We must review the role of the state

If we are to make progress we have got to review the role of the state in our society and economy. If we do so we can turn what is perhaps our biggest liability into a real asset of which we can all be proud, write EDDIE CROSS.

When it is all added up we are paying the great majority of whatever we earn to the state in one form or another.
When it is all added up we are paying the great majority of whatever we earn to the state in one form or another.

When the people of the United States revolted against English domination it was over a small tax on tea. In India it was Gandhi’s objections to a tax on salt that gave rise to his long walk through India to the coast where he symbolically made some salt from sea water. This simple act that became the turning point in the Indian struggle for Independence.

Today it is impossible to think of a country without a huge state infrastructure that commands much of our daily lives, for better or worse. In Zimbabwe we have a state that collects about 25 % of our national income in taxes – but that does not fully describe the role of the state in our daily lives.

If you are formally employed you pay about 25 to 30 % of your salary in direct taxes. You pay another 20 % in levies and social service charges to government-sponsored institutions like the National Social Security Authority, the Standards Association, the Aids Council and your National Employment Council – and perhaps a Trade Union. You also contribute to an Education Fund that is supposed to fund post-school institutions.

Duties, levies, tolls

In addition you will pay 15 % Value Added Tax, import duties on most of what you consume, levies and taxes on liquid fuels, taxes on tobacco and alcohol drinks, tolls on roads and bridges and license fees to all sorts of state-controlled organisations as well as fines to fund things like the Environmental Agency. The list is endless and when it is all tallied up we are paying the great majority of whatever we earn to the state in one form or another.

Nothing wrong with this – even the bible urges us to pay our taxes. But on the other side of the coin, the size of the state in a modern economy is a key element in economic activity of all kinds. If you add all the revenue flowing towards state-controlled institutions, it is not difficult to come up with numbers that suggest that half the GDP is directed and controlled by the state. Add to that all the state-controlled institutions in the business sector (railways, airlines, ports, power utilities etc) and the numbers become even more significant. What everyone has to understand however, is that all this money is the product of a small sector of the economy known as the “productive sector”. That is not to suggest that all state-controlled institutions are “unproductive”. But the reality is that almost all their activities could probably be carried out at lower cost and more effectively by a private system, where initiative and competition forced performance and minimised costs.

$4,000 million to NSSA

Since it was formed 24 years ago, the National Social Security Authority (NSSA) has collected about $4,000 million from a million people in Zimbabwe. In 2012 only $700 million of this remained – or just over 17 %. This means that 83 % of what has been contributed by working people to NSSA had been lost or squandered. In 2012 only 17 % of the total revenue of the Authority was spent on pension benefits.

The general public gets little or nothing back from this vast network and when you add to the cost of such “overheads” the cost of state corruption, which up to 2009 amounted to a third of our GDP, you get some idea of how massive this burden is for any country. It’s like being a porter climbing a mountain and carrying twice your weight in your back pack.

Then there is the role of the state as a facilitator rather than a player who must be paid for what they do. In this case we have to ask ourselves how does the state turn “red tape into a red carpet”. The crucial test of the state in this role is whether or not we view its role in our daily lives as being of assistance or an obstacle to our individual progress? In Zimbabwe I think we fail on all counts.

Much more difficult

Most business persons would say that the state made their lives much more difficult and were a major impediment to business and development. They get very little back for their tax dollars. Virtually every Zimbabwean would make the same judgment – we get very little back for our tax dollars.

Even the absolute poor can argue that they get very little from the state in terms of any real benefits, a few dollars for education assistance, some help from the Police perhaps, a small subsidy on very poor quality health services.

If we are to make progress we have got to review the role of the state in our society and economy. If we do so we can turn what is perhaps our biggest liability into a real asset of which we can all be proud. Until then, the state is just another burden we have to lug around in our daily lives unless we can operate in the economic underworld that is the informal sector. Most Zimbabweans survive by doing just that.

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