Simply put, a government manages its revenue, which represents the total amount of money it receives and its expenses, such as education, healthcare, security and social services, to name a few.
To deal with expenses, a government uses its twin powers of taxation and subsidy, a benefit given to energy and manufacturing companies, two main ones, to encourage enhanced operations for the ultimate benefit of the country.
Unfortunately, neither of these two entities can provide tax revenue as they once did. The energy sector is a shadow of itself and now drains foreign exchange, whilst the manufacturing sector, or more correctly an assembly sector, seeing that they almost totally import raw materials to manufacture products is now worse off than previously despite subsidisation.
The loss of jobs, fast-diminishing foreign exchange and insufficient focus on revenue streams have put the government “between the devil and the deep blue sea” as it seeks to budget for the 2020-2021 period.
A key dilemma will be, should it focus on economics, livelihood or a mixture of both as it tries to grow the economy and prevent unemployment, while having to cut back on some expenditure?
Whilst its primary revenue-generating tool is taxation, the government needs to be reminded that it must be extremely careful it does not kill the goose which is laying the golden eggs.
It is the small man’s money that keeps the economy going, as he spends almost all that he earns, whilst the businessman focuses on investments. This implies that increasing individual tax from the current two-tier formula to one-tier at the higher level for all is discouraged.
Similarly, value-added tax is already very onerous on the small man whose employment may have been compromised or is non-existent. The current 12.5 per cent on almost all items should be reassessed and removed on all basic food items and increased on luxury items, which the wealthier can more easily afford.
Far greater focus must be placed on generating revenue, whilst reducing unnecessary expenditure so it is ill-advised to “brace for a COVID budget,” which is more a statement of fear-mongering than amelioration and understanding of the sacrifices that all have been making in light of the negative-growth economy.
Arrogance or pomposity will not “make friends” or “influence people” but rather cause agony, distress and anger for all. The budget impetus must be focused on motivating all to “put their shoulders to the wheel” rather than finding ways to beat the system.
The government must articulate its plans to grow revenue in light of decreasing energy income. To a great degree, focus has to be placed on enabling small and medium enterprises to survive or grow in an economically-disadvantaged environment, where unemployment is increasing daily. The security and health of Trinbagonians should always be at the forefront of the government’s policies so tangible plans to address a potentially escalating crime situation and compromised health environment will encourage acceptance of the budgetary measures as opposed to discontent and anger.
Increasing borrowings, raising taxes, reducing subsidies, profligate spending and pursuing nice-to-have projects at this time in the country’s history will cause further hardships on the population and further erode the quest for economic recovery. If this were to occur, it will clearly signify ill-advised economics and mismanagement of the country’s resources.
T&T has adequate human resources with enviable intellectual capabilities, which the government can cull to put together a budget that will have sufficient buy-in by both Trinbagonians and businesses.
Unquestionably, egos must take second place to pragmatic budgeting in a depressed economy. It is not a matter of party supporters but support from any entity that can assist in creating a realistic budget, which can result in a progressive economy.
Regardless of which party holds the reins of power, all in T&T have a stake in its economy and are quite willing to lend a helping hand to enable it to be managed astutely for growth.
However, the ruling party must acknowledge that it may not have all the necessary resources and will require assistance if the economy is to be resuscitated.
Maturity, absence of ego and an acknowledgement that “all hands must be on deck” will go a long way on the road to economic recovery.
Instilling fear and displaying pomposity are anathema to good governance and budget management.
Will the powers-that-be rise to the occasion for the betterment of T&T or will narrow interests be served?