Latest update April 18th, 2024 12:59 AM
Feb 22, 2009 Features / Columnists, Peeping Tom
When the President of Guyana indicated that he was disappointed with the budget debate, he must have been referring to the presentations on the government side of the House. He could not have been referring to the opposition because all their speakers have done a good job in exposing the shortcoming and near-sightedness of the Budget.
The President has my support, however, when it comes to the Value-Added Tax, but not for the reasons to which he alluded. Reducing the VAT is not going to increase the size of the deficit. There are ways to keep the deficit in line even if there is a reduction in revenues. Even someone engaged in child’s play knows that you can cut expenditure to keep the deficit within limits.
Even a beginner at the CAT exams knows that reducing a tax need not yield diminishing returns to revenue since reduced rates can actually foster greater compliance and even increase revenue collection. The opposition had proposed that the VAT rates be cut because the intake from VAT is far greater than projected and as a means of easing the burdens on the consumers, they proposed a reduction in the VAT given the surplus that is being collected.
The problem with the opposition’s proposal is that it fails to acknowledge that reductions in direct taxes are rarely passed on by the private sector to consumers and thus it would be much better for the government to collect the tax and channel them to increasing the disposable income of workers and consumers alike.
Increasing the income tax threshold is not also going to help the poor. It will only benefit those that are earning above the threshold.
Tax reform, however, is long overdue. For sixteen years the private sector in Guyana has been pleading for tax reform. The corporation tax is 45% and 35%, except for manufacturing concerns. These are prohibitive taxes which are burdens to the future expansion of companies.
There was little mention in the Budget of employment creation. But if the government was serious about this and at the same time wished to bring relief to the private sector, it could have considered offering some tax incentive for business expansion which creates new jobs. One proposal would have been for companies to enjoy a relief from corporation tax providing that there was expansion and the creation of new jobs.
The process of policy-making in Guyana is dependent on brainwaves. The best example of this was the announcement last year of a single-parent fund even before the government had determined just how many single parents there were in Guyana. Somebody had a brainwave, sold the idea to the government and the next thing that happens is a grand announcement about a fund.
What is needed is a serious effort at policy making and planning. What is needed is a serious effort at tacking the main issues in the country rather than simply cobbling numbers together so as to ensure that fiscal and other targets set by the international financial institutions are met.
There is no doubt that any national budget must be circumscribed by these targets. But once it is determined just what are the limits, then programs and policies can be tailored to keep within these targets while tackling the central problems in Guyana.
Rice is in crisis, sugar is on the downturn, and forestry is not going to do well, all the talk about a competitiveness strategy seems to be leading us nowhere. In short, the government needs help. They have run out of ideas and can now only turn to playing politics and engaging in window-dressing.
Before it begins to drum up talk about the country’s largest ever Budget, it needs to inform the Guyanese people as to just what sums were budgeted to be spent last year and just how much was spent. Then it needs to say how much of this year’s spending related to that which was supposed to be spent last year and was not spent.
How can any Budget in this country where there is high inflation be silent on the question of a living wage? How can workers be paid 5% increases in one year when they had already suffered a 14% erosion of their purchasing power?
The global crisis is going to affect us more than through just remittances and unlike what is being said there is something which can be done about the level of remittances. One simple thing which can be done would be to work on reducing the cost of remittances so as to cushion some of the anticipated decline in remittance levels.
Allen Stanford is being accused of painting an unrealistic picture to his investors. But compared to what we have had in Guyana, Stanford did not overkill.
Were we not told years ago that Linden would make a LEAP? Were our hopes about an alumina plant not raised? And then there was the talk about Guyana entering the ethanol market. Were we not told that the Berbice River Bridge would bring cheaper goods and services to Berbice? Yet today the business community in that county is complaining about the prohibitive tariffs.
And then we were promised hydroelectricity. And now we are being told about our potential for environmental services. However, US President Barack Obama has made it clear that climate change initiatives must be balanced against economic considerations in the midst of a global recession which means the US is not going ahead with the proposed cuts in emission levels, a move that spells doom for our President’s grand ambition to have Guyana earn millions from providing carbon services. Where are the responses in the budget to these developments?
The PPP only knows one form of economic policy: repair more roads, build more schools, shore up the sea defence, engage in selective tendering for a large chuck of its medical drugs. And of course, keep borrowing more and more from outside of Guyana to do these things.
This is why the opposition must come out with an alternative Budget plan so that the Guyanese people can see just how visionless is the PPP.
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