THE OBSERVATION last week by Finance Minister Omar Davies of the need to rationalise and simplify the system of payroll taxes will likely find some sympathy among businesses, if not immediate resonance with the wider society. But it is an issue demanding serious debate.

For, as Dr. Davies pointed out in opening the Budget Debate, disclosing how he plans to finance this fiscal year's $380 billion budget, the current arrangements are inherently cumbersome. Firms have to make separate returns to the National Housing Trust (NHT), the National Insurance Scheme (NIS), HEART and the education tax. And these agencies are covered by separate legislation, different regimes for contributions and specific frameworks for collection, demanding specific accounting and auditing and management processes, adding costs to companies.

Indeed, the Matalon Committee on taxation policy had recommended the bundling of all these payments into a single payroll tax - a suggestion made three years ago, but which Dr Davies has now put back on to the national agenda.

We agree with the minister that a single collection regime, even if the cash was then allocated to the specific institutions, would of itself be a significant development. But Dr. Davies wishes to go further with the proposed reform.

He wants, for instance, to lift the cap on contributions to the NIS and more critically, to consolidate the entire payroll contributions into a single pot to be allocated to areas of greatest need.

The issue, seen from the perspective of the Finance Minister and, we suppose, his colleagues in government, is quite clear. There are huge amounts accumulated in the coffers of some institutions, which could be more efficiently utilised in financing areas of national development, such as education and health. The NHT, with over $80 billion in the bank and expenditure of about $7 billion a year on projects, is one of those agencies that could possibly be used as an example of an institution holding money that could be more efficiently used. An example of this, Dr. Davies would suggest, was the one-off 'gift' of $5 billion that legislators forced the NHT to make to the Consolidated Fund to help finance education projects in the last financial year.

Dr. Davies and the administration will, however, be aware that beyond the efficacy of his proposed consolidation, the idea is likely to raise major questions of trust. There will be those who will see the suggestion as a plan for politicians to get their hands on mounds of money to finance their distribution of pork. There will be the argument, too, that this readily available cash mountain will help to fuel official corruption.

Part of the problem, of course, is that there is a perception that special taxes, like the one per cent payroll levy for education, has brought no specific benefit. There has been no transparent accounting for this money and the Government's argument that this tax has been rolled into other resources to finance the annual education budget has not gained ground. Similarly, there is not the sense that the Capital Development Fund, into which earnings from the bauxite sector go, has been used for the stated intention of financing projects to ensure a sustainable economy when the bauxite runs out.

Whatever the truth of these observations, we support Dr. Davies' call for serious discourse on the issues to start with the Opposition in Parliament during the budget debate.