Burden Sharing


Grumbles have been recurrent for many years about the equity of our fiscal policies, portrayed as cuddly to private sector conglomerates and flourishing institutions as opposed to the middle classes and the ordinary taxpayers. These have taken a new dimension of resentment and anger lately in the wake of questions raised by different stakeholders about the legitimacy of the wage assistance being made rapidly available to the big corporations.

Presented as part of government’s Covid-19 assistance and bailout package to the corporate private sector, it has indiscriminately covered all companies including those which have been making billions of rupees of profit year after year and distributing a large part of which to their shareholders. Former Finance minister Rama Sithanen has also touched on this issue in an open letter to the Prime Minister, wherein he advised the latter to look into the unacceptable situation involving private companies which have, ‘for many years, declared massive dividends without any consideration for reserves for a rainy day’ seeking assistance from the Public exchequer. ‘Is it fair to the country that those who have distributed 80% of profit as dividends (in some cases more than 100%), be given support without asking them to plough back some of these excessive dividends?’ he stated.

The question of the taxpayer being called to bail out the Richard Bransons has been raised in the UK, Australia and by several others here. We must also bear in mind that many conglomerates have been particularly adept at using fiscal leeway and provisions (e.g. multi-year tax deductions for hotel refurbishments) to minimise taxes they paid to the exchequer over decades.

What is ironical is that such voices are being heard here simultaneously when the number of top employers in the citadel of capitalism, the US, that have cut executive pay has more than quadrupled in the last month. Large corporations are asking their executives to cut their salaries or bonuses as a way to show shared sacrifice as the number of laid-off and furloughed employees grows in the wake of the Covid-19 pandemic. The number of top 100 employers in the United States that have instituted executive pay cuts jumped more than four-fold from 6% on March 24 to 25% last week, according to JUST Capital, which advocates for companies to be a force for good in the economy.

This Corona crisis has added fuel to a simmering feeling of discontent with our fiscal policies and the equity of burden-sharing. We can expect the government at some stage to give due consideration to calls for revisiting our fiscal policy with a view to introducing greater equity in the country in the treatment of profitable conglomerates and companies, struggling SMEs, micro-entrepreneurs and the self-employed and the wider public. Meantime there are emergencies galore, but equity should be over-riding in sharing the burden of reconstruction that lies ahead.

One avenue would be a new tax regime more progressive in nature  — in fact a precondition which will allow the country to weather the financial storm on its hands, or for introducing some form of agrarian reform – a prerequisite to achieving food security. More reforms in different sectors will be necessary if we are to ride out of the present and forthcoming predicament, and it will require strong political leadership to drive such reforms whilst maintaining a just equilibrium amongst the needs to carry forward our Welfare State, save from disaster our productive sectors in the wake of Covid-19 and eventually increase their competitiveness as well as reduce inequality in our society.

Opposition and resistance from the traditional quarters and other vested interest can delay or limit the scope of reforms to be introduced in the best interest of the country. A strong and committed government will have to resist such opposition. The role of the State is frequently played down in the market driven economy. When private profit is thriving and there is scope to do even better in time to come, strident calls are made by ultra-liberalists to curtail the “interference” of government. The claim is then made that “small government is the best government”. In other words, the government should do the minimum leaving it to the private sector to drive the bigger parameters. However, when times are not so good, as happened in 2007 with the onset of the financial crisis in the West, governments are given compulsive roles to step in, preferably with a lot of bailout money in their hands at taxpayers’ expense.

Facts show that governments have intervened and will intervene now and in the future to save the economic machinery from collapse. But in order to play their role effectively, the government should wield the necessary authority, be respected and seen to be running the affairs of State in the public interest – not for the few.

* Published in print edition on 1 May 2020

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