Many of the reasons often touted by politicians and policy makers about the ineffectiveness of targeted income support programs are “cliches”, says policy and strategy consultant Robert Lee.
He said while targeted income support was an option that put money into the hands of the specific recipients to spend on basic necessities, there were many reasons why it did not find favour among policy leaders and public officials.
“The often cited reasons: that it is prone to abuse with the income spent on alcohol and tobacco rather than basic necessities, that it stigmatises the recipients and kills motivation, and that it is socially regressive, are all cliched reasons,” he said.
“They are not compelling reasons to reject an income support program, especially when the tax on alcohol has been reduced.
“There is a more fundamental reason why targeted income schemes are put on the back burner, and the VAT exemption chosen as the preferred option to assist the poor.
“Targeted income schemes force accountability, quantification and measurement, transparency, and real time data, all of which would make some policy makers and officials uncomfortable.”
Mr Lee, who was an instrumental figure in setting up Fiji’s tax system in the ’90s, said should those in leadership and in policy making roles wish to ensure their socio-economic policies would assist in driving down poverty rates, it was essential to have targeted income support programs.
However, if they were not confident of this measure, policy makers would find every excuse to avoid implementing such programs.
“They would prefer programs that allow them to say “look at the number of different programs we have in place to support the poor”, and not “look at the results”, Mr Lee said.
He stated that the past 16 years of economic leadership did not lower the poverty dynamics in any significant way.
It did, however, shift the burden to families and friends working outside Fiji to provide income support to those in Fiji.
“The incoming overseas remittances of around $1billion is the equivalent of a new export industry sector employing 50,000 workers on an average wage of $10 per hour, or $20,000 per annum, who don’t have to show up for work. “Or the equivalent of 125,000 workers on minimum wage. Consumption increased but income, skill levels, productivity and work opportunities did not improve.
“It fuelled a boom in the retail sector and a spike in GDP, and diverted attention away from improving the competitiveness and overall structure of the economy, which remains weak.”
According to Mr Lee, the decision to retain VAT exemptions or replace it with targeted income support was both a policy and a moral and/or ethical choice.
“Today, 75 per cent of those in poverty are iTaukei and that percentage will continue to increase if we continue to follow the same underlying economic philosophy of the past 16 years.
“The VAT exemption is a poverty trap. Tragically, it is not the only one. A number of policies designed by policy officials in the last eight years, that are currently in place, have created a perfect storm that has put and continue to keep communities in poverty.
“We need a major change in both our economic and fiscal policy priorities.”
