Budget Blues

It is that time of year once again when we prepare ourselves to hear what the government proposes to spend during the coming year and how they expect to finance it.  This usually results in a heightened level of stress as people wonder what new taxes might be imposed or what programmes might be cut.

This year is no different despite the assurance from the minister that no new taxes will be imposed.  Past experience demonstrates that we can’t rely on this promise and it certainly does not exclude increasing the existing tax rates.  Never the less there are some added concerns that we have about this year’s budget.

The first area that I am concerned about is the proposed restructuring of the public sector.  It was announced prior to last year’s budget of the need to cut costs associated with the public sector.  A committee was set up to identify the savings that could come from making operations more efficient as well as to identify possible cuts in the workforce with the aim being to eliminate the annual budget deficit.  However, despite the passage of more than a year we have heard little about what actual changes will be made even those cost cutting measures that do not relate to redundancies.  The question which must be asked is “how are we going to balance the budget if we are unable to complete the review process?”  What impact will the failure of implementing these cuts have on this year’s budget?

The second major concern is that we have come to another budget and we are still waiting on tax reform.  There is no doubt that the government does not want to give up any of its tax revenues but it certainly needs to assess how that revenue is to be collected.  The current structure is inefficient in terms of facilitating collection and the distribution of taxes is unfairly placed on the backs of a few.  It is time to change the system so that more persons are caught in the tax web, that those who are overburdened would get some relief and that overall tax revenue will increase.

The lack of tax reform will have a negative effect on this year’s budget.  In addition, the burdensome tax structure is also an impediment to having economic growth.

There is no doubt that we are likely to see the cost of debt servicing continue to decline this year but without these two areas being addressed it seems unlikely that we will have anything to smile about in this year’s budget.  It just might be that once again we are left singing the budget blues.