Good evening and welcome to a very full news night here on 7NEWS. We'll tell you about a ride-by shooting this morning in the city that left two working men seriously injured, also there's a murder that occurred last night in the city and of course, our team was in Cayo assessing the damage from yesterday's powerful thunderstorm and we'll tell you what happened today when DFC Manager Troy Gabb appeared before the DFC Commission of Inquiry.
We'll have all those stories, but first we take you to the Central Bank where three government ministers held a press briefing to explain government's so called adjustment program. As we found out, government's plan is modeled off the IMF recommendations and it includes major cuts in the wage bill which will mean some government employees will lose their jobs. Who will get the axe? That's what we asked.
Godfrey Smith, Minister of Foreign Affairs
"Let me state point blank that, no, there is no formal IMF program and, no, there is no chance of any devaluation or any failure to meet our commitments."
And while there's no IMF and no devaluation government is trying to make a $70 million adjustment in the budget - which is just a pinch sweeter than the IMF plan.
Godfrey Smith,
"The IMF itself they recommended an $88.7 million adjustment. Our technical team have looked at that and said what we need is a $70 million adjustment because IMF didn't take into consideration certain things. It is that $70 million in the first instance that this continued adjustment program is directed at."
And government hopes to realize that through at least $11 million in savings on the wage bill.
Godfrey Smith,
"Where will the cuts be made? One of the first things we embarked on yesterday was we spent in excess of two hours looking at contract officers, now when I say contract officers let me state upfront I am not talking about members of the Judiciary, the Magistracy, the Legislature, and so on, other contract officers. We went ministry by ministry and we've taken a decision to cut $3 million worth of contract officers. That decision has been taken, those persons have been identified and work will commence on that shortly. That's underway, that's not anything that will not happen. It will occur."
Janelle Chanona, Channel 5 News
"That's ten people, six people?"
Godfrey Smith
"That's a long list. I don't have the actual number of people but it's quite a substantial list of people. I will not be sharing the names with you at this time. Other measures for instance, we believe we can save close to $9 million (by) stopping this absurd practice of giving automatic increments to public officers. You know that has been in place. How it should work, when you go by the letter of the law, is that you have to earn it, you have to be assessed based on a performance appraisal. How it's been done is automatically you get it. That will be put in place and there's no reason why it should not occur."
Jules Vasquez,
What's the savings?
Godfrey Smith,
"We estimate close to $9 million."
And while government says it will make those cuts amounting to $11 million dollars, the question always is, is the government as good as its word or dies it need the IMF to police it?
Jose Coye, Minister of State in Finance
"The question is going with a formal programme under the IMF. where those believe (that) where countries don't have the discipline to do it, they believe that the IMF being there to look over it gives them some more confidence. We feel strong that we do have the discipline to carry out the programme."
Jules Vasquez,
But Minister isn't it preposterous to say that you have the discipline, and preposterous may sound like a strong word but its not, when Ralph Fonseca he predicted in his budget presentation a deficit that's 1.8% of GDP and it comes out to about 8%. Said Musa in the following year predicted a deficit that I want to say was 3% of GDP and it turned out to be 9% of GDP. How can you say you all have the discipline when all that this government has shown is a mounting problem with indiscipline and reckless disregard for targets?
Jose Coye,
"Jules I think what you must take note of and I hope indeed the press and the country on a whole would look at what the government has done I would say over the last almost 6 to 8 months, we did a restructuring particularly when it comes to the management of the public sector finance. Firstly we set up the Public Finance Committee which is made up of Ministers of government and a highly qualified technical team. So we did embark on a total new approach to the public sector financing management and therefore to me with that should come the discipline. This is no longer a case of where it was before, where indeed management of the finance was left to a ministry or to an individual in a ministry. It is not so any longer."
Jules Vasquez,
There is a chronic and systemic problem with this government that it is unable to be honest with itself and with its public and when it says its going to meet targets what I interpret and this is my judgement is that it is saying that in fact we don't want the embarrassment of having the IMF in here everyday micro-managing our economy we are unable to live with that as an indictment of the failures of past Minister of Finance Ralph Fonseca and present Minister of Finance Said Musa this government is unable to meet its targets all historical all empirical data suggests.
Jose Coye,
"The management of the public finance is very transparent and open. It is done by a technical team under the supervision of Ministers of the Cabinet through the Public Finance Committee and all data is made public and made public to the IMF, the CDB, and all the IFIs."
And while the IFI's may be persuaded, Coye concedes that the most important persuasion has to be done with the general public which will have to come up with those increases in tax revenue.
Jose Coye,
"The nature, the framework, and the contents of the program is what we need to convince the people of this country. We are of the opinion that while we need international credibility, you cannot have international credibility unless you have credibility at home first."
And to build that credibility at home, Coye came clean on taxes. Yes government has to collect more and that will mean retooling the sales tax system.
Jose Coye,
"We will be able to improve the revenue collections system so we expect that there will tremendous savings that will come in from that area."
Janelle Chanona,
"So today that's not an option to have to go back to the National Assembly and ask for an increase in taxes?"
Jose Coye,
"Well we prefer to do this course first and then if after that we need to fill any gaps that remain then we look at that."
Adele Ramos, AMANDALA Newspaper
"What other areas of taxes might you be looking at?"
Jose Coye,
"We're looking certainly at the sales tax. We believe indeed that what's been happening in the past is that the sales tax has really not been bringing in the type of revenue that it should, especially at the beginning point. We have a combination in the sales itself, its not really a fully sales tax in the true sense, it's a combination-;a hybrid of different taxes facing you."
Jules Vasquez,
Unlike the VAT.
Jose Coye
"Unlike the VAT, unlike the VAT mechanism indeed. The VAT mechanism is a better mechanism, there is no doubt."
Jules Vasquez,
Would you say that we are moving a more broad based system, a more inclusive system such as the VAT?
Jose Coye,
"What we need to achieve when we look at the system now, we want to indeed broaden the base of our tax system. I spoke earlier of the fiscal incentive approach and its not really about more taxation, its about more equitable taxation and if you can achieve that through broadening the base I think that is the type of system we are aiming for; broaden the base of the tax system."
Jules Vasquez,
As occurred under VAT?
Jose Coye,
"Well it can occur under any other..."
Jules Vasquez,
But its not a sales tax orientation to broaden the base.
Jose Coye,
"Sales Tax and VAT are the same thing except that when we say of a sales tax, a retail sales tax is on the same base like the VAT mechanism is on, except that it does not collect the tax at each change. And what the VAT mechanism provides, why it is stronger than the retail sales tax is because it provides you with audit trails and provides you with self-regulation."
So you just heard a PUP minister say the once maligned ‘Killa VAT' is better than sales tax, and the troublesome sales tax will have to be rebuilt to match it.
Jose Coye,
"So it creates a lot of problems and then we have it now also with services and with goods so its creating a problem for us in terms of trying to get the taxes we should be getting from it and in some areas it becomes a double taxation. I might buy something first and it was not intended for construction purposes so it has to be taxed but then when I used it for construction I pay the tax again and there is no revenue to it so we have to change that system. The mechanism itself is not sufficient and there is a lot of loopholes its creating in the system and that's what we are looking at."
They are also looking at the business tax but Coye would make no firm pornouncement on that.
Jose Coye,
"We're looking again on the business tax, not in the sense of necessarily going back as some would want, but if that is the way the committee should recommend then the government would make that decision."
Tough decisions ahead but this time, the government wants to make it clear that there's no room for argument, the stakes are high, it's either do this or devalue.
Adele Ramos,
"And what if your homegrown fails?"
Jose Coye,
"We're not banking on failure, we're banking on success."
Adele Ramos,
"Worse case scenario what do you do?"
Jose Coye,
"In a worse case scenario which I would take to mean that who would want to oppose our maintaining the peg and that's what I think the argument will be: do you prefer to go down the road of an unplanned process where you can lose the peg or are you prepared to go down an orderly planned adjustment program and maintain your peg."
Though it was not said at today's briefing, 7NEWS has learnt that government also plans to reduce recurrent expenditure by laying off open vote workers. And while that went unsaid, it was said that government hopes to collapse some government departments which means bundling space, responsibility and resources of similarly tasked departments. Examples given of cuts in the capital areas are that the technical vocational training programme will be deferred. Also, the Marion Jones Sports Complex, a $5 million programme will be sidelined for the time being. We hope to have details of other cuts in the coming week.
