Moral hazard…

first_img…and JordanOpposition Leader Bharrat Jagdeo pointed out that by offering tax amnesties to those folks who haven’t paid their taxes, Finance Minister Winston Jordan was opening up serious “moral hazard” questions. The PPP’s General Secretary also noted this danger was identified by the IMF. Well!! Who told Jagdeo to raise this moral hazard danger!??!! Jordan came out swinging: “I don’t know what’s all this nonsense about moral hazard Jagdeo’s talking about!!”This reaction was so heated and personal your Eyewitness assumed Jordan thought Jagdeo was accusing HIM of some moral lapse…like being caught in flagrante delicto?? But it soon became clear Jordan’s ire was raised because he didn’t fully comprehend the meaning of the term “moral hazard” as used by Jagdeo, who’s an economist. As such, the term refers to a situation when somebody has an incentive to take risks that OTHERS will pay for.It’s like the fella who’s carelessly installing expensive but required electrical wiring because he has big home insurance: he figures he’ll just buy a new home if the place burns down!! In the case of the taxes, all Jagdeo said was, “People know that when you have tax amnesties, anyone can go in there and work out special deals because it is not transparently done.”Now he was talking as an economist who’d been Finance Minister for years and President for another 12!! He KNOWS what goes on with these “amnesties”!! Jordan, however, insisted, “There would be no reduction of tax; none at all…it is just the penalties that would be waived.” From his reaction, it’s even clearer Jordan really doesn’t understand the ramifications of “moral hazard” – which is fatal for a man in charge of our national finances.He should’ve considered Jagdeo’s caution from at least two different perspectives rather than his rose-coloured glasses. Governments in general – and this government in particular – may have policies that are straight up. But the policies have to be executed by INDIVIDUALS – and this is where moral hazard enters the picture. Take the duty-free policy on vehicles for returning Guyanese…the policy’s very clear…but we know about the runnings – like with the Mook’s Lexus SUVs!!So, with the tax amnesties, shouldn’t Jordan conduct a check (an audit!?!) on how the amnesties were applied. The second area’s even more fundamental – and Jordan should be spanked for missing it. In Guyana, taxes have to be paid ahead of time – quarterly. A businessman who’s allowed to NOT PAY ON TIME – with no penalties imposed – will be encouraged to go this route. THAT’s moral hazard!!The Government loses because it has lost the opportunity costs of the taxes not paid up front!And we wonder why the economy’s tanking?!…and Amerindian (under) developmentPM Nagamootoo, in his role as apologist for the PNC-led Government with a column in the Chronic, confronts moral hazard issues every time he writes!! He recently expatiated at length about how much the Government’s done for Indigenous Peoples. One wonders which world he’s living in!! He mentioned the radio station – broadcasting Government propaganda day and night!! He spoke of his visit to the Rupununi last year when he observed the rainy weather flooding – apparently completely oblivious to the same flooding this year. Meaning nothing was done about it!! He went on and on about all kinds of innocuous Government programmes – all part of the Government’s pappy show about “doing something”.But reality kicked in when Allicock, the individual who he boasted invited him to the Rupununi, was quoted in the same Chronic bemoaning that 40,000 out of 48,000 Amerindian youths were unemployed!!So much for the Hinterland Employment and Youth Service (HEYS) programme Nagamootoo boasted about!!The sad fact is Nagamootoo is just a shrill PNC shill!!…in constitutional interpretationThe moral hazard question was raised when former PPP Exec Ramkarran – noting all Richardson had to show was the Parliament’s amendment of Art 90 “adversely affected” Art 1 and 9 to be unconstitutional – yet praised the CCJ’s decision.Denying thousands of citizens from contesting the presidency doesn’t “adversely affect” democracy?last_img read more