Controversial errors
Among other things the controversy that has arisen on taxing overtime is causing one to doubt whether the government is paying enough attention to ensure that the figures it presents to the public are correct. On two close occasions the Prime Minister...
Among other things the controversy that has arisen on taxing overtime is causing one to doubt whether the government is paying enough attention to ensure that the figures it presents to the public are correct. On two close occasions the Prime Minister gave different interpretations to the overtime figures.
Later on the Parliamentary Secretary at Finance also indicated varying figures and by implication projected an explosion in overtime to be worked during 2008. Let me elaborate on the basis of freely translated direct quotations...
Delivering the Budget Speech on October 15, on pages 84 and 85, the Prime Minister said:
"Last year we extended the 15 per cent band from Lm1,000 to Lm2,250 in the case of a single's computation, and from Lm1,700 to Lm3,500 in the case of a joint (married) computation. We did this to ensure that overtime was not taxed at more than 15 per cent.
"It appears that we managed to achieve that objective, although not completely so. It appears that out of a declared income of Lm12 million from overtime there is around Lm1.5 million that is taxed at the rate of 25 per cent. That being so, I am proposing to extend the tax band so that, as far as possible, overtime is taxed at 15 per cent."
Replying to the Budget Speech on October 22, the Leader of the Opposition said that to reduce the burden of taxation and to incentivise competitiveness (sic) a Labour government led by him during the next legislature would introduce measures which, while safeguarding transparency in conditions of work, will exempt overtime earnings from income tax.
Winding up the Budget motion debate two days later, the Prime Minister obfuscated the issue with partisan comments, while correcting his Budget Speech declaration on overtime without bothering to admit that his speech contained a mistake. Referring to the Opposition Leader's proposal not to tax overtime earnings, the PM said: "I remind him that during the tenure of Labour governments there was no overtime; they used to give time-in-lieu. Overtime started being paid during the tenure of Nationalist governments. But I want to remind him to be careful because such a measure (not to tax overtime) could lead to much abuse.
"We have made a calculation and concluded that on its own this measure would cost Lm12 million. But, if abuse leads to shifting from the basic wage to overtime, the loss in revenue would amount to Lm30 million..."
Effectively, the PM changed his Budget Speech reference to declared income from overtime of Lm12 million, to a tax take of Lm12 million from overtime - a vastly different issue. Why he didn't bother to point out that he had erred in the Budget Speech might be put down to human weakness, which refuses to admit that to err is human.
But surely to persist in error is worse still than diabolical. That is what the Department of Information did as the controversy grew and it came out with a statement to counter a claim made by Opposition spokesmen. In the media release issued last Thursday the DOI had the gall to state that "in the Budget Speech (page 85) the Prime Minister explained that at present revenue from tax on overtime is estimated at Lm12 million".
As shown above, on that particular occasion the Prime Minister had done no such thing. He had not referred to tax revenue, but to income earned from overtime.
It defies logic why there is so much hubris around, such a reluctance to admit an error so that one may correct it. Instead the DOI compounded the error with a falsehood.
Last Friday, the Finance Parliamentary Secretary entered the overtime controversy once again to demonstrate why and to what extent the MLP was wrong in its estimates of the cost of the proposals made by the Opposition Leader in his reply to the Budget Speech. The controversy had reached a very high degree of heat.
It may well rage further as the general election campaign is formally opened. That will probably serve to confuse the electorate further about who is making serious estimates, or otherwise. Meanwhile, the argy bargy skids along.
The parliamentary secretary gave more data than hitherto to show how the estimate of some Lm12 million in tax revenue had been reached. He gave useful figures and used correct terms. He confirmed an estimate that income currently earned from overtime approximated Lm49 million. He did so in the context of the objective clearly specified by the Prime Minister in the Budget Speech to tax overtime, as far as possible, at no more than 15 per cent. That being so, another estimate that the Parliamentary Secretary proceeded to give reads very strangely indeed.
He said that income tax on overtime was expected to reach Lm10.24 million in 2008. That is, once the tax changes proposed by the Prime Minister have come into effect, and overtime is charged at no more than 15 per cent.
Correlating the tax aggregate and the tax rate parameter indicates that the parliamentary secretary expects earnings from overtime work to exceed Lm68 million during 2008 - against the estimated Lm49 million earned during 2007.
Can such a massive jump in forecast overtime be correct? I do not think so. More likely, there is another error floating around; one too many, really.
Controversy is one thing, even if hyped up with very subjective hypotheses. Unreliable figures something else.
Later on the Parliamentary Secretary at Finance also indicated varying figures and by implication projected an explosion in overtime to be worked during 2008. Let me elaborate on the basis of freely translated direct quotations...
Delivering the Budget Speech on October 15, on pages 84 and 85, the Prime Minister said:
"Last year we extended the 15 per cent band from Lm1,000 to Lm2,250 in the case of a single's computation, and from Lm1,700 to Lm3,500 in the case of a joint (married) computation. We did this to ensure that overtime was not taxed at more than 15 per cent.
"It appears that we managed to achieve that objective, although not completely so. It appears that out of a declared income of Lm12 million from overtime there is around Lm1.5 million that is taxed at the rate of 25 per cent. That being so, I am proposing to extend the tax band so that, as far as possible, overtime is taxed at 15 per cent."
Replying to the Budget Speech on October 22, the Leader of the Opposition said that to reduce the burden of taxation and to incentivise competitiveness (sic) a Labour government led by him during the next legislature would introduce measures which, while safeguarding transparency in conditions of work, will exempt overtime earnings from income tax.
Winding up the Budget motion debate two days later, the Prime Minister obfuscated the issue with partisan comments, while correcting his Budget Speech declaration on overtime without bothering to admit that his speech contained a mistake. Referring to the Opposition Leader's proposal not to tax overtime earnings, the PM said: "I remind him that during the tenure of Labour governments there was no overtime; they used to give time-in-lieu. Overtime started being paid during the tenure of Nationalist governments. But I want to remind him to be careful because such a measure (not to tax overtime) could lead to much abuse.
"We have made a calculation and concluded that on its own this measure would cost Lm12 million. But, if abuse leads to shifting from the basic wage to overtime, the loss in revenue would amount to Lm30 million..."
Effectively, the PM changed his Budget Speech reference to declared income from overtime of Lm12 million, to a tax take of Lm12 million from overtime - a vastly different issue. Why he didn't bother to point out that he had erred in the Budget Speech might be put down to human weakness, which refuses to admit that to err is human.
But surely to persist in error is worse still than diabolical. That is what the Department of Information did as the controversy grew and it came out with a statement to counter a claim made by Opposition spokesmen. In the media release issued last Thursday the DOI had the gall to state that "in the Budget Speech (page 85) the Prime Minister explained that at present revenue from tax on overtime is estimated at Lm12 million".
As shown above, on that particular occasion the Prime Minister had done no such thing. He had not referred to tax revenue, but to income earned from overtime.
It defies logic why there is so much hubris around, such a reluctance to admit an error so that one may correct it. Instead the DOI compounded the error with a falsehood.
Last Friday, the Finance Parliamentary Secretary entered the overtime controversy once again to demonstrate why and to what extent the MLP was wrong in its estimates of the cost of the proposals made by the Opposition Leader in his reply to the Budget Speech. The controversy had reached a very high degree of heat.
It may well rage further as the general election campaign is formally opened. That will probably serve to confuse the electorate further about who is making serious estimates, or otherwise. Meanwhile, the argy bargy skids along.
The parliamentary secretary gave more data than hitherto to show how the estimate of some Lm12 million in tax revenue had been reached. He gave useful figures and used correct terms. He confirmed an estimate that income currently earned from overtime approximated Lm49 million. He did so in the context of the objective clearly specified by the Prime Minister in the Budget Speech to tax overtime, as far as possible, at no more than 15 per cent. That being so, another estimate that the Parliamentary Secretary proceeded to give reads very strangely indeed.
He said that income tax on overtime was expected to reach Lm10.24 million in 2008. That is, once the tax changes proposed by the Prime Minister have come into effect, and overtime is charged at no more than 15 per cent.
Correlating the tax aggregate and the tax rate parameter indicates that the parliamentary secretary expects earnings from overtime work to exceed Lm68 million during 2008 - against the estimated Lm49 million earned during 2007.
Can such a massive jump in forecast overtime be correct? I do not think so. More likely, there is another error floating around; one too many, really.
Controversy is one thing, even if hyped up with very subjective hypotheses. Unreliable figures something else.