import levy reform: will it work?

Will it work?

Government’s apparent haste to push through levy cuts may have nothing to do with corruption.

They appear likely to be pushed through with the best of intentions.

Many Cook Islanders, such as those building their own houses, may benefit. Other positive outcomes may be numerous. Cook Islands News quotes Deputy Prime Minister Dr Terepai Maoate as saying that the planned phasing out of import levies is government’s first planned project:
“which will make goods cheaper and keep more money for business to  reinvest ... we’re confident that it will boost the economy and be a win-win for everyone.” (Cook Islands News Thursday 19th January 2006)

Other benefits may include a lessening of state administrative costs, although this too might be a question of degree considering that items like cars, beer and ciggies still have to be counted.

Will cutting import levies work? Will it result in a “win-win” situation for “everyone”?

Giving the private sector an additional $10 million to play with may “boost the economy” but exactly which part? In the past, when government was encouraged by the private sector to allow open shipping, for example, importers promised that significant savings would be passed on to consumers.

Later, when it was pointed out by the media that prices continued to rise, importers said that shipping charges were only a small part of total import costs. In other words, no savings for consumers.

Could this happen again?

Historically, increased economic activity has produced uncertain returns for consumers.

In 1984, for example, personal income taxes returned 18% of all government revenues. By 2004, personal income taxes returned 24% of all government revenues, a near 50 per cent increase in 20 years.

Impressive. However migration continues to be a problem with long-term calls by MFEM for labour and, now, migration surveys to be conducted ignored by successive governments. Anecdotal evidence concerns costs of living as a leading factor for migration. Minimum wages are $4 an hour, barely enough for a loaf of bread.

Why this apparent contradiction?

Again, given the lack of proper due process within government, it is hard to tell. It could be, however, that gaps between rich and poor are getting wider, as elsewhere.

Import levy cuts: governance gaps
Import levy cuts: short term suggestions
Import levy cuts: long term suggestions
Import levy cuts: conclusion
Import levy cuts: whole submission