Overview of the economy for 2017 and fiscal measured which must be reversed

It is common knowledge that the Guyanese economy has been contracting over the last two years. Fortunately, Minister of Finance, Winston Jordan has publicly acknowledged this reality. This contraction is the product of both external and internal factors.

Externally, there has been a dramatic decline in prices for Guyana’s exports on the world market. Notably, this has been more than compensated by the fall in fuel prices, one of our largest imports. However, the more significant contributors are internally driven.

In this regard, let’s examine a few of these worrying factors:

– The loss of the Venezuelan rice market.

– A lop-sided approach to the Sugar Industry, thus directly jeopardizing close to 20,000 jobs and indirectly affecting thousands more.

– The scrapping of the housing policy, resulting in the decimation of the previously booming construction industry.

– The Government’s willful refusal to offer assistance to the productive sectors; including rice, sugar, mining and forestry.

– The removal of incentives and concessions designed to attract investments, both local and foreign.

– The harassment of importers of goods and the business community in general in order to augment revenue collection to compensate for the revenue short falls which have been precipitated by a decline in imports and commerce.

– The failure to dismantle the regime of sanctions imposed against our financial sector although we have complied with outstanding legislative obligations in our Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) structure, rising crime rates and public insecurity.

– Rampant corruption and discrimination

– The expenditure of large sums of public monies on symbolic and ceremonial ventures, and an exponential increase in the cost of Government.

The list just narrated is by no means exhaustive. Against this dismal backdrop, the Government chose to impose, over the last two years, almost 200 new tax measures upon the backs of the citizenry.

It is Sir Winston S. Churchill who once said, “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

Against such a depressing economic mosaic, Guyanese have witnessed an increase of every category of taxes on income, property, production, services, consumption, international trade and the introduction of VAT on a wide variety of items which hitherto never attracted VAT. This has been coupled with a devastating increase in a wide variety of public licences fees, as high as 1000% in some cases and in almost every case, over 200%.

The menu of tax burdens and insensitive financial measures have had generally an incapacitating, and in some categories of household, a crippling effect on disposable income.

Consequently thereof, there is a progressive and correlative reduction in the demand for goods and services and a widespread inability to discharge financial obligations, further contributing to the cyclical downward slide of the economy with the ultimate result being an increase in poverty and all the ailments associated with it.

While these measures have had an excruciating impact on the people, the Government has been reaping a windfall in revenue, increases by nearly $11 Billion for mid-2017, when compared with the same period in 2016.

The Government, no doubt, ought to be making savings with the reduction in the price for oil on the international market, one of the nation’s largest expenditures; the billions that are accumulating at the Guyana Power & Light (GPL), again caused by the reduction in the price of fuel; the removal of subsidies previously granted to pensioners; the imposition of VAT on electricity; the hundreds of millions saved as a result of the scrapping of the $10,000 cash grant to every child in a public school and the school uniform voucher programmes; and the abolition of many similar poverty-alleviating measures.

These leave the Government with billions of dollars in revenue extracted in a depressing economic environment and from a population who have not received any proportionate increase in income over the same period. This unsymmetrical fiscal and economic matrix is a recipe for social disorder and chaos in any civilized society.

This disproportionate and unfair equation, for want of a better term, has been acknowledged by many Guyanese; hence the quest to seek a compromise on an optimal taxation level and/or tax incentives necessary for growth. It is with a view of striking this delicate balance that the following recommendations for immediate implementation by the Government are offered:

1. Restoration of the regime of concessions and benefits previously offered to investors;
2. The removal of the imposition of VAT on zero-rated items, new fees and licences imposed in the 2016 and 2017 budgets;
3. The revocation of Order no. 18 of 2016, imposing VAT and reinstate Schedules 1 and 2, which it revoked. This would include the following:

• The reversal of VAT on essential food items,
• The reversal of VAT on water and electricity,
• The revocation of zero-rated VAT for imports of household solar equipment,
• The removal of VAT on all pharmaceuticals and medical supplies,
• The reversal of taxes and fees on importation of raw materials for local manufacturing,
• The removal of VAT on construction materials produced locally,
• The removal of VAT on agricultural, mining and heavy duty equipment,
• The removal of VAT on local products in the forestry sector, such as logs, shingles, wood, piles, etc.,
• The removal of VAT on materials and supplies used in the fishery sector,
• The reduction of VAT to 12% as promised by the APNU/AFC during the 2015 Election Campaign,
• The removal of VAT on purchases by Government Agencies.

4. The reversal of increase in fees for rental and drainage and irrigation in respect of state lands in Region 5 and other areas in the country;
5. The removal of tax on fuel for the agriculture industry;
6. The repeal of increased fees for motor vehicle licences;
7. The increase of the income tax threshold;
8. The restoration of the cash grant programme for every school child in public schools and increase it to $20,000 per child;
9. The restoration of and the increase in the uniform voucher programme to $4000 per child;
10. The reversal of the increase in tuition fees for the University of Guyana;
11. The restoration of the subsidy to pensioners in respect of GPL and GWI bills;
12. The removal of unconstitutional provisions in a series of tax and fiscal legislation enacted over the last 2 years;
13. The adoption and implemention of the proposals, which are the subject of a Motion to be presented by the PPP in the National Assembly under the caption “Proposals to stimulate the economy, reduce poverty and hardships in the 2019 budget”, when it resumes sitting.