Mar 26, 2013 News
-tax break for new homeowners; NIS rate hiked 1%
-assistance for senior citizens with GPL bills
By Leonard Gildarie
Several measures, including a $2,500 monthly increase in the old age pension and lowering of the Pay As You Earn (PAYE) tax rate to 30 per cent, were introduced yesterday as Government unveiled its 2013 National Budget to the tune of $208.8B – its largest ever.
During a three-hour long budget presentation yesterday afternoon in the National Assembly,
Finance Minister, Dr. Ashni Singh, also announced plans to allow homeowners who have mortgages to deduct their interest payments from the taxable income.
While the tax threshold for workers will remain at $50,000 monthly, the PAYE rate was reduced from 33.3 per cent to 30 per cent.
“As a result of this reduction in the personal income tax rate, more than 184,000 taxpayers will benefit with higher take home pay, and an additional $1.8 billion of disposable income will be placed annually in the hands of the taxpaying public,” Singh said.
Regarding the measures, Dr. Singh said it is Government’s objectives to ensure that the debt remains within manageable levels.
In addition to $1B to assist the ailing sugar industry which fell to its lowest production last year, this year Government has allocated $11.2B to the Guyana Power and Light Inc. (GPL) that will assist that state-owned agency meet its cash flow requirements.
The money will also help in key projects including the upgrade of GPL’s transmission and distribution network, its loss reduction programme, and activities relating to the Amaila Falls Hydro Project.
The Minister argued that GPL last raised electricity tariffs since 2007, when fuel prices were a fraction of what they are today. “The escalation in fuel costs has been borne by GPL in the absence of tariff increases, placing tremendous pressure on the cash flows of the company. For this reason, it was necessary last year for Government to inject a transfer of $6 billion into GPL. Those circumstances remain substantially unchanged.”
Another $2.9B has been allocated as electricity subsidies for over 10,300 residents of Linden and Kwakwani, Region Ten. Last year, attempts by government to raise electricity in Linden met with protests with three persons shot dead by police. That hike has since been placed on hold.
Regarding the non-contributory old age pension which Government has introduced several years ago to persons over the age of 65 years, Singh noted that it has been increased annually from $3,500 in 2006 to $10,000 last year.
“I am pleased to announce that Budget 2013 provides for the old age pension to be increased to $12,500 per month, an increase of 25 percent, with effect from May 1, 2013. The annual impact of this increase would result in an additional $1.3 billion of disposable income being placed in the hands of 42,500 senior citizens, and will bring the overall old age pension bill to a total of $6B in 2013.”
In addition to the old age pension increase, the budget this year will also see government paying part of the GPL bill for seniors. This will amount to $20,000 annually or $1,666 monthly. Government has also been spending $200M annually assisting senior citizens to pay the water charges they incur at the Guyana Water Incorporated (GWI). This electricity subsidy will cost the national treasury $590M annually.
Government did not leave out the National Insurance Scheme from the budget. Reviews have called for revenues to be increased urgently or face continued shortfalls by the dwindling number of contributors.
Government has decided that it is raising the rates payable by employees and employers alike by one per cent. This will generate additional revenue for the NIS of approximately $890M annually. The Finance Minister said that government will meet both the employers’ and the employees’ share of the increase in contribution payable with respect to employed persons whose income is not more than $50,000 per month.
There will also be changes to property taxes and valuation on companies and individuals. “With effect from year of assessment 2014 …the first $10M of net property will be taxed at zero percent; the next $15M of net property will be taxed at 0.5 per cent, and the remainder of net property will be taxed at 0.75 percent.
Thousands of small businesses with net property below $10M will no longer be subject to property tax.”
In introducing relief measures for homeowners who have mortgages, the Finance Minister disclosed that with effect from year of income 2013, first time homeowners who are holders of mortgage loans of up to $30M granted to them by commercial banks or the New Building Society will be permitted to deduct the interest they pay on such mortgages from their taxable income for the purposes of personal income tax.
“That portion of taxable income used by a first time home owner to pay interest on a housing loan of up to $30 million from a commercial bank or building society will be exempt from personal income tax.”
|Tax Threshold||Remains at $50,000|
|P.A.Y.E||Reduced to 30%; down from 33.3%|
|Mortgage Interest Relief||Interest on loans up to $30M can be deducted from taxable income|
|Old Age Pensioner||Increased from $10, 000 to $12, 500, pus $20, 000 a year for electricity|
|NIS||Contributions up by one percent; gov’t will pay the increase once salary below $50, 000|
|Property Tax||No tax on property up to $40 million; remainder of net property will be taxed at 0.75%.|
|Subsidy for Sugar||$1 billion|
|Subsidy for GPL||$5.8 billion to meet cash flow requirement; $5.4 billion for projects = $11.2B|
|Subsidies for Linden and Kwakwani Electricity||$2.9 billion|
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