While undoubtedly the majority of Jamaicans focused attention on the massive tax package that was implemented during the recently concluded Budget exercises, the whole episode highlighted as well a number of other critical issues.

Apart from the fact that the Budget exercises highlighted the scope and depth of the current crisis, we also got insight into the quality of the management of the country's economic affairs; and a view of the limitations of our current political culture.

For some, particularly the poorest in the country, many of whom are among the 15,000-20,000 people who have been laid off during the past year, the tax package is nothing short of catastrophic, generating considerable disillusionment and anger. We should not forget either that the tax package is only one component of the hardship which the population will face. Remember that prices are going up and that public sector workers are facing a wage freeze even as they confront the prospect of higher taxes. No wonder then the palpable sense of anger, protest and betrayal being expressed in the county. It would be a mistake to simply put this down to a political contrivance of 'power-hungry' politicians.

Important lessons

Beyond the facts of hardship and anger, however, the Budget contains other very important lessons about Jamaica's economic situation and the scale and severity of the crisis which the country faces. First are the clear deficiencies in the economic management of the country. The furore over the size of the tax package and the fear of social unrest has diverted attention from the fact that the economic fortunes of the country have lurched sharply downward.

During the past fiscal year, all critical targets were breached. Real GDP declined by 0.6 per cent, the first annual decline in 10 years. Our debt in nominal terms grew by 20 per cent, i.e., by over $200 billion - total debt now standing in excess of $1.2 trillion. Our fiscal deficit worsened to close to seven per cent of GDP as compared to 4.0 per cent the previous year. The value of the Jamaican dollar depreciated some 18.2 per cent during the fiscal year and inflation for the fiscal year was some 12 per cent - far above the programmed rate of under 10 per cent.

Alongside this, there have been some increases in interest rates (up to seven per cent on 365-day instruments) in the face of a sharp decline in our Net International Reserves, which deteriorated by US$622 million. No wonder then that all international credit rating agencies downgraded Jamaica's credit rating over the past seven months.

Full effects not felt

Without a doubt, our current difficulties are linked to the severe financial and economic crisis being experienced in the global economy. As a consequence of the sharp contraction of economic activity in the world economy, bauxite and alumina production in Jamaica is down, and tourism earnings are down even if the numbers of visitors remain in place, and remittance inflows are down also. Indeed, the current national accounts do not reflect the full brunt of the effects of the international crisis. The full effects of the global economic storm have still not been felt in Jamaica and will only become evident in the next few months.

To a considerable degree, the severity of the current adjustments that the country is called upon to make is now the consequence of unrealistic revenue projections made last year. For example, the Budget for 2008/2009 programmed revenue growth of 19.3 per cent.

This was unrealistic to begin with and, in any event, the target was not achieved - the actual collections being almost 10 per cent lower than was budgeted. Conversely, expenditures turned out to be higher than budgeted.

Mixed signals

Another area of obvious management weakness concerns the mixed signals sent to the country as the global economic crisis gathered momentum. While the rest of the world's leadership was battening down, we were being told that the global crisis "would benefit Jamaica". As a consequence, the country failed to make the necessary timely adjustments. Put simply, we were like the people who ignore the hurricane warnings and who, when the storm hits, come out to put up the shutters. Generally, these types suffer worse damage than the rest.

My purpose here is not to lambaste the current administration, although they will have to accept a large share of the responsibility. Nevertheless, the issues go beyond that. The main issue, I believe, has to do with a political culture that has been excessively divisive and partisan and which has impeded the country's ability to develop the national consensus. One consequence is that we have been unable to tackle effectively those urgent issues facing the country which involve difficult national choices. These include issues of tax reform, educational reform, crime control, etc.

Fomenting social dislocation

Over the years, for example, both parties have contributed in fomenting social dislocation in relation to fuel taxes. We can perhaps take some comfort from the fact that general restraint was exercised by all concerned this time around.

This, however, should not blind us to the fact that much of the public distrust of political authority stems from the kind of recklessness with which elements of the country's political leadership has approached national issues over the years. Who can forget, for example, the promises made not so long ago to "double the salaries of nurses" and other public sector workers. Now the chickens have come home to roost. As the saying goes, 'cock mouth kill cock'.

The more cynical among us would say that this is the nature of politics. I believe, however, that we can do better. In any event, the current crisis does provide an opportunity for new beginnings. Certainly, the prime minister in his contribution to the Budget debate spoke at length about the need to put the 'tribalist' political culture behind us. Quite frankly, he could have done much more to convince us if he seized the opportunity to allow Parliament to have a meaningful role in the consideration of the Budget, and even more so the tax package.

It has never been clear why in Jamaica successive administrations persist with out current 'Nicodemus'-style approach to taxation, whereby a minister of finance comes like the proverbial 'thief in the night' to impose his tax package. In this scenario, Parliament is reduced to a mere rubber stamp. This is spectacularly highlighted by the fact that the so-called 'new taxes' were all being collected before Parliament voted to approve the Appropriations Bill which gave formal assent to the Estimates of Expenditure.

Little justification

If this 'Nicodemus approach' may have been justified in the past when there were extensive price controls and there was need to prevent 'price-gouging' and the amassing of super-profits by business monopolies, there can be little justification now in today's more competitive environment.

Indeed, in 1999, following the 'gas riots' of that year, it was recognised and accepted that there should be a greater role for Parliament in the taxation process, as it is in other parliamentary democracies. Accordingly, the Standing Orders of the Parliament were amended to provide for the establishment of a Taxation Committee to consider and report to the full Parliament on Tax Proposals.

Standing Order 65A states:

"The Committee on Tax Measures shall have the duty to examine all matters relating to the new tax measures for the ensuing financial year presented to the House and make such recommendations to the House as may seem fit and appropriate, the committee to consist of nine members and shall be required to report to the House within 60 days of any tax measures being referred to it."

Unfortunately, following the protests of 1999, successive administrations have ignored these provisions of the Standing Orders of the Parliament, and nothing has been referred to the Committee on Tax Measures.

It must be preferable, however, to have a process which would allow for sober, realistic and sincere dialogue with stakeholders about taxation proposals, than our current situation where two weeks after the minister of finance's presentation to Parliament confusion still reigns as to some of the specifics of some of the proposed taxes and their real effects upon firms and/or the general population.

Moreover, there is something fundamentally undemocratic about a system where taxes are imposed essentially by edict with neither parliamentary representatives nor affected stakeholders having any opportunity to participate in any meaningful deliberations regarding the proposed taxation.

Carnival of confusion

In the absence of such opportunities, the country was left with the 'carnival of confusion' visible in recent weeks, where the interest groups were forced to cajole and lobby on the airwaves and in the newspaper columns for a hearing of their views. At the same time, Customs and officials were unclear as to the precise details of the new taxes. Ultimately, Government was forced into unseemly and embarrassing reversals and changes to their original proposals.

Some may put all of this down simply to the incompetence of the administrators. While there may be some truth to this, at least part of the problem is also due to the failures of the process which we have inherited and which is increasingly unworkable in today's complex environment.

A system such as that envisaged by Standing Order 65A would not be easy to operate. It would require, first of all, sincerity of purpose across party lines, and a willingness to recognise the national imperatives and to place them above the search for narrow partisan political advantage. Some will argue that we are not ready for this, and that our politics is still too enveloped on cynical and short-sighted motivations.

But the question must be asked: 'If we can't reach for higher purposes now in the face of the existential crisis of the Jamaican nation, when will we ever do so?' This is the challenge for our parliamentary and national leaders. Two hundred and thirty years after the call of 'No Taxation Without Representation' helped establish the foundations of democracy in the modern world, we should by now be able to give full expression to this demand in our own national institutions.

Peter D. Phillips is an Opposition Member of Parliament. Feedback may be sent to columns@gleanerjm.com.