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Analysis: Tax Rebate or Disaster?

NFP’s Parmod Chand admits that businesses will not be able to sustain the promise of a $5 minimum wage. Many employers recently, including the TCF Council had gone public to
30 Oct 2018 11:55
Analysis: Tax Rebate or Disaster?
National Federation party candidate, Parmod Chand

NFP’s Parmod Chand admits that businesses will not be able to sustain the promise of a $5 minimum wage.

Many employers recently, including the TCF Council had gone public to say that a sudden increase in the minimum wage to $5 an hour will see substantial job losses and wider consultations on such matters is necessary.

As the promise about the $5 minimum wage has started to lose ground rapidly among businesses and ordinary people, Mr Chand now claims that NFP will give employers tax rebates to cover the increase in the minimum wage to $5.

Probably this is the loose and impractical “package” that the leader of NFP was shy to admit during the debate with the A-G.

Speaking in Hindi, he said: “If your annual income is $500,000, you pay $5 an hour. If you pay $3.50 or $4 an hour right now, you will need to pay an additional $1 an hour.

“So, every month, for that amount of an extra $1 per hour per person, we will give you a tax rebate. For three people, for 48 hours, we will give you tax rebate of $192 – $195.”

This statement by Mr Chand clearly reveals that NFP has finally admitted that the $5 minimum wage is unsustainable for businesses.

Now, even the damage control idea of a tax rebate has many flaws and will dry the public purse and blow up the Government budget.

While NFP has again not provided any cost estimates for this new proposals, internal estimates are that this may cost Government around $700 million to $750 million annually. Such a scheme to give rebates will be an administrative nightmare.

While NFP has been talking about debt, this clearly will pump up the nation’s debt, unless NFP plans to cut back on expenditure programmes or raises taxes to similar amounts. The package is still mathematically loose.

Apart from the cost implications, there are fundamental flaws in the idea with a rebate. Income/turnover is not the same as profits. So businesses whose turnover maybe more than $500,000, they may still be making a loss or minimal profit.

So while their cost will increase because of the wage increase, they will not be eligible for the tax rebate. This will worsen financial and cash flow situation and force these businesses to shut down, laying off thousands of people.

What will happen to farmers who don’t file tax returns? They do employ farm hands who are unskilled. But, because they do not file tax returns, they will not only be forced to pay their farm hand $5 an hour, but they will not be able to get any rebates.

Will NFP start by asking all farmers to file in their tax returns?

What will happen to households who hire people to work as housemaids, cleaners, gardeners? They will be forced to pay $5 an hour? Will each household now start filing a separate tax return for their maids? Or, if a grandmother is looking after her grandchild, will the household claim that they are paying her to look after the child and claim tax rebate on that?

What will happen to those workers who currently get $5 and their pay goes to $8 or $10? How will NFP give them a rebate? These workers would be working for bigger companies. How will these companies sustain it? Or, will we see people closing up big companies and leaving our shores? The garment factory owners have already said they will.

Mr Chand’s leader has already talked about reducing duty on imports which will mean any supermarket will be able to buy noodles from overseas and flood our market.

What will happen to the workers who work in a noodle making company? How do we compete with cheaper overseas products?

Their leader Biman Prasad knows that the duty protects the employees who work in companies such as a biscuit factory. Will we start buying all our biscuits at cheaper rates from overseas?

What will happen to these workers?

Has NFP done an impact study on prices or inflation?

Or are they waiting to do all of this in their first 100 days in Government?

When Mr Chand talks about tax rebates to subsidise increases in salaries, he needs to show people which countries have successfully done this already?

Which country in the world does this as it is administratively hard?

There can be lot of abuse as businesses who can afford to give pay rise over time will shift burden on Government. How will NFP ensure this does not happen?

Or will they come up with another plan and add this on their 100-days to-do list?

Pies in the sky is what NFP is cooking up right now.

More cooking will be done in their 100 days and when small businesses start cooking their books, our country will very well head towards a financial/economic disaster that will be irreversible.

Edited by Epineri Vula

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