Where does the Caribbean Get Money to Develop?

With less money coming from overseas, Caribbean countries now need to identify local organizations which can fill the gap. Some of these organizations include the government and private financial institutions. The government raises revenue through the collection of taxes and private financial institutions through pooling of savings. With the expected economic hardships caused by the global financial crisis and recession, developing countries have to use these resources very wisely.

Relationships often taken for granted have to be carefully re-examined to ensure that the expected results are realized in the most efficient manner. Do expensive measures to reform a country’s tax administration and financial sector always result in increased mobilization of funds? And even if they do, are the mobilized funds used in a manner that best fosters economic growth and development?

The output from this research was published in two journal articles: Investigating the Performance of Caribbean Commercial Banks in the Mobilisation and Use of Savings and The Efficiency of Tax Administration in Jamaica: An Introspective Assessment.

The Efficiency of Tax Administration in Jamaica

Generally, nobody likes any announcement of increased taxes by the government. But even within this environment of opposition to increased taxes the citizens still expect the government to provide more and better services. To meet these expectations the government has to increase revenue collection which depends to a large extent on the efficiency of the tax administration.

Dr. David Tennant, a development economist, has assessed the Jamaican tax administration system to identify the inefficiencies in the system and to propose improvements. In conducting the study he interviewed stakeholders integrally involved with tax administration in the country and reviewed files and other documents internal to the operations.

Important Findings

The results showed largely negative trends in collection and compliance levels in spite of a comprehensive reform of the tax administration in Jamaica. The researcher identified internal bottlenecks hindering the efficiency of the tax administration. His findings were documented in a journal article, co-authored with fellow economist, Sandria Tennant. The paper recommended regular self assessments by the tax administration of its procedures, personnel and supplementary inputs as being critical to the maintenance of efficiency in tax administration.

The researcher also dedicated time to investigating the performance of private financial institutions with a focus on commercial banks in five Caribbean countries.

Investigating the Performance of Caribbean Commercial Banks

The important role that commercial banks are expected to play in efficiently mobilizing and using society’s savings motivated Dr. Tennant to compare the performance of commercial banks in five Caribbean countries – Barbados, Belize, Guyana, Jamaica and Trinidad and Tobago. Through this comparison, he was able to identify and document areas in which commercial banks in some countries have exhibited higher standards of performance relative to the others. He was also able to suggest areas in which financial institution managers, policymakers and regulators from different countries within the region can investigate and benefit from best practices in effective and efficient financial management. The differences across countries were also examined to provide possible explanations for the disparities in Caribbean commercial bank performance.

Results of the Study

The results show that two out of the five countries studied distinguished themselves by maintaining the highest standards of performance. It was also shown that these countries were those which had relatively high levels of per capita income, low and stable rates of inflation, low Treasury bill rates, low and stable exchange rates and low debt burdens. They were also the countries with the smallest populations, and had the lowest incidence of social and political instability. The third article is The Impact of Foreign Direct Investments, Financial Crises and Organizational Culture on Managers’ Views as to the Finance-Growth Nexus.