Import levy cuts: process gaps

Import levy reform: gaps in due process

“Import levy reforms” cannot, as a phrase, be found in the budget policy statement for 2005-06.

This indicates this activity will not be implemented until the new budget for 2006-07 with comment being sought now to finalise policy for the budget policy statement in March next month.

Such a timeframe leaves scant opportunity for any other governance processes, such as inputs from consultation, transparency and accountability.

From the MFEM advertisement it appears such inputs will barely be taken notice of anyway: “Implementation of this decision to remove import duties on all items … is underway.”

MFEM appears to have circumvented the spirit if not the letter of the law including under section 10 of the MFEM Act which states:

“10. Economic and financial policy - The Government shall specify in a statement the economic and financial policy that will determine the decisions the Government will make in all of its economic and financial dealings, and disciplines that it will adhere to, and will lay that statement, or an update of that statement, before Parliament at the same time as, or prior to, the time it publishes a budget policy statement pursuant to section 11 of this Act. The statement shall include all significant economic and financial policies including policies affecting the key variables stated in sections 18 and 19 of this Act.”

Emphasis added. If the removal of one seventh of all government revenues is not significant then what is?

Support for the argument that government is failing to adhere to its own budgeting processes can be found in further examination of the budget policy statement for 2005-06.

Table B.1 on page 23 of the BPS projects a clear and steady growth in operating expenditures, from $76.9 million in the last financial year, to $77.8 million in the current financial year, $81.6 million in the next financial year and $85.8m the year after that (2007-08).

Nowhere is there any indication in a reduction of government revenues. Clearly, government is acting outside of its own budget processes.

Or is it? MFEM has previously criticised usage of supplementary budgets but now appears to be using the same method to introduce cuts to import levies. Under supplementary budget, MFEM predicts a lessening of operating revenue of $3.1 million. There does not reflect full losses from import levy reforms, representing instead net losses after including other gains.

Why now? Government claims to have had the import levy reforms on the books since the mid-90s, making the question even more relevant, not less. For its part, the Asian Development Bank mentions levy cuts as far back as July 2006, in its Country Programme and Strategy Update:

“Government revenue will also decrease in the short and medium term as a result of decisions relating to the removal of levies on imported goods…”

ADB does not mention when those decisions were made. So why are import levy reforms being snuck into a supplementary budget at short notice now, rather than introduced properly a year or two ago? For what purpose? Or, perhaps more accurately, in whose favour?

This and previous governments have already shown themselves willing to amend significant areas of law and otherwise interfere politically in specific programmes and projects. Not beyond the realms of possibility it is for politicians and officials inside government to seek a massive reduction in import levies prior to a major construction project. The new police headquarters, perhaps. Or maybe Tim Tepaki’s new hotels. While not spelling out specific projects, regional institutions like the Asian Development Bank note governance concerns:

“…it is generally acknowledged that there have been breaches of these legislative provisions in the last few years, particularly regarding ministerial intervention in departmental operational management and lack of compliance with legislative requirements on public service appointments.”  

Potential for corruption is obvious. It is far from clear that the $4 million courthouse was built to full value. Nor is there any guarantee that the $3.5 million police headquarters will either, such as following any quantitative surveys, at least not to any independent sources. Just how, for example, did the Chinese get permission to install toilets without any s-bends? Why were these not picked up in the planning stages, or corrected by building inspectors during the construction phase, or remedied during the sign-off afterwards? Corruption does not necessarily mean money going in back pockets. It can also mean a system so weakened by political interference that it no longer operates to its legal including constitutional potentials.

It is noted here that the current administration includes political interests who, in 2000, saw fit to remove freshly passed legislation that required all political parties to publicly declare all financial sources. Who is funding our politicians and what are they paying for?

Import levy cuts: will it work?
Import levy cuts: governance gaps
Import levy cuts: short term suggestions
Import levy cuts: long term suggestions
Import levy cuts: conclusion
Import levy cuts: whole submission