Criticising the Budget, but with a pinch of salt

BY EDITOR

16th June 2013

Editorial Cartoon

Members of Parliament spent most of Friday giving their views on the Government Budget unveiled by Finance Minister William Mgimwa on Thursday, where unavoidably most of those who rose to speak expressed misgivings in this or that area.
That was only to be expected, as one seeks to air sentiments about issues that are disturbing to his mind, while the rightful or proper is left on its own, not receiving the praise it may otherwise deserve. So an erroneous picture can be created on most MPs opposing the Budget, whereas in actual fact most MPs have areas in the Budget where they fell a bit uncomfortable.

One area where the criticism was loudest – if indeed it was loud, to start with – was with higher taxes on petroleum products, and another was higher taxes on used cars, and still a third was taxes on beverages, with a section of MPs saying the government has run out of ideas, levying higher taxes on the same things each year.

That was quite interesting, as those MPs would also have to accept the corollary of what they are saying, that the definition of luxuries might differ from one year to another, so that this year it is beverages as a whole, next year, alcoholic beverages, and the following year, non-alcoholic beverages. Taxation is best done on luxury items, even if its consumption is sensitive to taxes, as equity.

The same is true of taxing used vehicles more, where the issue of pollution cannot be ignored, which a section of MPs are contesting ostensibly on account of equity, that the buyers of those vehicles are poor people, whom the government should assist (in their quest to drive cars) rather than increase taxes on their efforts.

That has its laudable points, and a series of negatives, first because it is a given principle in international law or diplomacy on environment that the polluter should pay – a principle that needs to be translated locally in terms of taxation. This idea that buyers of used vehicles are poor is true only versus buyers of new vehicles, not with ordinary citizens; do we help with hospital drugs, or with cars?

So the government cannot be wrong in resorting to taxing luxuries each year, as that is what it should be doing, if taxation is to be equitable, as otherwise it would have to randomly select objects of taxation by lot, throwing a coin and deciding what to tax this year.

At the same time, MPs were pushing for taxes where the government had restrained its hand, especially in relation to property taxes, where some radical MPs see a golden opportunity, partly because all they see is property, not dictates of what drives construction, etc.

Focusing on property taxes risks dampening activity in one of the key growth pullers, as all increase of taxes in a specific area discourages further investment into that field, unavoidably so.

This also helps to explain why the government always resists meeting frontally all MPs’ demands as to what to do about mining sector taxes, and in recent years, mobile phone service providers.

Taxation that is based on distribution concerns, that this or that sector should pay more to the public coffers, fails to realise that such an orientation compensates inefficiency especially in the public sector, and cultivates negative habits typical of the socialist era that those who do well in the economy are sabotaging zero-profit public firms.

This habit was so ingrained that when commuter bus services started being allowed, one proviso was that they should pay a levy to Usafiri Dar es Salaam (UDA) as they were ruining its market.

An economy premised on private sector growth cannot allow itself to be swayed by various representatives of inefficient economic operators, seeing vindictiveness on the private sector as equity.

SOURCE: GUARDIAN ON SUNDAY