Friday, February 24, 2006

The great 50 million dinar give-away

As I wrote before, the government is thinking of ways to help low income families who will be hurt by rising fuel prices. Today all four major dailies tell us that the government is planning to spend 50 to 60 million dinars a year to do this. Two formulas are reported. Al Ghad and Al Dustour report (quoting deputy Mohammad Arslan) that the government will give payments to any individual who makes less than 1000 dinars per year, whereas Al Arab Al Yawm says that the government will pay 130 dinars to every individual who's family income is less than 1000 dinars a year. Al Rai says that the payments will be for families who's annual income is less than 4800 dinars a year.

My hunch is that the Al Rai report is closest to government thinking, since all the other proposals reward larger families over smaller ones. I would be surprised if the government is going to give based on family size, especially if they start talking about age cut offs (does a new-born baby count?).

According to the Department of Statistics census of 2002-2003, about 21000 households with 84000 family members have incomes of less than 1200 dinars a year. Dividing 50 million over 84000 yields almost 600 dinars a year, not 130 as reported by Al Arab Al Yawm. I have trouble picturing the government handing over 6000 dinars a year to a family of 10, so I will set aside this scenario.

The DOS numbers show that about half a million households with 3.3 million family members make less than 4800 dinars a year. Dividing 50 million over half a million households yields 100 dinars a year per household. Bumping the number to 10 dinars a month will cost 60 million. Al Rai further says that these payments will be made for one or two years before ending.

Thus, it is clear that the amount of money each family will receive will be modest, and of little real help, especially given that the payments will be temporary. Moreover, it is useful to remember that many people underreport their income for tax purposes. This scheme will give people even more incentive for tax evasion.

As I wrote before, such a scheme will not be particularly helpful for lower income families. It is just a temporary sedative which will be subject to ridicule and abuse. I hope that the government would set aside more money for strengthening services that people need. This is why taxes are collected in the first place.


At 11:00 AM, Blogger Yael K said...

When governments promise cash returns like this it always sounds very appealing to the voters but you are right, it is never enough to make a real difference in their lives doled out individually. Much better would be to use it to improve health care services or programs for disadvantaged children and other things that will directly effect the quality of life of many and for a long period of time.


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