Contributing factors to contracting economy are internally driven

Dear Editor, It is common knowledge that our economy has been contracting over the last two years. Fortunately, the Minister of Finance has publicly acknowledged this reality. This contraction is the product of both external and internal factors. Externally, there have been a dramatic decline in commodity prices of our exports on the world market. Notably, this has been more than compensated for by the fall in fuel prices, one of our largest imports. However, in my view the more significant contributors are internally driven.

Some of these are the loss of the Venezuelan rice market due to an irresponsible approach by the government; a flawed approach to the sugar industry, thereby directly jeopardizing 20,000 jobs and indirectly affecting 1000s more; the scrapping of the government housing policy, resulting in the decimation of the previously booming construction industry; the government’s wilful 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 creation of an atmosphere of fear and intimidation by the likes of SOCU, SARU and SARA; the harassment of importers of goods and the business community, generally, in order to augment revenue collection to compensate for the revenue shortfalls which have been precipitated by a decline in imports and commerce; the failure to dismantle the regime of sanctions imposed against our financial sector, though we have complied with outstanding legislative obligations in our 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 chooses to impose over the last 2 years almost 200 new tax measures upon the backs of the citizenry. It is the latter upon which I now wish to focus. It is Winston 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, we have witnessed an increase of every category of tax 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 licence fees, as high as 1000% in some cases, and in almost every case, over 200%.

This astronomical regime of tax impositions and harsh fiscal measures have had, generally, a debilitating, and in some categories of household, a crippling effect, on disposable income. Consequently, 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, increasing revenue by nearly $11 billion for mid-2017, when compared with the same period in 2016. When coupled with the savings that the government ought to be making 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 GPL, caused again, by the reduction in the price of fuel and the removal of subsidies previously granted to pensioners along with 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, it is left with billions of dollars in revenue extracted in a depressing economic environment and from a population which has not received any proportionate increase in income over the same period. This asymmetrical fiscal and economic matrix is a recipe for social disorder and chaos in any civilized society.

I believe that this disproportionate and unfair equation, for want of a better word, was recognized by the recently held Business Summit, hosted by the private sector. Hence, part of its quest was 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 I humbly offer the following recommendations for immediate implementation by the government:

1. restoration of the regime of concessions and benefits previously offered to investors;

2. the removal 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 reinstatement of Schedules 1 and 2, which it revoked. This would include the reversal of VAT on essential food items, the reversal of VAT on water and electricity, the revocation of zero-rate VAT for imports of household solar equipment, the removal of VAT on all educational goods and services, 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 locally produced, 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 fisheries 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 of the country;

5. the removal of the new taxes imposed on the mining sector – return tributors tax to 10% and remove the 2% final tax;

6. the removal of tax on fuel for the agriculture industry;

7. the repeal of increased fees for motor vehicle licences;

8. the increase of the income tax threshold;

9. the restoration of the cash grant programme for every school child in public schools and increase it to $20,000 per child;

10.the restoration of and the increase in the uniform voucher programme to $4000 per child;

11.the reversal of the increase in tuition fees for the University of Guyana;

12.the restoration of the subsidy to pensioners in respect of GPL and GWI bills;

13.the removal of unconstitutional provisions in tax and fiscal legislation enacted over the last 2 years;

14.the adoption and implementation 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.

I feel compelled to say that I do not take much comfort from the Minister of Finance’s recent assurance that there will be no new taxes in the 2018 budget. It has escaped many that at that very press conference, the distinguished Finance Minister proceeded to assert that there has been no imposition of new taxes in his three budgets over the last two-and-a-half years. The fact that we are meeting here and having this very discussion, by itself and without more, demonstrates how wrong he is. The technical distinction of the Minister means very little to the Guyanese taxpayers. Whether it is a new tax or an increase in existing taxes, the reality is that the taxpayer is shouldered with a greater tax burden. That is what matters to him and that is what matters to us in the People’s Progressive Party as representatives of the people. Yours faithfully, Mohabir Anil Nandlall, MP