VAT is introduced and what we observe is that prices go through the roof. Which is the worst possible outcome. People won’t be happy because they feel it in their wallet.
Then business can tell GOA: I told you, this was trouble, you should have listened!
GOA responds: This is not right. There is no justification for these crazy high prices according to our excel sheet calculations. We’re going to fight back by implementing price controls to stop businesses from taking advantage of consumers.
We might perhaps find a couple of evil business people who take advantage of situations. But most businesses are just trying to survive.
In economics, the Rational Expectation Theory, says decisions are based on three elements, human rationality, the information available and past experiences.
My past experience tells me there are examples of well-intended public sector interventions that failed miserably and ultimately had to be reversed, the information available may not be enough, especially for a small business, to navigate the complexities of taxation and remain confident that it will NOT be getting a massive ‘naheffing’ later.
If a ‘naherffing’ is coming, the business would need to scramble to pay it, without making provisions earlier. So, rational business owners, need to take the low inflation expectation from GOA with a huge grain of salt and act according to what THEY believe is prudent to ensure continuity.
So it’s one thing to calculate low inflation, but with incorrect assumptions about human rationality, DIMP and MinFic are missing a big part of the picture.
I genuinely hope we don’t end up in posthumous finger-pointing scenario. The only way this works is through a really solid and comprehensive communication campaign and offering businesses, big and small, strong hands-on support.”
To conclude, the timing of the implementation might prove to be very unfortunate. Inflation, perhaps as high as double digit, is already expected globally in 2023. Aruba imports everything, inflation included. It’s hard to plan ahead with such global uncertainty, but the fact remains that even without VAT households will likely struggle to maintain their heads above water.
