Home / Op-Ed / Op-Ed: On Jordan’s preposterous move to talk up importance of manufacturing, other sectors while ignoring calls to remove burdensome taxes
irfaan jordan

Op-Ed: On Jordan’s preposterous move to talk up importance of manufacturing, other sectors while ignoring calls to remove burdensome taxes

The Minister of Finance, during his featured address at the GMSA’s dinner, spoke unctuously on the importance of the manufacturing and services to GDP and the economy. Having underscored the manufacturing and service sectors as key economic locomotives, but yet imploding the very same sectors with a slew of tax measures while deliberately ignoring the perennial calls of businessmen for an immediate withdrawal, is simply preposterous.

A closer look at the manufacturing sector would reveal that, the average contribution of rice and sugar to the manufacturing sector has reduced from an all-time high of 46% in 2015 to 39% at the end of 2016. Yet the government amassed the impudence to propound their claim that growing the manufacturing sector remains a priority, when the truth of the matter is, within one-year in office the manufacturing sector contracted by 9.4% or $2.7 billion.

The principal cause is the government’s lack of vision. The imposition of tax on heavy duty machineries and key industrial equipment, compounded by tax on electricity and water, not only will raise production cost but overall prices of commodities. Hence, higher prices will reduce demand for finished goods at both the local and international market. Failure to keep the largest employer and one of the main generator of foreign exchange, the sugar industry, buoyant will not only fray economic gains, but will also put us on a trajectory towards import substitution, since import will become relatively expensive as purchasing power depreciates.

Overall the Minister’s address was a slew of unrealistic goals. The pipe-dreams objectives outlined in the Green Strategy Development Agenda (GSDA) resonates more like a string of “cut and paste” long-term development objectives of a highly developed country. Failure to outline coherent policies to address current economic issues such as damp investment climate, flimsy economic foundation, cyclical upswing in prices, shrinking middle class, and iniquitous tax burden point to comatose and amateurish state of this government.

Starting from the heavy tax burden, it must be categorically noted that the slew of tax measures instituted by the Government has severed disposable income as a result of higher prices: directly through the levying of tax on commodities, and indirectly through the increase in production cost due to higher electricity price. Consumers, businesses and central government have all been affected.

As consumers spend less, and businesses make less profit, revenues from consumption tax such as VAT, and income tax will reduce -tax collection is already down by G$3 billion as reported by the Minister of Finance.
With this burgeoning trend, when external debt and balance of payment problems become uncontrollable, the government not only will lose its nerve, but will flip-flop into more confusing hybrid policies.

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