Budget’s expenditure ‘unrealistic’

Ialibu-Pangia MP and former Prime Minister Peter O’Neill says the Government has introduced a more than K22 billion budget for next year, which is historically, a large size budget appropriation. He said expenditure of about K14 billion was unrealistic. Below is a summary of his commentary.

THE Government has introduced almost over K22 billion budget for year 2022 which is historically, a large-size budget appropriation.
At the same time they stated that our gross domestic product will grow by at least 5.4 per cent in 2022 to over K101 billion.
We have some concerns about the budget itself because some of the mismatch in revenues and expenditures are of great concern to the country and its economic stability.

Revenue
For the first time, our Government is predicting close to K16.2 billion in revenue, while at the same time, they expect the grants to be given in dollars by countries to the equivalent of K1.8 billion.
Together, the total grants and expenditures they think will exceed almost K18 billion in total revenue and grants in 2022.
This is quite historical, meaning it is quite a large revenue estimate for the country. We are concerned that this would be a bit difficult to achieve by the Government.
That is because the Treasurer stated in Parliament that he will raise the revenue by making sure that he collects more tax from citizens – people who are working, people who are paying for goods and services, and of course corporate taxes from companies that are paying taxes and they are being profitable.
But we have some very massive concerns about that. Over the past two and a half years, our economy has been struggling.
As it struggles, there are more and more people out of jobs.
As more and more people are out of jobs, they are not paying taxes because they have no income and they are not paying any wages.
More and more people are unemployed because they are put to unemployment by companies and institutions employing them.
They are cutting down on costs because their businesses or organisations are not doing well.
When they are cutting down on costs and prioritising their business, you would expect in that environment that the profits these companies are making will also go down.
When profits go down, that means less corporate taxes are paid to the Government.
We have a scenario that the Government is not collecting enough tax, salaries and wages tax.
There is not enough tax collected in company tax. And when people don’t have the money to spend, they do not have the money to spend to buy goods and services in stores and all the other things that we pay GST on.
When we cannot pay GST, we cannot buy more goods. That means the GST goes down.
So when the economy is struggling and the Government says to collect more in those taxes, I think there is a need for serious concern.
This year, they are expecting to collect K13.6 billion. That is at the back of 2020, when they only collected K12 billion.
When you have those kind of numbers in 2020 and 2021, all of a sudden you have a jump, almost K3 billion to K4 billion in 2022.
It is a very serious and huge number.
Just because it’s almost K18 billion, that doesn’t mean that it’s a small jump.
The Government is not realistic enough to say that we will not collect that much money in 2022, so let us estimate a lower number. And if we collect more, that is even better. But let us be realistic about the level of tax that are due to the nation.

Dominant player levy
There is also a lot of debate going on in the business community and public about the super taxes that are being targeted on two industries that is the banking and telecommunication.
This was basically targeted towards BSP and Digicel. We are concerned about that. Why target only two companies?
It’s obvious that the Government did not give much thought around it. They just introduced it thinking maybe they will collect maybe K200m to K300m from these industries because they are making massive profits.
If they are making massive profits, then they are also paying massive corporate taxes already – which is about 30 per cent of the profits that they are making.
When you look at the banking and airline industry, and when you look at the cigarette and alcohol industry, or when you look at forestry industry or fisheries, where there are very dominant players that are almost becoming a monopoly, and if there is a need to try and get the Government to make sure these areas become more competitive, and try to promote the interest of the smaller players to be more active and competition will drive prices down, then this supposed to be heading in the right direction.
But targeting two particular industries without any data to back them, to say, this is necessary, I think this is unnecessary.
And it creates the anxiety and takes the focus away from challenges we have in the country.
Though the Prime Minister says the implementation is in June/July of next year, the fact of the matter is that the law has been passed, and it comes into effect on Jan 1, 2022.
So whether they collect the money on Jan 1, or the last week of December, it does not matter.
What the Prime Minister stated is misleading and it’s not true.
The law is there, and it can be implemented at any time.
Our concern is that these particular charges they are charging these two companies.
First, the two companies will do is to make sure that they will work out the fees, how many customers they have across the country, divide those fees among the customers and then they will increase the price of banking services or telecommunication.
Eventually, it will mean that you and I will end up paying more for these services.
We’ve heard concerns from shareholders in those companies. They need certainty, and the role of the Government is to give certainty.
I hope that the next Government following the elections can bring some sense back into this.
Repeal that Act, that legislation that was passed and reverse it.
But right now, it is there.
The Prime Minister’s statement is not law.

Expenditure
Another issue I am concerned about is the level of expenditure – K22 billion in total for the Government’s expenditure estimates for 2022.
Out of that, K14 billion is going to fund the operation of Government. And that is the Government departments, the provinces, the employees and all these.
The K14 billion is by far the highest we have ever increased. It is a huge increase – about 9 or 10 per cent in just one given year.
There is no justification for that increase.
There is no new massive number of people going into the public service.
There is no new additional services, our health system is the same, education system is still the same, our law and order challenges are still there.
The operational cost in the budget increased up to K14 billion in just one year. This is unacceptable.
As a country, we should be debating more.
Why has the Government allowed this massive blow up to take place?
I know there may be arguments like it is an election year and there is the Coronavirus (Covid-19).
But many countries around the world are living with the Covid-19 and their economies are doing well.
Many countries around the world are having elections and their economies are doing well.
We just cannot keep on giving excuses after excuses.
We need to take it under control, make tough decisions.
What we have seen today is that many of our big projects, and foreign direct investment in the country are almost down to zero.
There has not been any foreign direct investment in the country in the past three years.
Though they have introduced a bill to move the P’nyang project forward, which is good, I think it’s a little too late.
Many of these projects will wait until after the general election.
Many investors like stability and predictability.
It is something they expect of any government.
One of the disappointing thing about the budget is that all the documents were not put on the floor.
In my humble opinion as a legislator, when you do not table a document in Parliament and is not certified properly, that document cannot be implemented.