Budget recommendations

The Senate has a reputation of being the more sober of the two houses of parliament, perhaps owing to the fact that senators are not directly elected. However, the Senate’s recommendations to the National Assembly on the budget currently range from the sensibly necessary to the unnecessarily optimistic.

The recommendations, which are non-binding owing to a constitutional quirk, include some measures that can be supported. For instance, a drastic reduction in the size and expenses of foreign trips by government officials is easily achievable. In a similar vein, the freezing of non-salary expenses at various ministries is a sensible approach to encourage penny-pinching on the part of bureaucrats. The Senate has recommended that the government should increase entitlements for pensioners and salary increments from junior bureaucrats. This would be a long-term spike in the government’s liabilities, and one cannot be in favour of fiscal discipline by advocating such unsustainable increases. The proposal to increase the corporate income tax on banks seems downright unfair. Banks already face far more intrusive regulation from the State Bank compared to most other industries.

Why should they be asked to pay more in taxes compared to all other corporations? It seems that the Senate has not yet been able to jettison the old government habit of taxing what they can, not what they should. What is most perplexing, however, is why the Senate opposed the one per cent increase in the General Sales Tax (GST). In the absence of the implementation of the VAT, the government has no choice but to increase the GST rate. Rather than a blanket opposition to the rise, the Senate should use its good offices to advocate for the VAT, a more balanced tax that now seems to be on the verge of being scrapped.

Published in the Express Tribune, June 18^th, 2010.