by Mohammed HAMUTH

The government?s sudden reintroduction of customs duties on some clothing goods is unjustified. Traders should have been warned in advance of the government?s intention to levy duties. This new measure will seriously affect those small traders who have chosen to directly import their clothing goods. It is not their fault if duties were removed in the previous budget, thus opening an opportunity for competition. Many small businesses, including street vendors, have invested their hard-earned income or borrowed heavily to finance their ventures. This sudden decision contravenes the ?transparent governance? idea and the ?putting people first? philosophy of Ramgoolam?s New Labour.

Hon Rama Sithanen tried to justify on TV that this is not a duty but a tax on clothes to protect local industries. Mr Sithanen may have his own interpretation of economics, but a tax, whether ad-valorem or specific, is still a tax, and worse, his specific taxes are highly regressive and hit the poor more than the rich. For example, two dresses, one costing Rs 100 and the other one Rs 1,000 will both be taxed at Rs 50, the effective rate being 50% for the cheaper dress and only 5% for the expensive one!

On the other hand, men?s blazers, which are neither a regular purchase by ?la masse? nor sold by street vendors, will see a duty of only Rs 200 (a very paltry sum compared to their sale price). It is very clear whom the Minister wants to protect! Thirdly, in some cases, the specific duty will be more than 100%. Finally, the VAT will be calculated on the cost+duty amount, and the bill will be a heavy one. Importers have to desperately find additional funds to pay duties and VAT and this is a huge burden on small traders. Imagine a small trader faced with a bill of over Rs 100,000 and unable to cope with it, risking his uncleared goods being seized by customs.

Protectionism through tariffs is no longer recommended as the global trend is towards market liberalization and increased competition. Rama Sithanen?s argument of protecting local industries does not hold. Local SMEs do not consist of textiles alone. EPZ companies are already protected since they are duty- exempted and do not sell on the local market. If Mr Sithanen?s real objective was to protect local industries, then why limit duties to clothing only? Why not protect other locally manufactured goods against imported ones? For example, local Sunny and Diego juice against Ceres, Viva, and other imported brands? Why not further protect locally-made baby diapers and tissue paper? Why not project Sarjua foods, Yeo?s, etc? Similarly, imported canned vegetables affect our small planters who are compelled to let their harvest rot rather than sell at loss on the market. There are hundreds of items produced by local SMEs that need protection, e.g soaps, detergents, toothpaste, yet Mr Sithanen sees only clothing!

We understand that all economic indicators are red. But this does not mean he should tax our underwear to fill State coffers. Those who have allegedly dilapidated the economy are not being bothered. Before the elections we were attuned to vigorous arguments condemning the supposedly five families who control the economy, the Illovo Mari-Deal, the IRS projects, and Labour?s commitment to retrieve from them what the State, and indirectly, the population, had lost. Today, when you need funds to finance your much-awaited electoral promises, instead of reviewing pro-capitalist policies, as you have promised yourself, you want to target the pockets of vulnerable street vendors, small traders and businesses? This is very unfair and contrary to the democratization and social justice policies of this government.

Besides, your decision to reintroduce duties that the previous budget abolished is one step backwards and against free market competition and consumers? right to a choice of products at affordable prices. The April budget was voted for one year and businesses have planned accordingly. We understand that you did not agree with the budget and you wanted to take your own measures, but you should consider those traders caught in-between. To change the rules of the game mid-way is akin to serious dishonesty, discrimination and bad faith. Now that the harm has been done, the government should urgently postpone the effective date of these duties to allow small traders some breathing space to clear the goods they have already ordered. We are not against duties as such, we rather condemn the timing of their reintroduction. It is the government?s duty to protect the financial interests of small importers, traders, street vendors and entrepreneurs. All entrepreneurs ? even the small ones ? contribute to the economy and the government cannot indiscriminately penalize to favour others. We urge you to consider one request in the name of justice.