2011 Budget… Income tax threshold raised, Corporation tax lowered
Minister of Finance, Dr Ashni Singh yesterday presented what he justifiably called the largest budget in Guyana’s history but unlike the previous year, budget persons can look forward to some sense of relieve in some areas.
The $161.4B budget was presented under the theme, “Together Building Tomorrow’s Guyana Today” and will feature no new taxes.
Dr Singh announced that with effect from year of income 2011, the personal income tax allowance, or threshold as it is popularly known, will be increased from the current level of $420,000 per annum to $480,000 per annum.
This means that the taxable income has now moved from $35, 000 per month to $40,000 per month.
Companies also have something to smile about.
As it relates to the Corporation tax, Dr Singh said that prior to the adjustment commercial companies would pay corporation tax at the rate of 45 per cent of chargeable profits. “Such companies shall with effect from year of income 2011 pay corporation tax at the rate of 40 percent of chargeable profits, except for telephone companies which shall continue to pay corporation tax at the rate of 45 per cent.”
He said, too, that whereas prior to the adjustment non-commercial companies would pay corporation tax at the rate of 35 per cent of chargeable profits, such companies shall with effect from year of income 2011 pay corporation tax at the rate of 30 percent of chargeable profits.
Dr Singh said that it is hoped that companies benefiting from the measures would be in a position to retain and reinvest a significantly higher share of their profits.
In his projections for this year, Dr Singh did make some predictions that raised eyebrows such as Value-added and excise taxes are targeted to increase by 3.9 percent to $50.2B.
Total VAT and excise tax collections for 2010 increased by 8.2 per cent over 2009 collections to $48.3B, “with increases recorded on import and domestic supply VAT along with excise tax on motor vehicles, while excise tax on fuel products declined due to the lower tax rates applied.”
Dr Singh told the House that current revenue (net of GRIF inflows) is budgeted to increase by 3.9 percent to $112B, with Guyana Revenue Authority contributing $104.4B.
He said that customs and trade taxes are projected to collect $10B representing an 8.3 per cent increase primarily attributed to higher import duty collections arising from higher import volumes after allowing for the impact of implementing the Economic Partnership Agreement.
The Minister said internal revenue collections are targeted to increase by 1.9 per cent to $44.1B, reflecting improved performance of the self employed category and PAYE, primarily due to higher collections on imports, and on domestic supplies due to increased domestic trade activity. Non-tax revenue collections are projected to increase by 11.2 per cent to $7.7B, primarily on account of higher Bank of Guyana profits.
He said that total expenditure is projected at $157.7B. “Of this, current expenditure is projected to grow by 10.6 per cent to $95.5B, while capital expenditure is projected to increase by 33 percent to $62.1B.
The growth in non-interest current expenditure is primarily attributed to cost of conducting general and regional elections in 2011, with the Guyana Elections Commission’s recurrent allocations being increased by a total of $2B to accommodate this cost.
“The growth in capital expenditure is mainly due to heightened activity in ongoing projects and new projects commencing execution,” according to Dr Singh.
The Finance Minister told the House that total receipts of the public enterprises are projected to increase by 13.5 per cent to $109.5B which he premises mainly on account of higher export sales of sugar.
He said that capital expenditure is projected to increase by $5.7B attributed to the purchase of additional generating capacity by Guyana Power and Light adding that the overall deficit is projected at $2.3B.
Dr Singh said the deficit of the non-financial public sector is projected to decline to $17.3B or 3.5 percent of GDP.
The Minister said that in 2010, the country despite the global environment namely still feeling the effects for the global financial crisis performed the country achieved growth in the Gross Domestic Product to the tune of 3.6 per cent with the non-sugar economy growing by 4.3 percent in 2010.
Inflation in 2010 was at 4.5 per cent and is projected at 4.4 per cent for this year.
The Finance Minister said that monetary policy for this year will continue to support the expansion of private sector credit in an environment of low inflation and a stable exchange rate.
“While global food and fuel prices are projected to increase, the domestic economy is expected to be insulated from these developments as we continue to gain from the investments made to assure food security, and regulate the excise on fuel to moderate pass through…Consequently, the inflation rate is targeted at 4.4 per cent.”
The Minister said that the overall balance of payments is projected to achieve a surplus of US$24.4M, compared to US$90.1M surplus at the end of last year 2010.
This, he said, is attributed to a projected widening of the current account to US$385.6M due to higher import commodity prices outweighing the projected higher export earnings.
“Meanwhile, the capital account is projected to improve by US$84.2M to US$410M surplus as the level of disbursements is expected to increase significantly.”
The Minister stressed that at present the Guyanese economy is larger than ever with GDP now measured at $453B, “and more resilient than ever before having recorded annual real growth of 4 percent on average over the past four years.”
The Minister said that Guyana’s external reserves now stand at US$780M compared with US$277 million at the end of 2006.
According to the Minister, external debt has been reduced from 72 percent to 47 percent and the fiscal deficit from 7.2 percent to 4 percent of GDP, while the percentage of Central Government expenditure financed with Guyana’s domestic revenues has been increased from 60 percent to 81 percent over the past four years.
The Minister also detailed developments in the global and regional context as well as details in the various local sectors.
Following the presentation yesterday the Opposition will now have a week to prepare for the debates on Monday following which the House will resolve itself into committee and there will be an opportunity to scrutinise every single allocation in the 2011 budget.