Dear Sir:

Re: Government Borrowing

A lot has been said with respect to the Government of Anguilla borrowing money for public expenditure. A lot of that lot has been negative and critical.

Historically, when economies are in recession; when Private Capital has ceased to flow, it is Government spending that has provided the basis for recovery. The USA, Great Britain, Japan, France, and Germany are but a few of the countries that come to mind in this regard. All Governments do it because there is no other way out of a Recession or Depression. Full Stop!

This Government Spending, generally funded through loans, whether from lending Institutions or by issuing Government Bonds, has provided the economic stimulus which job creation introduces into the Economy. These jobs provide the people with money to spend on goods and services etc. This spending provides the basis for providers to buy goods to sell, which in turn provides Government with revenue from which to repay the loans/bonds. There are both the Ripple and Multiplier Effects applicable to every dollar spent by Government, with positive results economically.

Those who are against Government Borrowing are sadly uninformed about how economies function, and cannot be serious in their opposition to the Anguillian Government borrowing money for Public Sector Expenditure.

Repayment? There is fear expressed of Government introducing Income Taxes to pay these loans. That is an impossibility, as it would destroy the Economy. Every single person earning an income on Anguilla has tailored his or her expenditure based on his or her take home pay. To deduct a Tax from that at source would lead to a collapse in the Economy. Surely the Economists at Government know that.

The time has come for the Government to be innovative. Introduce a Tax on the sale of Goods and Services at point of delivery, while at the same time abolishing Import Duties. Not a VAT which is both cumbersome and expensive - to administer, and on the citizenry - but a straight Sale Tax ,of say 10%, at the Point of Sale of the Goods and Services. The same as obtains in the State of Florida, where the Tax is 6%. Simplistically, the Importers goods will be less expensive to put on their shelves, and would be less expensive to the consumer than before, even with the Sales Tax added on. The revenue generated for Government would be at least 3.5 times greater than that generated on the same goods at Customs. The Sales Tax would be applicable to every item in a case based on the Retail price, as opposed to a one time Duty imposed on the CIF price of the whole case at Customs.

Government can monitor the collection of these Sales Taxes by requiring that each business in Anguilla be linked to the Inland Revenue Dept. real-time, by the internet, as a condition of the issue of the Business Licence. The Revenue Department would then have a live running figure of what Taxes I am supposed to pay on sales of services on any given day. I would the very next day rush over to Revenue and pay the prior days Taxes forthwith so that I do not run into accounting difficulties. If all providers do that on a daily basis when they are making their bank deposits, this would both alleviate any accounting problems for them and provide Government with a steady cash flow. All at little or no additional cost to me and any other provider of goods and services, or to the consumer.

This would require some hardware and software, and some technical expertise in this area. I cannot see the State of Florida denying an unofficial request from the Government, whether directly, or through an intermediary, for assistance in the implementation of such a system. But if they were to, this would be a very necessary purpose for Government to borrow in order to implement this program.

This program, from start to finish, can be implemented within 4 months. I suggest that Dr.Harrigan be immediately tasked to do it; not to produce Reports and Papers and to hire Consultants etc., but to do it!

Government must borrow, and I think that they are NOT borrowing enough at this time to jump start our Economy. They need to borrow enough to start The Valley Roads program, the Airport Expansion, complete/renovate the water delivery system, build the Government Headquarters etc. etc. These will create jobs which are necessary to infuse life into our Economy.

Government should invest now while money is cheap to borrow.

Thank You

Tommy Astaphan
Little Harbour

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