Heliconia Blog

In the last budget, the government stated that only 25% of those with gaming machines are paying the appropriate tax. There is a simple solution to this.

This is an enforcement problem. Enforcement requires two things: knowledge of how many machines are in an establishment and knowledge about how many the establishment is claiming to tax authorities. It is expensive and difficult for the tax authorities to monitor the many establishments, some of them quite small. Most taxes are based on self reporting with a low percentage of audits to incentivize honest self reporting. Moreover, Trinbago is increasingly corrupt so the chance of collusion between the gambling establishment and the auditor is non-trivial.

One approach that could work is to make the list of members clubs and their registered number of machines by type publicly accessible. This should be a simple web interface. Second, there should be a reward scheme where anyone attending a members club and noticing the number of machines gets an reward for reporting the any underpayment to the authorities. This reward could be all or a portion of  he fine members clubs have to pay for under reporting.

By crowdsourcing this function, the government can drastically improve compliance. This will also be a fairer policy where the overall rate may fall as more members clubs join the rolls. It also has the added incentive of reducing the likelihood of collusion between the tax collector and the gambling establishment.

I recently applied for a new passport. It costs only $250! Why are passports so cheap if the decade-long driver’s license costs $1,000? Even the 5-year license is $500, still twice as much. Driver’s licenses only let you drive on our two islands. Passports get you onto a plane that can allow you to see the entire world. I’m assuming they cost more to make and have much more advanced technology to prevent adulteration. When I got my driver’s license, it was printed right in front of me in the Tobago office.

But this blog entry isn’t just about that mispricing but about the concept of dual pricing for government services. Dual pricing would involve a low general price for most with standard service but a premium price for expedited service. This has several benefits.

How it will work

80% of the public will pay a lower generic price and receive generic service. However, 20% of the population will be able to pay a market rate for an expedited service. It could also be that the top rate is higher than market rate and those with means cross-subsidize the cost of producing the good or service. There is usually an initial guess for the premium price. If the premium demand is above the desired 20%, the price is increased, usually weekly. Most democracies usually have an allowable spread between the premium product and the generic service. This spread is usually determined by policy makers and are in line with the country’s strategic goals. As such, if the international benchmark for time to get a new passport is one month, policy might allow the generic service to be no more than 6 weeks. And the premium service will likely be in line with international best practice. Usually prices settle into a known rhythm with known seasonal variations.

It should be noted that dual pricing is not a way to get around requirements. As such, you will still need to pass your driving test. It offers only a time saving, not easier requirements.

Benefits

The top level price can be set by market forces allowing the relative value of various government services to be more accurately priced. As such, we can probably assume that passport prices will be higher than driver’s licenses. This allows a market signal to tell the government which services should be improved based on the benefit to citizens. For example, let’s assume that the price for premium passports was $2,000 for the expedited service, that could signal government to take several steps. The government could then increase the staff at this agency to reduce the time overall. The government could increase the cost of the generic service in recognition that this service is more valuable and perhaps under-priced.

By allowing an avenue for the desperate to get premium service while remaining within the law, this should also reduce corruption. For me, this alone is worth it. Trinidad is not yet a place where you will be denied a good or service from a government agency without first paying a bribe. To me that’s the lowest level a country can reach when it comes to corruption. However, as we have gotten richer, more and more of us have the means to pay what is referred to as ‘speed payments’. And to me, this weakens our democracy.

We already have a similar structure with the Concordat. This is a relationship that allows religiously affiliated secondary schools to choose 20% of their student population. Ostensibly, this was to allow them to choose co-religionists. However, because some of these schools were ‘prestige schools’, it also allowed them to offer these prized spots to patrons who would then make donations to the school. This means that the few who pay help build new labs and keep these schools top notch and keep our elites tied to our public schools. It also means that providing a way within the system, the rich do not need to subvert the existing system or build a totally separate system.

Share your thoughts below.

Median income in Trinbago is somewhere between $5,000 and $6,000. The lower number comes from Guardian (2015) article quoting Dr. Roger Hosein. The higher number comes from various online sources of dubious quality in terms of citations but claiming a more recent date. When stated, most people are shocked by this number as being unbelievably low. Let’s assume this number is accurate.

How fair is it to charge someone more than a months salary for a driving infraction? Heliconia supports a more progressive regime. The Prime Minister makes more than $50,000 TTD/month, a regular parliamentarian makes $33,000 TTD/month. While these people can easily pay these fines, it seems onerous to charge someone more than double their salary for something that all of us have done/still do occasionally. And this is important, while it may be wrong, culturally, many of us speed and know people who speed. As such, getting a ticket is not fair comeuppance for a heinous act but bad luck for behaviour that we frown upon but regularly engage in. If that is true, then the fines should visit reasonable but not onerous pain.

How would the PM feel if he was fined $50,000 for speeding - one month’s salary? That clearly feels excessive. But that’s exactly what is happening to more than half our working population. The charge for speeding is $7,000. Imagine the utter financial ruin that befalls the unlucky person who can barely afford a car, insurance, gas, and then is unlucky enough to get a speeding ticket that is above one month’s salary. This fine is the kind of thing that can put a family close to the edge onto the breadline.

This concept is known as a ‘day-fine’. This is meant to equate the fine for the infraction to a certain number of days of the offender’s income. As such, instead of quoting the fine as a dollar amount, the fine is quoted as certain number of days. Several countries already employ fines in this way: Finland, Sweden, Denmark, Croatia, Germany, and Switzerland. We can work with these countries and their international/developmental aid divisions to get support on setting up this framework with our nuisance fines.

Heliconia believes this will be in keeping with the social goals of the current government.