Opinion

The price of the state

by | Sep 30, 2013
nino evgenidze

Nino Evgenidze is Executive Director of the Economic Policy Research Center.

Everyone demands something from the state budget: pensioners – increased pensions, public sector employees – higher salaries, socially needed – adequate social assistance, everyone else – free healthcare, education, etc. Not many of them realize that there is no such thing as a “free lunch”. Someone always has to pay. In other words, one cannot get something for nothing.

As a matter of fact, that someone is every single citizen of the country. The society in post-Soviet/post-socialist countries, just like in Georgia, finds it difficult to realize who the taxpayer is.

In Georgia, much like elsewhere, the taxpayer is not only hired individuals or employers, but rather any consumer in the economy, and therefore virtually every citizen.

To put it simply, society has little or no understanding of the “price” it pays for running the state. A layperson does not understand the true financial load that he/she bears individually for receiving public services.

An innovative web-portal designed by Economic Policy Research Center (EPRC) will give answers to a wide range of questions regarding public finances. The website user will become aware of the size of the state budget, its annual collectables – tax revenues as well as other inflows – priorities of budgetary expenditures, state debt of the country, personal contributions in providing healthcare, education and other programs, for paying salaries to the government officials, how much one works for oneself and how much for the state. Moreover, the website presents budgetary expenditures both from a per capita and per employed individual perspective, thus helping to better understand the real “state burden” for each citizen and each working individual.

As of 2013, Georgia’s state budget expenditures exceed 8 billion Georgian lari (GEL), approximately 4.7 billion USD. This figure translates into a 2,134 GEL “burden” per capita annually. Given the low number of individuals who are employed as hired (approximately 662,000, or roughly 14% of the entire population), not taking into account the self-employed, the “burden” is as high as 13,203 GEL per year per employed (hired) individual.

The most “expensive” is transfers to the local budgets – 285 GEL per capita, next is pensions and road infrastructure with 231 GEL per capita. The “cheapest” services are financing the public broadcaster – only 6 GEL per year, providing aid to internally displaced individuals – 9 GEL.

The “bill” for government services explains the citizens how much the state “overspends” which results in a budgetary deficit. As of 2013, it is planned to finance 82% of budgetary expenditures through tax and non-tax revenues. The remaining 18% will be financed through borrowing, privatization and other inflows, such as decrease in non-financial assets, as well as increasing domestic and foreign debt. In 2013 the state debt will increase by 193 GEL and reach 2,136 GEL per capita at the end of the year.

This cash register receipt represents an easy tool for distributing the information and explain to ordinary people where his/her taxes end and in what amount he/she contributes for public services. The bill presents state provided services and their per capita cost. At the same time it provides with information on deficit spending per capita as well as growing public debt. Due to calculation method – per capita – it is clear, that the data only illustrate the costs of services, on the other hand, this method allows everyone to calculate, how much would the tax burden need to grow per capita, if, for example, the pensions should rise by 10%.

The web-portal further presents a number of simulation “games” to its users. For example a virtual shop “Buy Your Own State” helps to illustrate everything that the state does today and how much money it costs us, at the same time, by entering this imaginary shop one will be able to choose which services he/she really wants from his/her personal state and those for which he/she would not pay even a single Tetri. The price of the “personal” state will then be calculated based on the choices made and the user will discover how much cheaper or more expensive his/her state would be.

The calculator What do You Pay, will help to count how much a person pays for state provided services. After entering information on monthly gross income, monthly expenditures in total while breaking down as per monthly rent/mortgage, spending on fuel, smoking and drinking habits, the calculator will show person’s own monthly balance, and even how much in a 8-hour working day he/she works for himself/herself and how much for the state.

Establishing such practice of research and making it available and accessible for the public in an understandable manner will help citizens realize their personal financial role in the State, which will raise civil awareness. Individuals will have an easy reference to understand the sources of budgetary expenditures, to assess the necessity of particular budgetary expenses proposed by the State, and to analyze the economic affects that an increase in budgetary expenses has on their pockets. Thus, the aim of the project is to empower citizens with knowledge and information needed to engage actively and meaningfully in critically important budgetary processes at every stage – formation, allocation, implementation and monitoring. The capacity to understand the budgetary processes and priorities of the government is a necessary step towards a greater objective of politically engaged citizenry and a more accountable government.

Find out more by visiting www.priceofthestate.ge.



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