A few days after Finance Minister Audley Shaw attempted to level the playing field on alcohol tax in Jamaica by imposing a tax based purely on alcohol content by volume and ending the unfair advantage that the tonic wine market had enjoyed for seven years, executives at J Wray and Nephew were able to secure a meeting with the prime minister – on a Saturday.
As it was gleaned, the prime minister was moved to seek a reversal in the taxes in favour of J Wray and Nephew, a company 95 per cent owned by CL Financial of Trinidad. It was also determined then that Finance Minister Audley Shaw was not in the least amused. As the liquor giant refused to release its stocks, and bars across Jamaica saw the move as another bungling by the government, Shaw uttered words to one journalist: “Withholding stocks will not deter me.”
More than two Saturdays later, he has been drawn back in line as the flip-flop tax, brought about by a flip-flop prime minister, has been officially imposed. Although Shaw’s initial move was a worthy one – bringing the “tonic wine” market into the tax net for which they had enjoyed a “holiday” for seven years, Wray and Nephew was smart enough to recognise that the liquor-drinking public would see it differently.
“A wah Audley Shaw a gwaan wid? Like ‘im nuh know weh ‘im a do”, one bar owner said to me as I tried in vain to explain the new tax regime to her. Years before, beer manufacturer Red Stripe had been at a disadvantage as the “tonic wine” market ate into their share of the market as these “wines”, some of which had 18 per cent alcohol by volume, gave drinkers a cheaper boost and encouraged irresponsible drinking.
For seven years Red Stripe had paid a tax at a rate which equated to 1000 per cent of what Wray and Nephew had been paying on tonic wines.
To date the executives at Red Stripe have not been as lucky as those at Wray and Nephew. They have not been able to secure a meeting with Prime Minister Golding, on any day of the week, and definitely not a Saturday.
As the chief “mind-changer” in charge of the country’s business, in 1995 Seaga called Golding a vacillator. In May of this year as the streets of Kingston erupted in violence over the Tivoli incursion, a young JLP politician telephoned me early one morning and gave his best concise analysis of his prime minister.
“Whenever a crisis arises, he goes back into his head too many times.”
Well, the prime minister has neutered his finance minister by placing a tax on tonic wines of $960 per litre of pure alcohol while hitting Red Stripe with one of $1130 per litre of alcohol. Unbelievable!
That tax will bring additional hurt to Red Stripe which endured the fall-off in market share as Wray and Nephew made a literal killing by the tax loophole for a full seven years.
In the new alcohol tax regime, it punishes the company which played by the rules but eventually got shafted, while rewarding Wray and Nephew which for seven years must have enjoyed windfall profits from the loophole in what was then an inequitable alcohol tax regime.
As I understand it, Red Stripe is not leaving Jamaica, the land of its flagship brand. What it intends to do – I have been informed – is move its production facilities to another country where its costs will be less as local consumption is expected to fall in light of the increased tax.
The jobs, jobs, jobs which the JLP had trumpeted in its 2007 election campaign will leave Jamaica and add to an already overburdened state which has shed thousands of jobs since the JLP came to power.
One becomes scared that someone will seek to have another meeting with the prime minister. Should this happen, it is likely that he will flip-flop again, the Finance Minister will shout again, “I will stand my ground”, then later there will be another change as Audley Shaw gathers his tail between his legs and whispers and whimpers as he sneaks away in silence.
Is the government anti-business?
Prior to the imposition of any new tax regime, the government should have had all players on board. It is never an easy business to rattle the cages of big businessmen in Jamaica, many of whom are big funders to the political parties and will be expecting a “break” one day.
Many times the temptation is for the Cabinet, in this case the JLP administration, to convince itself that it has the handle, the right to dictate the affairs of this country to businessmen who consider it their duty to control the real power in this country. It is therefore not an easy business for any administration to forge consensus as the government did in its behind-the-scenes meetings with the big financial players in the months leading up to the JDX, a programme which gained high ratings across the global landscape.
At the very least, Red Stripe, Wray and Nephew and Wisynco (which has been hit with a shock-attack caffeine tax), should have been summoned to the finance ministry and many meetings held at lower levels in an effort to hammer out the best compromise. Strong negotiating skills on the part of Shaw and his team would have been needed while recognising the culture of business in Jamaica, especially from that business cohort which has long believed that it is their right to continue to make money with the least amount of competition.
Instead, Audley Shaw snorted like a big red bull in the pasture and threatened to charge without the attempt to sit down with big business and con his way into their hearts. That, after all, is what they would have attempted to do to him had there been such meetings.
It is therefore safe to assume that the Cabinet, or at least Shaw and his technocrats, felt that negotiating skills were unnecessary and instead the snorting of a red bull was considered the best way forward. In the mix, Shaw forgot one main player, his flip-flopper-in-chief, Prime Minister Bruce Golding.
For now I hope you find it in your heart to embrace peace, and allow love and merriment to enter your life in this Christmas season.
By: Mark Wignall