Straw man fallacy

Please permit me to comment on a letter by Mr Ruel Johnson (SN January 6, 2016: ‘It is good to show we are capable of clemency but first we must show we can deliver justice’).

That letter was partly in response to a letter by me in Stabroek News January 5, 2016 ‘Treatment of Sattaur by persons from the GRA is not acceptable’.

My letter addressing four main points spoke for itself. I believe therefore that Mr. Johnson was engaging in the classic straw man fallacy of creating, in order to refute, a point not made in my letter.

I will not pursue any further correspondence or argumentation on this matter.

Ram & McRae was never provided with any proof of an $82M deposit to any Republic Bank account holder

Some time ago, Messrs Ronald and Rustum Bulkan, Joint Managing Directors of Precision Woodworking Limited (PWL) called to request a meeting with me. Although we had brought the auditor-client relationship between Ram & McRae (the firm) and the company to an end for professional reasons several years earlier, I agreed to meet with them at our office.

At the meeting, the company’s directors informed me that there was an issue between Republic Bank (Guyana) Limited and PWL as an account holder of the Bank over what they claimed was a deposit of a certain sum of money to the company’s account. They explained that they were seeking my representation in the matter.

I responded that for professional reasons, neither the firm nor I could offer any representation or information to them in the matter. What we did not disclose was that, out of an abundance of caution, we not only reviewed the working papers in our office but a partner of the firm was asked to carry out a further review of the alleged deposit. We found that there was no such deposit.
Continue reading Ram & McRae was never provided with any proof of an $82M deposit to any Republic Bank account holder

Treatment of Sattaur by persons from the GRA is not acceptable

Commissioner General of the Guyana Revenue Authority Mr Khurshid Sattaur erred gravely when he shared taxpayers’ information with the administration. However irrestible the demand, he ought to have made it clear that he would not comply. Instead, he compromised himself, his office and his profession. A complaint of professional misconduct was made to the local and international professional accounting bodies but was later withdrawn. There was therefore no adverse finding against him.

Seven months into a new government, the public learns that Mr Sattaur has been sent on leave to facilitate a forensic audit of the authority. I accept that, even with the apparent inconsistency.

What I do not find acceptable is the humiliating treatment he is reported to have received from persons from the Revenue Authority. If the report of leave is correct ‒ and there is no reason to doubt this ‒ Mr Sattaur remains Commissioner General and a member of the Governing Board of the GRA. He does not cease to be either because he is on leave. It is rare and improper for persons on leave to have their homes visited by their subordinates and computers and firearm taken away from them. In the case of a taxman for whom threats to life are an occupational hazard, the danger is obvious and is recognised in his being provided with a guard and a firearm licence.
Continue reading Treatment of Sattaur by persons from the GRA is not acceptable

It was a serious error to treat a special package for the AG as a benchmark

Prime Minister Moses Nagamootoo appears to have intended to dismiss the public’s response to the 50% salary increase for Cabinet members in describing it [the response] as “comparable to beating a dead horse”, adding that “this rage has run its course”. (SN Oct 22 ‘Pay hike necessary to offset ministers’ loss of earnings’). The latest evidence to the contrary is a letter by Mr Nowrang Persaud in yesterday’s Sunday Stabroek (25-10-15) ‘Attorney General’s salary should have been red-circled’.

In his letter, Mr. Persaud refers to a report touching on the differential between the salary of the Attorney General and the rest of the Cabinet on the need some decades ago to ‘import’ a Guyanese legal luminary with unique competences. In his last week’s Stabroek News column on the subject of the increases, Mr. Ralph Ramkarran had identified the package offered by Prime Minister Burnham to Sir Shridath Ramphal. Mr. Ramphal was at the time working in a top law firm in Jamaica, and in his new position in Guyana would be designated responsibility for two disparate portfolios – Attorney General and Minister of State for External Affairs – with the additional task of drafting the emerging country’s Independence Constitution.

It seems from his writings that Mr. Ramphal did his best to discourage Mr. Burnham from employing him: he would only accept the position as a technocrat without party affiliation; was doing well financially in Jamaica with his family; if for any technical reason he had to sit in the Legislature, he wanted no vote and would not be subject to any party whip. But as he said, Forbes Burnham was not easily put off and agreed to all his conditions, presumably salary included.

While the assertion that Mr. Ramphal received a special package is correct, it is unlikely to be the source of the link between the salary of the AG and that of the Chancellor. There was no Office of Chancellor at the time in 1964. A senior PNCR member explained to me that the link came much later when Chancellor Keith Massiah accepted President Hoyte’s invitation to become Attorney General and Minister of Legal Affairs.

In both cases – and I do believe the comparable situation is Justice Mr. Massiah’s – the appointment and the link were unique. Accordingly, the link should have been discontinued a long time ago, and certainly by the Granger Administration which came in to office on a promise of change. The incumbent AG is an elected member, not a technocrat and not a former Chancellor, and would not otherwise qualify for any special package. In my view therefore it was a serious error to treat such a package as the benchmark against which the salaries of other Cabinet members should be adjusted.

Mr. Nagamootoo declares that “any numbers could have been agreed for me, for the Prime Minister and it would have been fine”. That is noble but it would have been more convincing to his Cabinet colleagues and the public if he had declined any increase for himself. Instead, it appears that it was the lawyers in the Cabinet, who are in a minority, who argued that since their previous incomes were higher than they were originally receiving as cabinet ministers, they were entitled to the substantial increases.

Clearly not all of the Cabinet members are lawyers or were otherwise engaged in employment earning hefty taxable income. But even if they were, are they any less willing to serve than Peter D’Aguiar who left his top job at the most successful public company at the time to become Finance Minister? Even as an avowed capitalist Mr. D’Aguiar placed country before self. He did not insist that his Ministerial salary must be comparable with his colleague Ramphal’s, or that he should receive compensation no less than what he was receiving as the Managing Director of Banks DIH Limited.

And while we focus on the 50%, let us not forget that the number of Ministers has been increased, partly by increasing the number of ministers in some ministries and partly by splitting ministries and reducing the workload of many of them. This is the case with the Office of the Prime Minister, the Ministry of Home Affairs, now separated into Citizenship and Public Security, and the Ministry of Commerce, Tourism and Industry now split into separate ministries of Business and Tourism. Effectively then, while the increase on the salaries is 50% for Cabinet Members, the overall cost to the country is much greater, particularly when all the perks, some of questionable lawfulness, such as the tax free salary for the AG and maid and gardener allowances are taken into account.

Now that a leader of the AFC has expressed a position, the most saddening part of the episode for me is the eloquent silence of the leadership of the Working People’s Alliance. It is a party with a deserved reputation for speaking out on issues of political morality, conflicts of interest, misuse of power and fairness to and for the working class. While it was with some relief that I learnt that the Executive of the party is unhappy with the decision by Cabinet, if they want to restore the party’s reputation, they will have to do more than bear their unhappiness in silence.

That 50% salary increase

After less than five months in office, members of the Granger Cabinet have decided to award themselves salary increases of 50%. The increases take effect from July 1, so that the increase of 50% was after less than six weeks the Ministers had been on the job. When the press approached him some months earlier, Governance Minister Mr. Raphael Trotman had said there would be no astronomical increases. But is it not astronomical when compared with what Cabinet approved in the Finance Minister’s Budget for government employees and pensioners?

In that Budget, the minimum salary in the public service was increased from $42,703 per month to $50,000 per month, or 17.1%. But there was a catch: unlike every other year in the past thirty years, the increase was for half the year only. The effective increase then, for the people at the bottom of the scale, for 2015 over 2014, is 8.5%. For public servants receiving a salary of $100,000, the increase was 10%, or 5% over a full year, and for those receiving $200,000 and $500,000 the effective annual increase was 3.75% and 3.0% respectively. There was an additional increase of $5,000 per month for persons above the minimum wage. Note that for public servants the higher salaries attracted lower percentages and lower salaries attracted higher percentages. Cabinet clearly did not think that principle applied to them. The APNU+AFC’s 100 days commitment was “Significant salary increases for government workers, including nurses, teachers in primary, secondary and tertiary education; security personnel; and civil servants on the traditional payroll.”

And how about pensioners? Ram & McRae’s Budget Focus 2015 had noted that 2015 pension increases were subject to no retroactivity. And while the Finance Minister announced a $3,875 increase in the monthly pension from September 1, 2015, the Budget withdrew the monthly subsidy of $2,500 and $990 for GPL and GWI previously enjoyed by pensioners. Net increase: $385 per month but payable from September 1, an increase in 2015 of less than 1%! The APNU +AFC’s 100 days commitment was “Significant increase in Old Age Pensions”.

It seems however, that no percentage, however egregious, can truly reflect the palpable outrage felt by citizens over the increase awarded to themselves by a Cabinet in office after less than half a year. This is not about bad optics, bad timing or bad politics as some are suggesting without any regard for the finances of the country. Unless the Government can transform the 2015 projected $50,000 million deficit into a surplus, pay its public servants a living wage, and afford its pensioners some dignity, the increase will be as bad next year as it is now.

The unprecedented increase has been justified on some unusual grounds: this is about wage-led growth; that Cabinet is made up of quality persons; the beneficiaries were earning more in their private practice; they deserve the increase; or the increase will stop them from thieving. The merit of each of these is not only arguable, it is dubious.

The question for me is if the financial situation which confronted Cabinet when it took office was worse than they thought, and which therefore prevented them from honouring commitments they made to voters, how come they can meet commitments they did not make? That is not the integrity and transparency which many thought would be the principles on which an APNU+AFC Government would operate.

I remain open to persuasion and therefore invite my professional colleagues in the Cabinet to make public their tax returns to show the kind of income which they now demand, because, as they claim, that is what they used to earn. And if that is indeed the case, why did they not tell us about their plan? And is there no element of public service to their work? And can they confirm that they have all shut shop and have given up their private businesses?

Many commentators and bloggers argue that the increase is really about income maximisation, and that what was involved was the use of creative counting to achieve the desired result. So take the salary of the Attorney General which in turn is the salary of the Chancellor. Now, because the Chancellor gets a tax-free salary, the thinking is that the AG’s salary should be treated as net. And since the AG cannot earn more than the Prime Minister, the Prime Minister’s net salary has to be higher than the AG’s, followed by VP’s, followed by Ministers and MP’s. One has to ask, why stop there?

But the base is clearly wrong. Only three persons are statutorily permitted a tax-free salary: the President, the Chancellor and the Chief Justice. Anything else is illegal and even Cabinet cannot make it so. I respectfully recommend that they read the Income Tax Act and the Financial Administration and Audit Act.

As the Ministers make their case for entitlement, they must not ignore the range of benefits which they receive at taxpayers’ expense: 24-hour security; all expenses paid vehicle and chauffeur; tax-free gratuity for their chauffeur; free electricity; free telephone; housing or housing allowance for Senior Ministers and the Attorney General, even when they live in their own homes; entertainment allowance when everyone knows the Ministers are the ones to be entertained; free crossing on toll bridges; no airport tax; generous leave and leave benefits; access to valuable medical benefits; and perhaps as valuable as all the other allowances put together, the right to duty exemption on a vehicle every three years.

Oh, and these are not all. MP’s are paid an additional $20,000 per month for being a member of a Parliamentary Sessional Committee; an additional $25,000 per month as a Chairman or Deputy Chairman (sic) of such a Committee; and an allowance of $15,000 per month as a representative of a Geographic Constituency. Conservatively, these are easily worth another million per month.

Oh, and I forgot. Members of Parliament earn a pension after four years while the average person has to work and contribute to the NIS for fifteen years!

Is there a way out? I think so. But Cabinet needs to admit that they have made a giant misstep. It is not too late to reverse the decision and have the National Assembly appoint an independent Compensation Committee to look into the question of compensation for Ministers, MP’s and other political appointees. Indeed, this should be a permanent arrangement which prevents what is a clear conflict of interest for Cabinet members.

The terms of reference of such a Committee should not be difficult to establish: not too high to make it a coveted job and not too low to deter suitable persons; comparability with jobs in the public sector; ability to pay (they tell public servants that all the time); and evaluating the compensation package in its entirety, including all perks. To the extent that there is any comparability with other countries, regard must be paid to the economic and other conditions of those countries.