Role of the state in our daily lives

WHEN the people of the United States revolted against English domination, it was over a small tax on tea.

Eddie Cross

In India it was Mahatma 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, a 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 employed you pay about 25-30% of your salary in direct taxes.

You pay another percentage in levies and social service charges to government-sponsored institutions like the National Social Security Authority (Nssa), Standards Association of Zimbabwe, National 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.

In addition, you pay 15% value added tax, import duties on most of what you consume, levies and taxes on liquid fuels and taxes on tobacco and alcoholic drinks, tolls on roads and bridges and then license fees to all sorts of state controlled organisations, as well as fines to fund organisations 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 and even in the Bible we are urged to pay our taxes; in the days of the patriarchs, the temple collected a modest 10% of all incomes to meet the social security needs of the community.

On the other side of the coin, the size of the state in a modern economy is everywhere a key element in economic activity. 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 Gross Domestic Product 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) then 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 state-controlled activity could probably be carried out at lower cost and more effectively by a privately controlled system where initiative and competition force performance and minimised costs.

Since it was formed 24 years ago, Nssa has collected about US$4 billion from a million people in Zimbabwe. In 2012, only US$700 million of this remained or just over 17%.

This means 83% of what has been contributed by working people to Nssa has 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 state 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 backpack.

On another tack, there is the role of the state as a facilitator rather than a player who must be paid for that. In this case, we have to ask ourselves how does the state turn “red tape into a red carpet”, as the new President of India Pranab Mukherjee stated during the recent Indian elections.

The crucial test of the state in this role is whether or not we view the role of the state in our daily lives as being of assistance or an obstacle to our individual progress? In Zimbabwe, I think we fail on all counts.

Most business persons would say that the state made their lives much more difficult and was a major impediment to business and development. They get very little back for their tax dollars
If we are to make progress, we have 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.

Cross is MDC-T MP for Bulawayo South. This article first appeared on his website www.eddiecross.africanherd.com

3 Responses to Role of the state in our daily lives

  1. C Frizell June 21, 2014 at 11:54 am #

    Government provides the Administration function in a business, such as Accounts, Training, Security and so on. As such it should be kept as small and as low-cost as possible because it is basically an unproductive (non wealth earning) function. The cost of government (Administration) is paid for by the productive sector, the taxpayers. It is imperative that these administration costs be kept as low as possible and also that they are fully transparent to the Taxpayer who funds them.

    • BeckyDMichael June 22, 2014 at 8:29 pm #

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