Double-edged taxes

Tuesday, 15 November 2016 00:01 - - {{hitsCtrl.values.hits}}

It is a universal truth that Budgets come with taxes. Fiscal consolidation is at the heart of Budget 2017 and a slew of new taxes have been introduced in an effort to increase public revenue.

Over the weekend fresh announcements were made indicating water bills would add to the burden already incurred by vehicle costs, data and phone bill charges, higher traffic fines and bank transaction levies among a plethora of others that are just beginning to dawn in the public’s collective consciousness.

The key to realising the Budget’s goals is actually collecting taxes but as usual the Government has made a rocky start. Last year the Government attempted to pull back duty free vehicle permits but eventually caved to public pressure and allowed them to be available to a large number of State employees. A year later parliamentarians are being slammed by a massively disappointed public that have seen yet another edition of abuse by public officials who have sold their vehicle permits or have imported luxury vehicles that have deprived the State of billions in tax funds.

Adding to the public’s ire are simmering allegations that the Government is preparing to hand over the third phase of the Central Expressway to a Japanese company after a flawed tender process. The first phase has reportedly been granted to a Chinese State company without a tender. Continued silence on the part of Highways and Higher Education Minister Lakshman Kiriella to respond to these charges has rubbed salt into the wounds created by a VAT increase that was pushed through Parliament earlier this month.

Austerity budgets can only be implemented if the people also see politicians making an effort to reduce expenditure. But in Sri Lanka just days after the VAT increase to 15% people were reading headlines about how 50-odd parliamentarians are to be given Rs. 500,000 per month to rent luxury sports utility vehicles for “development activities” on behalf of the Government. This is on top of lucrative vehicle permits already given to these same parliamentarians. The list goes on and on.

The moderate global population around the world has accepted that the main reason Donald Trump became the president-elect of the United States was because the Democrats failed to understand the discontent of the middle class. In some ways this evaluation can be strongly applied to Sri Lanka where the Government is focused on a policy dialogue or policy-based reform but has turned away from the good governance principles and middle class ideologies it espoused during the election last year.

People are not content to simply listen to policies presented in Budget proposals, no matter how progressive they may be. People want to see tangible change on the ground. What they voted for was a changed political culture and honesty is a major part of that equation. If people do not see politicians making an effort to meet their expectations then they will become less likely to contribute to Government revenue.

The more taxes people have to pay the more they will look for the Government to deliver on its promises and the more they will become disgruntled if promises are not kept.