To lessen burden of public debt, focus on DSE growth, realistically

04Dec 2017
The Guardian
To lessen burden of public debt, focus on DSE growth, realistically

CONTRASTING trends usually characterise economic life but the sustainability of policy action requires that there is capacity to sort out bottlenecks, instead of making hurdles of growth a permanent feature of policy action.

There are weaknesses of the sort in economic policy where for two decades or so the country is being asked to clear up hurdles to doing business to no avail, as the drawbacks often relate to policy fundamentals taken for granted to be good things. They can only be resolved if the government needs to solve some essential problem where the policy hurdle will stand up on its own, not as ideology.

One such problem is the size of the public debt, which by all accepted measures even by indicators of the Bretton Woods institutions is still manageable and sustainable, as the portion of revenues it takes to service the debt is not a massive burden as yet, there is another side to it. Instead of looking at the debt and its sustainability in constant terms, in like manner as comparing it across countries having similar levels of debt per capita GDP, a behavioural method could do a better job. It is to measure the level of stress that is felt across the country’s economy owing to the debt, as it impacts tax collection behaviour.

In examining the behaviour of revenue collection agencies, it is not easy to say what is the role of the debt in the methods applied, as taxpayers aren’t distinguished by those who pay for development projects and those who pay to service the public debt. The point of convergence is the urgency that is publicly felt and shared as to the urgency of maximisation of revenue collection, where the International Monetary Fund has to make a public appeal lately for payment of vast sums owed to the private sector in withholding tax and other overdue reimbursements. Some ringing operations on tax evasion are also an illustration of this.

Business wisdom has it that the lower the tax levels, the higher the level of voluntary compliance, where the higher the tax burden the more likely the corruption level to avoid taxes. If corruption is physically lowered without altering this burden, or increasing it appreciably as is likely to be the case in certain sectors of economy (while lightening it in the sphere of industrial start-ups, capital imports, etc.) real dangers of divestment start rising on the horizon. So a dynamic industrialisation roadmap has to have an element of diminished taxation to lessen draconian tax collection and that’s where the DSE facility arises.

At DSE, there is a difference between capital mobilisation enthusiasm which seems to be catching on, even when initial pressure was regulatory or statutory, and share purchasing. This puts a severe limit as to the potential uptake of shares, and even if that initial step succeeds, tests how far real capital mobilisation is likely. Quite often just a few stocks have any buyers out of more than 20 listed companies. So far little is heard from the Bank of Tanzania as overall supervisors of the DSE project, for instance as to placing the commanding heights of the economy at DSE rather than under the Treasury Registrar, where only debt methods of capitalisation are feasible. Indebted companies like TANESCO, Air Tanzania, Tanzania Railways would be capitalised on touching the ground, assuming that occupancy titles are raised to long leases so that banks can accept such titles to extend credit for massive share purchasing, recapitalisation.