Why broad-based consumption tax, instead of higher taxes, is good for democracy and capitalism

A picture speaks a thousand words. We begin this article with Charts 1 and 2, which underscore two indisputable facts. One, public operating expenditure (opex) is eating up the entire government tax revenue annually — and has been for the past 15 years. With little left over, it means that development expenditure (capex) must be funded entirely with borrowings. Debt compounds. And, two, that has led to rising public debt levels with serious implications for the economy, including spending constraints on critical public services such as healthcare (and, therefore, its outsourcing to the private sector) and limited fiscal headroom during crises. Case in point: The nation breached its parliament-approved statutory debt ceiling of 55% (which has been in place since 2009) during the Covid-19 pandemic. Federal government debt-to-GDP currently stands at 65% (total public sector debt, including government-guaranteed debts, is at a high 86% of GDP). This situation is obviously untenable.