Friday, December 12, 2008

The Business Tax: The Best of Bad Policy

Yesterday's meeting of the House entailed discussion about, what I believe to be, two of the most salient issues on the present Belizean agenda. First, with regard to the 5% business tax increase for telecommunication entities, I believe that our government has succumbed to a similar form of bigotry - one that is similar in taste, but distinct in its motivation - that consumed the previous administration.

The government, from what I have tried to garner, has not provided a single legitimate reason for specifically targeting the telecommunications industry. It consistently references the need to increase its revenues, and as a result, decided to go after the most profitable company, not industry, to achieve this increase. This is the best example of bad policy. There have been rumors that the government's motivation rested on the fact that Ashcroft has discontinued his payments on Intelco. A second rumor states that the government's intention to frustrate Ashcroft to the point whereby he increases rates and issues layoffs, thus paving the way for a third competitor to enter the market. Rumors, of course, are simply rumors. Nonetheless, when Hon. Mark Espat asked the Prime Minister whether he could assure the Belizean people that rate increases and/or job losses would not result, our Prime Minister simply evaded these pivotal concerns - concerns that should be taken into serious consideration when deciding to increase tax rates.

To conclude, the telecommunications industry has done wonders for ability to communicate: we enjoy the benefits of two fierce competitors, both offering low rates and innovative ideas. There are SMS bundles, Digicell Messenger, Gimme Dalla and the list goes on. But the list can only go on if these companies are allowed the resources to innovate. Putting pressure on their investment capacity is ultimately disadvantageous to the consumer, not to Lord Ashcroft.

(Seeing as this topic was fairly lengthy, I will discuss my opinion on the ICJ in the subsequent blog entry.)


Anonymous said...

I agree that there has been a lot of smoke and twisted logic if not out right lies on both sides. Let's stay with the facts: what is the rate of NET PROFIT to Sales, Rate of Return on Capital Invested, over the last few years! .... real facts not convulted ones made to fit a preconceived objectives. THis much I know, BTL's service sucks, BIG TME! and its rates, despite recent reductions, is nothing if not legal robbery .... check out what, for example, Digel is doing in the Caribbean and Central America. Facts only, please.

Democrates said...

Their Net Profits have been exorbitant, I admit, let us be fair. Our telecom companies are not like the oil companies, who for the past several years made exorbitant net profits yet still managed to charge high prices for oil. Our telecom companies have been making high profits, have been paying high taxes and have been able to keep rates competitive compared to other Caribbean countries. My main point is this. Having said all that, what is the justification for raising the business tax. It is clearly a sign of politics seeping into policy decisions.

Anonymous said...

"and have been able to keep rates competitive compared to other Caribbean countries" ...... Facts, please .... cold facts, like comparison tables of prices, profitability rates, etc ,,,, try Barbados and Panama, not to mention Jamaica and St. Lucia.

SaintJack said...

"we enjoy the benefits of two fierce competitors" - not if you are a landline user.

"...telecommunications industry has done wonders for ability to communicate..." - yes they have, but surely BTL and SMART have both just followed other international trends. Just like their "innovative ideas" - they aren't breaking new ground here, nor spending fortunes on research and development. (Also any new innovations may be good for users, but I bet they are also good for the companies too - I don't see their profits falling).

Hon. Mark Espat raised some very important questions, but also very clever questions. He knew the PM could never guarantee those things - he's not running the company, and he has no say in it. So how can he guarantee no job losses etc?

If you believe that BTL have defaulted on loan payments, then I am all for the gov. to pursue them no matter what. But raising taxes isn't the way to go. However, if court isn't an option (and i don't know if it is or isn't), then as a last resort, I support the gov, and have no sympathy for BTL - especially since they seem to be out & out blackmailing the gov (raise taxes and we'll cut jobs, stop sponsoring parks, giving internet to schools etc).

For all the media hype about this, I notice that BTL have not countered the claim that they have defaulted on the loan.

Democrates said...

With regard to the last Anonymous comment, I have been trying to acquire a comparison table to show Belize's competitive rates vis a vis the Caribbean but I have been unable to secure one. When I do, however, I will be sure to post it here. Nevertheless, I have spoken with two individuals - one working for BTL, the other for Speednet - and they both attest to the competitive rate theory.

As for SaintJack, while the landline rates are not comparatively low, keep in mind that over 60% of BTL and Speednet's profits come from mobile services alone. It is, and will continue to be, the fastest growing market in Belize. Secondly, you seem skeptical to admit that both have done wonders for our ability to communicate. Ok, but the mere fact that both companies have been following international trends does not detract from this point. To expect Belizean companies to set the bar on an international standard would be silly. But they have been able to, at the very least, narrow the gap between the telecom industry here in Belize and the rest of the developed world, especially considering we have such a small market to work with.

Mark Espat asked some hard questions, but to just say that they were difficult to answer does not excuse the Prime Minister from answering them; he cannot guarantee those claims, but he clearly is acting irresponsibly if he did not negotiate those items.

FINALLY, while I would love to spend the next few comments debating the advancements of BTL and Speednet, I would much prefer to discuss the efficacy of GOB's taxation policy on the telecom industry.

Anonymous said...

" Nevertheless, I have spoken with two individuals - one working for BTL, the other for Speednet - and they both attest to the competitive rate theory"
I still beg to disagree ...... BTL doesn't come close to being competitive either in service or rates .... e.g. their so called 'high speed internet of one meg is a joke: one meg is no longer considered 'high speed' and BTL does NOT deliver one meg - neither clean and consistent.