Faltering between a rock and a hard place
Guyana’s economy is declining. The growth rate fell this year and the projection for next year is modest. This means that the income of the government has declined significantly and so has its ability to spend. Public expenditure is one of the two main props that keeps the economy ticking over and sustains employment, income and services. The other is private investment.
In making decisions on the budget, the government found itself between a rock and a hard place. It had to decide whether to reduce spending in proportion to its reduced income or sustain the same or a similar level of public spending as previously by raising funds by way of taxation and borrowing. It chose the latter course by imposing or increasing taxes on individuals and businesses. It has also increased the amount that it will borrow next year, eliminating any prospect of a decline in interest rates.
With the choice made by the government to maintain public expenditure in the face of a declining economy, it was to be expected that the taxes it would raise would target those who are able to pay. This would have meant higher income tax for the higher income bracket, higher corporation tax, higher sin taxes, taxation on high-end consumption and other similar measures affecting the better off.
But none of this happened. No measures were announced to encourage the self-employed to pay their fair share of taxes.
Instead, taxation measures reduced burdens on the well off and on companies, while at the same time, the burdens on low and medium income earners have been increased.
The Private Sector Commission and other business organisations, including the Guyana Gold and Diamond Miners Association (GGDMA) have complained bitterly at the measures proposed and have suggested that business growth will suffer. The GGDMA has been vocal about the new impositions on the local mining industry and have predicted that gold declarations may well decline.
Space permits the mention of only a few proposals. For both the population and businesses, the abolition of the zero-rated status and imposition of exempted status