Dear Jose,
It has been some months since we last communicated; indeed it was briefly at the launch of Dr. David Scott's book "Last Flight Out Of Dili". As promised at that meeting, I include a copy of my presentation given at Victoria University's "Cooperating With East Timor" conference in 2005 and subsequently published, entitled "Wrestling The Crocodile: IT Development in East Timor" (attachement #1).
At our last meeting, you were the Minister of Foreign Affairs and Cooperation. Since then, following some chaotic experiences in Timor-Leste, you are are now the Prime Minister.
Whilst you primarily know me as the person who maintained the MFAC local area network and engaged in IT policy development and training, you may not be aware that IT work is actually a second interest of mine. My primary academic experience and research over the past twenty years has been in politics, economics and social theory.
As Prime Minister, it is important to alert you to an opportunity for the government of Timor-Leste to spur economic growth, reduce unemployment and provide a stable source of public revenue. This can be achieved by shifting as much as the public revenue base from the onerous and distorting taxation on labour, capital and transactions and to derive public revenue instead from the unimproved site value of land and natural resources. In other words, do not punish those who invest money and labour into the country, but rather derive public monies from the use of the resources which belong to all the people of Timor Leste.
The positive effects of such a policy are well known by economists across the political spectrum; indeed it is one of the few things that they seem to agree on (see attachment #2). However implementation in developed nations is invariably hampered by a powerful landlord class who see such a policy as reducing their social status. In nations like Timor-Leste, the opportunity exists to put this beneficial public policy into practise.
It is not without reason that thirty-five of the top economists in the U.S. made a similar recommendation to Mikhail Gorbachev in the transition to a market economy in the former Soviet Union (see attachment #3). Unfortunately before Gorbachev had the
opportunity to review the proposal in detail, political changes saw Boris Yelstin ascend to power who regrettably sold off most of Russia's natural resources. The economic effects of this policy is self-evident and well-known.
You will know that I am not the sort of person who makes recommendations without engaging in thorough research and testing beforehand. Nevetheless, I recommend that ask your senior economic advisers and financial planners the simple question: "What would happen if we reduced tax on labour and capital and transactions and instead derived public income from the rental value of natural resources?" I am certain that they will give you the answer that I have just advocated.
As always, thank you for you attention and I look forward to your next visit to Melbourne.
Hare dalan di'ak,
Lev Lafayette
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Ramos Horta pushes for tax-free E Timor
As East Timor goes to the polls to elect the country's Parliament, President Jose Ramos Horta has unveiled his plans to use his new position to push for a largely tax-free East Timor.
Dr Ramos Horta says he wants to base the country's economy on a tax-free Hong Kong model.
He says East Timor would use its oil and gas revenues to create instant opportunities and wealth for the nation's young and poor.
"It would be a very simplified tax system that makes it easier for investors but also for salary earners in this country," he said.
"Most important for us is job creation, so anything we can do to encourage investors, we should do, and I intend to push very hard in the next few weeks."
Twelve months of upheaval and instability have seen Dr Ramos Horta shift from the role of foreign minister to prime minister and earlier this year, to the more ceremonial role of President.
As East Timor votes for a new prime minister, most of the votes are expected to be split between the ruling Fretilin party of ousted prime minister Mari Alkatiri and the new party formed by ex-president Xanana Gusmao, CNRT.
Dr Ramos Horta has made a point of saying he is an independent President but he has been seen at a CNRT rally and wearing a CNRT hat. He denies it is clear which side he backs.
"I have made every effort to be neutral," he said.
"I would do disservice to the country, I would discredit myself, if I show my sympathies.
"I have a sympathy with many of them - many of the parties are very good. There are people with extraordinary qualities in Fretilin, in the other parties, like the Social Democratic Party, the Social Democratic Association, the Democratic Party, as well as CNRT.
"Of course, Xanana Gusmao was always a towering figure and he is the most respected leader in this country, with an incredible history of struggle in this country. No-one of us can compare with his legitimacy.
"But even if the CNRT does not win, the CNRT and the Xanana leadership would come second, let's say, in Parliament and would be a formidable and I hope positive and constructive opposition."
Dr Ramos Horta says he has a strong relationship with most Fretilin leaders, including Dr Alkatiri.
"If Fretilin wins, I will do my utmost to assist in building the bridges between Fretilin and the other parties," he said.
"The difficulty will not be between me and Fretilin but it will be between Fretilin and the other parties, like CNRT, the Democratic Party and all the others.
"That's where the resentment runs deep and it's not going to be easy."
Just who would be elected to guide East Timor out of its current crisis is likely to be decided by smaller parties.
The biggest among them is the Democratic Party, known as PD, which expects to side with CNRT.
The party ran second to Fretilin last time around and has a huge following among East Timor's disgruntled youth.
Preliminary results on the percentages of votes going to the 14 parties running should be known by early next week but the exact composition of any ruling coalition may not be known for weeks.
http://www.abc.net.au/news/2007-06-30/ramos-horta-pushes-for-tax-free-e-...