Tuesday, January 25, 2011

Where is the Limit?

So I'm wondering where the limit of the Kittitian's patience is for the latest moves by the government. Many people believe that the government is corrupt and that the current Prime Minister stole millions and has it in a Swiss bank account somewhere. Many others believe that the opposition leader is no better, particularly after he seemed to be offering to sell out the country and was allegedly caught on tape doing just that. Whether either of these accusations are true (and I'm not suggesting they are) doesn't really matter, because people believe the allegations regardless. Things got rather interesting during the latest elections when both sides allegedly tried to win votes by providing houses, flying in far-away Kittitians (which they'd do again), buying folks appliances, and employing all kinds of shenanigans. For whatever reasons the votes went the way they did, I'm wondering if there are any regrets (kind of like Bush, Round 2).

In the last few months, we've been hit with the following:

1) A 17% VAT tax. Not only is it higher than other VAT implementations in other much larger countries (who can absorb it), but it's being applied to essential goods & services that would not normally be taxed - like baby food, medicine, and even hospital care. My favorite is the argument the PM made that the reason some other islands were not paying VAT was because they had personal income taxes - did people want him to bring those back???? - See #4. They're shaming businesses into paying up, but I'm hearing through the grapevine that, unsurprisingly, many businesses are still waiting to see their refund checks from the gov't. Restaurants are paying 17% VAT for goods necessary to run their operations. They must also collect 10% from customers + an extra 2% for an "Island Enhancement" fund (whatever that fund is, it was initially touted as going by the wayside thanks to the VAT - well, they lied) and submit that to the gov't monthly along with Social Security taxes. Restaurants used to have to add 9% to menus for the gov't and then would usually also charge a 10% gratuity for their staff. Thanks to the increases, owners must now charge 12% for taxes so are either lowering gratuities or removing them altogether trying to keep patrons unaffected. Does anyone win in this scenario?

2) An 85% increase in electricity tariffs. Rams grocery store(s) already reported that this would increase their bills to $4 Million EC (about $1.5 Million USD). Of course, they're going to have to pass this along to the customers in higher prices. So is every other business. Some are even cutting hours of operation to cut costs, which also cuts salaries...

3) Workers are seeing a .5 to 2% increase in their social security levies.

4) Rumor has it that the government is talking about reimplementing a personal income tax in as little as 2 month's time. UPDATE: To give an equal voice, the PM recently denied such a proposal.

5) Some disgruntled auxiliary workers just announced that that they were told they'd be receiving salaries below the minimum wage. If a business tried to do that, they'd be stopped in their tracks. As it is, trying to do the littlest change to worker benefits or hours results in 2-week notices, shutting down (sometimes), and all other kinds of hoops to jump through so the company can do what it needs to do. Apparently though, the government can just bypass all those pesky rules. Supposedly, the first to be affected by this will be the Parks & Beaches Unit. Now, I have to admit, I've never seen a government worker every clean up a beach, but that's besides the point. If this is really happening, then the PM's earlier denials might make his "outrage" over rumors of an income tax seem less believable.

This is the the political party for "labour"? Really? Anything positive that this government has accomplished could be on the brink of being overshadowed by a bad miscalculation. Does anyone really think think they can overtax everyone to get out of debt? People have already started brown-bagging it to work, hurting restaurants. There's less money to sponsor fun events, less money to donate to causes that need them, less money to start new ventures. The gov't really expects to pull itself out of debt using money pulled from the poorest people? Jeez, good luck with that. There's only so much tourists and investors will take too - so tread lightly there.

There's certainly less for us to spend. We were already pretty frugal about our electricity usage, but I've lowered the refrigerator temp and got us down to 2 loads of laundry per week with only one of them going into the dryer (sheets, underwear, towels). The rest is being hung outside, despite the rules of our complex, and I've noticed that our neighbors are starting to do the same (I expect a polite letter from management any day now). Luckily, it's been cool enough to ditch the ceiling fans too, for now. Although we never went out much, we are now doing so even less. I say all that not as a "woe is us," but as proof that our cutbacks will affect businesses and the government's expected windfall.

We're not the only ones. This isn't good for anyone and most certainly isn't going to do much for the country's debt-reduction program when people stop spending or hiring. I doubt it'll improve crime issues either. Speaking of crime, many enterprises are paying for security measures to protect themselves and their customers - that ain't cheap. How much more does the gov't think businesses can take to their bottom lines? In fact, a number of businesses are for sale (under the radar) or are teetering on the brink of insolvency. Does this make sense? I'm not against taxation; you can't get something for nothing, but neither can you break the backs of the beasts you're burdening.

It's true that people will not always like the medicine you're spooning them, no matter how necessary it is for their "health." On the other hand, when there are side affects, you sometimes have to change the prescription. Add beliefs that the reason they're being forced this bitter medicine is because of a misdiagnosis (in this case a belief of mismanagement and corruption) and you've got some unhappy patients. Unfortunately, whatever the screw-up, they likely still have to take their medication if they want to get better (maybe, one can only hope). Of course, the doctor keeps on treating...sometimes he gets it right; sometimes he gets it wrong. Whether the recipients benefit or not, everyone pays (literally).

So my question is - where are people's limits? And what will people do when they reach them? Apparently, I'm not the only one thinking this. We've been labeled a higher risk on the Aon 2011 Political Risk map and I don't know the date of this article, but it still resonates. While I am not implying that any action needs to be taken at all (there's always wait and see), the question still begs to be answered. How far can people be pushed and what are their options should they reach the breaking point? Per the commentary article, there do seem to be a couple of routes here for people to shed a government who's lost its luster in a "polite" way, but will people be patient enough to wait? Look at Tunisia. It was a rather stable country in Africa, but greed, mismanagement, and higher prices (among other things) started protests and a ruler & entire government was ousted. Ditto Egypt. Yemen. Americans got so sick of both parties that a somewhat new one emerged (The Tea Party). You can keep pushing to see how much people will take, but don't be surprised when they start to push back.

The last time St. Kitts saw any type of true unrest was back in 1967 during a failed government takeover (although that one didn't really originate from "the people"), so luckily, violence doesn't seem to be foremost on people's minds. Of course, no one was trying to overtax them either. Let's hope cool minds prevail and that those in the opposition (even if within the same political party) come up with an actual alternative, rather than simple grandstanding (and more of the same). Whether that happens at all, during the next election, or before will depend on the will of the people. Democratic governments might want to throw those people a bone every once in a while (and not just during their election campaigns) before they get bitten. BTW, that was an observation not a threat and could apply to every democracy that's taking more than their giving.