‘Irresponsible’ tax hike should not be imposed

Letters

I realise that the tax hike which is projected to be implemented in the 2017 Budget will bring more harm than good to the local economy.
The government has vehemently projected various tax increases and notably on alcohol, tobacco and
housing to prop up government finance.
If the 50 per cent excise tax increase on alcohol and a one off increase in tobacco are implemented, it will kill consumers, the manufacturing industry and the economy.
I note that alcohol and tobacco each have very strong inelastic demands and so whenever there is an increase in the level of excise taxes imposed on their retail prices, demand will respond at a rate proportionately lower than the proportional change in their prices hence, excise tax revenues will soar. I further note that the government is obnoxiously collecting around 75 per cent of excise tax on alcohol and tobacco at retail prices at the back of the above economic notion.
I see the tax hike proposal as an illogical economic solution because at the meantime, the main economic problem is lower economic growth rates of around 2 per cent in 2016 and projected at 2.8 per cent in 2017 which will concurrently be dragged on by the excise tax increases.
The excise tax increases will signal a fall in demand of the targeted products at the retail level and this will ripple back to the retail and manufacturing industries through creation of surpluses.
Surpluses will increase holding costs of firms and lower sales revenues which will result in cuts to productions thus creating an economic “slack”.
Speaking at the back of a government  which is focused on growing the economy, a tax hike is an interventionist approach which will result in the opposite outcome.
This is fiscally irresponsible and fraudulent.
Moreover, there will be a number of unintended outcomes on law and order and health sectors due to the proliferation of black markets through the production, bootlegging and consumption of illicit drugs solely as a dispersed mechanism to rebalance consumer’s selection and habits over the official rates of the excise taxes on alcohol and tobacco.
Assuming that consumers currently consume tobacco and alcohol at a standard budget level and if the excise tax increases are implemented in 2017, the two products will become unattainable and so consumers will have to readjust to absorb these changes.
Such readjustments will bring into considerations (or budget) the illicit substitutes which will drastically have negative ripple effects on health and law and order which will also stretch scarce government finance.
Based on the above logic and reasoning, I strongly recommend that the tax hike proposal contained in the 2017 Budget must not be implemented.
Up to the 109 legislative seats in Parliament to decide.

Mike Haro, Via email