Realigning levies

The government has finally responded to suggestions for greater budgetary discipline and financial accountability which the House of Representatives and analysts have repeatedly made in the last few years. The government's response was reflected in the bill on non-tax revenues which Finance Minister Mar'ie Muhammad unveiled to the House on Monday. But while the full effects of the new legislation will not be known immediately, as the government will be given five years to fully implement the law after its enactment, the bill reflects a step forward in the ongoing struggle of the people to make the government fully accountable for all of its revenues and spending.

The bill is important because it will govern the non-tax revenues the government is authorized to raise. The legislation will also stipulate that all non-tax revenues, like tax receipts, shall be accounted for in the annual state budget. This means that when the new legislation is fully implemented, all government revenues and spending will have to pass the scrutiny of the people through their representatives in the House. The bill also stipulates that levies or fees shall be collected by the government institutions which are appointed by the finance minister. At present several politically well-connected private companies hold the authority to collect, on behalf of the government, levies or fees.

We should commend the marked improvements in the state financial account and budgetary discipline over the past three decades. However, as the economy expands and the variety of government income increases, many kinds of revenue remains outside the budgetary account.

This means that a portion of the government's spending remains outside the House's control. Nobody has tried to estimate the size of government revenue unaccounted for in the state budget but many people believe it must be very large. The fact is the variety of levies, taxes and fees collected by the various government agencies is so large that not even the finance ministry is fully aware of their exact number. According to the government, reforestation fees alone have accumulated to several billions of dollars, all kept in the forestry minister's account.

The problem with levies and fees is that the officials responsible for collecting them often raise more than the amounts or rates mandated and pocket the balance. One can imagine the impact of legal levies and fees, combined with the illegal ones extorted from people, on economic efficiency. All this covers the levies and fees imposed by the central government.

A similar multitude of levies and fees has also been collected by local administrations and similar to the practices at central government level, their collections also often go hand in hand with illegal levies. Encouraging, nevertheless, is the government's intention to realign all these levies under a bill on local taxes and user taxes and fees which was presented by the finance minister to the House early last month.

The bill on non-tax revenues clearly stipulates that government's non-tax revenues can be derived from a number of sources including the management of government funds, the exploitation of natural resources, the investment of government assets, public services, administrative fines and the measures based on court verdicts and other sources explicitly stipulated in the bill.

Once the two bills are enacted later this year, they will contribute greatly to improving budgetary discipline and financial accountability on the part of both the central government and local administrations. The legislation will also bring about legal certainty as to what kinds of levies and fees the central government and local administrations are authorized to collect. Hopefully, the enforcement of the new laws will sharply reduce the number of levies and fees currently imposed.