The blogmaster studied the declaration of election expenses incurred by candidates in the recent St. George North by-election and it confirmed his views about many things, one being the entanglement of the duopoly in the body politic of Barbados for the foreseeable future.
Discuss for 100 marks
Grenville Phillips II, leader of Solutions Barbados
Tax on companies is called corporate tax. Tax on personal income is called income tax. In 2015, the Government received $210 Million from taxing companies and $452 Million from taxing individuals’ income. The Government also received other taxes from individuals. For example, much of the $811 M from VAT and $150 M from property taxes.
Companies normally receive significantly more revenues than what workers collectively earn. Therefore, why must workers carry more than twice the tax burden as companies? The answer lies in a ridiculous legally permitted loophole that all companies are instructed to exploit. The Government of Barbados has decided to tax companies on their profits.
A company sells products and the total amount earned is called revenue. However, the company had to pay for materials and labour to produce the products. The costs that a company spent to produce the products are called expenses. When expenses are deducted from revenue, the result is called profit.
Since the Government of Barbados taxes profit, the reasonable aim of company owners is to reduce the amount of profit in order to reduce the amount of taxes that must be paid. How can a company reduce profit and still grow the business by selling more products and making more revenue? Profit can be reduced by inflating expenses. How can expenses be inflated? There are diverse ways, including claiming any personal expenses that can reasonably be justified as company expenses, and claiming investments in new products.
There are many personal use items that can be justified as necessary for a company to develop and sell company products. Such items may include: cars, cell phones, clothes, lunches, dinners, gym memberships, home help (eg. maids), home maintenance (eg. gardeners, painters), caterers, donations, overseas travel, taxis, overseas hotel costs, tools, furniture, appliances and utility bills.
A company may invest in a new building and new equipment to increase the number of products that can be developed in the future. However, even though no products have been developed from this investment in the taxable year, the Government allows the company to include this spending in the company’s expenses for that year. This will significantly reduce the company’s profit, and therefore, the taxes to be paid.
If company expenses balance or exceed revenue, then companies with very high revenues can legally avoid paying taxes for decades. Since the Government needs revenues to fund social services such as education and health care, then instead of asking companies to share the tax burden, the Government instead increases the tax burden on individuals.
`Why is the Government so afraid to fairly tax companies? One likely reason is that companies have admitted to giving money to political parties’ election campaigns. Such contributors normally qualify as proverbial pipers. In the 2013 general election, the BLP candidates reported spending approximately $1.2M and the DLP candidates reported spending over $1M. The winning candidates spent an average of over $41,000, while the losing candidates spent an average of over $33,000. Is there a better and more equitable tax policy that is not influenced by the pipers?
Solutions Barbados published its fair tax policies over 2 years ago and they have undergone over 2 years of rigorous public scrutiny. It is proven that when taxes are low, simple to calculate, easy to pay, and easy to check for compliance, governments normally receive more revenues. Therefore, corporate tax rates will be reduced to 10%, and applied to revenues with no deductions.
In a Solutions Barbados administration, companies can avoid the wasteful costs and effort required to inflate their expenses to trick the current system, and they will finally be allowed to equitably share the national tax burden. It will also allow personal income tax rates to be reduced to 10% with no deductions, and VAT and the NSRL to be abolished.
Since Solutions Barbados is not funded by any of those entities who fund the BLP’s and the DLP’s political campaigns, we have no such pipers, and can do what they simply can never do. This includes implementing policies that can allow Barbadians to finally prosper, rather than simply appearing to.
In a document titled ‘Getting there on time:notes on the regulation of campaign finance in Latin America the author in great detail outlines issues of campaign finance our region continues to be challenged. The BU household hardly expects the BU family to read the 122 page document although we highly recommend it.
The unexpected annoucement recently by Attorney General Adriel Brathwaite that the government has de-prioritized the implementation of anti corruption legislation should be of concern to civic minded Barbadians. By sharing a few excerpts from the document we hope to explain why the problem just got even bigger.
The opening paragraph of the document:
The relation between money and politics has come to be one of the great problems of democratic government’. It is with this sentence that James Kerr Pollock began his pioneer volume on practices of political financing in the United Kingdom, Germany, and France, published in 1932. This assertion, as well as his appeal to public opinion to understand that ‘[h]ealthy political life is not possible as long as the use of money is unrestrained’, are truer today than in Pollock’s own time (1932: 328). The spread of democracy, the growing complexity of electoral processes, and the awareness of the risks posed by corruption to the viability of democracies have placed the financing of political activity at the center of the public debate worldwide. The issue has become global and urgent.
Private financing is a legitimate and necessary tool for political parties and their candidates, with both its virtues and its dangers. Among the former, it allows political parties to engage more with society. Nonetheless, the possibility of raising private funds to finance political activities opens up an array of considerable risks to democracy. The first and most serious of these is the possibility of using money from criminal or illegal activities for political ends.
The effects of faulty campaign finance regulation can be as negative as the absence of regulation, because any effort to regulate tends to raise expectations that new rules will at least be capable of moderating the worst abuses. Failed reforms leave behind a sense of disillusion and cynicism and become a barrier to new regulatory efforts.
This category includes those instruments that regulate the flow of economic resources to political activities, both by controlling and prohibiting the use of certain sources of financing (‘negative’ or ‘passive’ regulations) and by stimulating the use of other sources (‘positive’ or ‘active’ regulations). The more widespread controls apply, as one would expect, to private political donations. Almost all democracies restrict the use of at least some types of private donations, albeit with very uneven levels of intensity. While some countries (Greece, for example) simply impose a cap on contributions, most modern democracies place an absolute prohibition on the use of certain sources of financing. The limits on individual contributions range from very low amounts in some countries to approximately USD 200,000 per year in Japan. The prohibitions, for their part, generally pertain to foreign donations—prohibited in dozens of countries—and certain types of corporate donations, typically those from state enterprises or firms that benefit from contracts or licenses granted by the state.
On the 26 January 2008 BU posted the following blog in response to questions about voting irregularities reported in Deacons on election day, the constituency of St. Michael North West seat was contested between Chris Sinckler and Clyde Mascoll. Sinckler won by 340 votes. Continue reading
Prime Minister Fruendel Stuart admitted he witnessed voting irregularities
In reference to the current debate about corporate financing of the BLP and DLP, The Mahogany Coconut Group quotes from an article, it submitted to, and was published by BU shortly after the last (2013) General Elections
“ While we shout from the roof tops about what took place on elections day, we bury our heads in the proverbial sand, by refusing to ask one simple question: How did the two political parties, both claiming to be rather financially impoverished, raise a conservative estimate of over twenty million dollars to pour into a three week campaign? We ask Dale Marshall (BLP) to tell us about the successful “cake sales and car washes” that raised their money. We ask Ronald Jones (DLP) to tell us more about the “$500 here and there” that was given to his party by well wishers. Let’s face it; elections are now big business and the corporate shadows are well entrenched in both the Barbados Labour Party and the Democratic Labour Party.
Anybody who believes that car washes, cake sales and a five hundred dollar donation here and there, can raise this large amount of money, needs to seriously wake up from his/her slumber!
The truth is that deals are common place in our politics and state agencies are used to distribute largesse. There is a sophisticated corruption sanctioned by both parties. We hear about consultants and contractors being given work for which they are unqualified. We should pause and thank the majority of our civil servants who are honest, hardworking and not corrupt, like some found in other countries.”
Full article link : http://mahoganycoconut.blogspot.com/2013/02/barbados-elections-2013-and-cash.html
How did two poor political parties raised millions to fund a three week political campaign?
The Mahogany Coconut Group submits that the real vote buying is in the upper echelons of our society. What we witnessed on Election Day was some voters getting cash, cell phones, IPods and a bill paid here and there. The real votes were bought by those shadows- black and white, – who Dr. Don Blackman referred to a few decades ago! Of course Dr. Blackman talked only about white shadows but the corporate landscape has dramatically changed over the years – we now have shadows of all colors and ethnicities.
While we shout from the roof tops about what took place on elections day, we bury our heads in the proverbial sand, by refusing to ask one simple question: How did the two political parties, both claiming to be rather financially impoverished, raise a conservative estimate of over twenty million dollars to pour into a three week campaign? We ask Dale Marshall (BLP) to tell us about the successful “cake sales and car washes” that raised their money. We ask Ronald Jones (DLP) to tell us more about the “$500 here and there” that was given to his party by well wishers. Let’s face it; elections are now big business and the corporate shadows are well entrenched in both the Barbados Labour Party and the Democratic Labour Party.
Anybody who believes that car washes, cake sales and a five hundred dollar donation here and there, can raise this large amount of money, needs to seriously wake up from his/her slumber!
