ECONOMY & TAX REFORM
Achieving economic growth through tax reform and direct investment in local businesses.
There is little dispute that the current tax system is in real need of an overhaul. The heart of changing the way tax is collected and managed is to achieve a stronger economy through the adoption of a more economically neutral tax system featuring much lower marginal tax rates, especially for local businesses.
It will also mean cutting Council expenses, reducing the budget and dealing with current and future budget deficits and debts, and redirecting the savings into giving jump starting a vibrant economy.
Proponents of higher spending have sought to co-opt the language of tax reform, especially the renewed aversion to tax loopholes, to disguise their goal of raising taxes.
Improved economic performance is by no means the only reason to pursue tax reform. The tax code can, and should, also be made much simpler for taxpayers, cheaper for the government to administer, more transparent, and fairer.
Tax reform does not mean finding smarter ways to use tax policy to direct economic decision making. On the contrary, as a general rule, the economy would perform better if economic decisions were guided entirely by relative prices presented entirely free of government and Council interference.
Since the chief goal is and should be, improved economic performance, a centerpiece of reform should be a significant tax-rate reduction, especially for women, most of whom are only trying to earn enough for their families next meal and just to get by.
Tax rates are the most obvious, and often the most consequential elements of a tax system affecting economic performance.
Revenue-neutral, growth-enhancing tax-rate reduction, in turn, depends on broadening the tax base and this is why there will be programs that will make the Kanifing Municipality the absolute startup and investment capital of businesses, innovators, and entrepreneurs.
Tax reform’s goal of improving economic performance is worthwhile and sufficient to warrant the effort.
Allowing the economy to continue to underperform for no better reason than tax policy inertia is unacceptable.
There are many good options for tax reform that can achieve a stronger economy by reducing or eliminating the tax biases against saving and investment, lowering tax rates, simplifying the tax system and having big corporation pay their fair share of taxes while enjoying new tax breaks for increasing salaries.
The case for tax reform starts on the business side because that's where an overhaul could make a direct contribution to economic growth: the attract of more investors and business, and the creation of more jobs.
Cutting the corporate rate would make a big difference in how businesses manage their earnings, be more likely to stay headquartered here and their workers will bring home more earnings.
The lower the tax burden, the more competitive our local small businesses will become, and when we invest in them, the more likely they will grow.
The tax system should be fairer to individuals, and businesses should get a break to be competitive with other cities in Sub-Saharan Africa.
There is a way to get this done to improve the prosperity of Kanifing Municipality in the short-term without stealing from the future generation of our municipality.
So while we understand the temptation to lower individual tax rates, we need to see a realistic plan to pay for cuts.
Everyone agrees that the current tax system is outdated and holding back the Kanifing Municipality economy.
Changing this system should focus on removing or at least reducing the main impediments to economic growth.
In recent years, The Gambia has been losing the regional competition for businesses. Prominent Gambian firms, such as the Taf Construction, which was right here in Kanifing Municipality have moved their headquarters overseas through a process known as corporate inversions.
The chief culprit is Gambia’s unusually high corporate income tax rate. Although it was reduced, it remains one of the highest in the sub-region.
It puts Gambian businesses, Kanifing Municipality in particular at a tremendous competitive disadvantage, leaving our residents and investors — and the economy as a whole — worse off than they would fare under a more reasonable tax burden and better tax collection and management system.
Any tax reform plan should drive the corporate tax rate as low as possible — if not get rid of it all together.
A lower corporate tax rate can help reverse the inversions. The Gambia and Kanifing Municipality, in particular, can win the competition for international business by also moving toward full expensing.
This would certainly help workers. Most of the recent economic research shows that workers actually pay a majority of the corporate income tax in the form of lower wages.
High corporate tax rates also make it harder for businesses to invest in new equipment, factories, and research and development. Slow investment caused by high and distortionary taxes further limits job creation and wage growth.
This isn’t some hidden truth known only to economists and this is why we would reverse the negative economic consequences of the current system and help spur economic growth.