–    Slew of tax adjustments announced
–    Norway funds captured
MINISTER of Finance, Dr. Ashni Singh, in Parliament yesterday unveiled a national budget totalling $161.4 billion, 13.1 percent higher than the 2010 budget and into which the Norway funds – all $14.4 billion of it – has been incorporated  and tagged for spending this year.
The minister also announced that economic growth for the country is projected at 4.6 percent, with the non-sugar economy growing by 2.8 percent. This year’s budget is themed ‘Together – Building Tomorrow’s Guyana – Today’ and is financed without the introduction of new taxes.
The inflation rate is targeted at 4.4 percent this year, the Minister announced. Further, he announced that the overall fiscal balance of the Central Government as a percentage of GDP is expected to remain level at 3 percent.
The Minister also announced, in addition to other tax measures, that corporation tax has been re-adjusted downwards.  “…whereas, prior to the adjustment, commercial companies would pay corporation tax at the rate of 45 percent of chargeable profits, such companies shall with effect from year of income 2011 pay corporation tax at a rate of 40 percent of chargeable profits, except for telephone companies which shall continue to pay corporation tax at the rate of 45 percent,” the minister said.

He also announced the adjustment downward of the rate of corporation tax for non-commercial companies that now pay at the rate of 35 percent of chargeable profits. Those companies will now pay at the rate of 30 percent. The minister made the point that companies benefitting from the tax adjustment measures would be in a position to retain and reinvest a significantly higher share of their profits.
The minister also announced readjustments for the income tax threshold, public assistance and old age pensions. (See other stories)

2010 performance indicators
The minister said that for 2010, the economy achieved a growth of 3.6 percent, the fifth consecutive year of growth. According to Dr. Singh, the expansion of output achieved in recent years has relied less on the traditional sectors and increasingly on new and emerging sectors of the economy. He said the non-sugar economy grew by 4.3 percent in 2010.  At the end of 2010, the country achieved a balance of payments surplus of US$90.1 million and as a result of this, the Bank of Guyana increased its external reserves position to US$780 million at the end of 2010, exceeding the previous year’s level of reserves, the minister announced.
Export earnings expanded by 16.1 percent to US$891.9 million, reflecting both volume and price increases in the case of most commodities. Foreign direct investment increased by 20.7 percent to US$198 million.
The rate of inflation for last year was 4.5 percent, the minister announced, noting that Government continued to apply concessional tax rates on fuel products, “thereby helping to contain the pass-through of upward movement in world market prices.”
Interest rates, the minister said, continued to trend downwards reducing the cost of borrowing to businesses. “The weighted average lending rate declined by 22 basis points to 11.95 percent, while the small savings rate declined somewhat more moderately by 12 basis points to 2.67 percent. The 91-day Treasury bill rate…declined by 40 basis points to 3.78 percent,” said Dr. Singh.
Minister Singh credits this performance of the economy in 2010 to sound economic policies and sustained implementation.
VAT and other taxes
According to Dr. Singh, total value added tax (VAT) and excise tax collections increased more moderately by 8.2 percent to $48.3 billion. He said internal revenue collections amounted to $43.3 billion or 18 percent more than the 2009 level, “largely on account of continued robust performance by the private sector.”
He noted that income tax generated from the pay-as-you-earn (PAYE) system surpassed 2009 collections by 15.8 percent as all sectors of employers remitted higher levels of PAYE and as the number of employers remitting taxes also increased.
“Withholding taxes increased by 16.5 percent or $470.6 million due to increased collections from gold miners. Customs and trade taxes amounted to $9.2 billion representing a 20.1 percent increase over 2009 mainly due to a 21.5 percent increase in import duties bringing collections to $8.3 billion, driven by all categories of imports,” the minister said.
In giving his projection for 2011, the minister said value-added and excise taxes are targeted to increase by 3.9 percent to $50.2 billion, “primarily due to higher collections on imports, and on domestic supplies due to increased domestic trade activity.”
Final sugar production for 2010 was declared at 220,862
The minister pointed out that at the time of Budget 2010, when sectoral targets were outlined, “there was every expectation that the favourable results anticipated from implementation of the turnaround plan for the sugar industry would start to manifest themselves.”
He said the projected increase in output was premised on expansion in acreage under cultivation and gains being made in productivity. “Disappointingly, these results remain elusive, and the industry ended the year with final production of 220,862 tonnes, 5.5 percent lower than in 2009. This outcome reflected a protraction of the challenges confronting the industry, with less than favourable weather conditions, complicated industrial relations, and the need for greater improvements in managerial efficiency and effectiveness,” he said.
“Mr. Speaker, to say that 2010 was a disappointing year for the sugar sector would be an understatement of considerable proportions…,” Dr. Singh said.
The minister believes looking forward, Guysuco’s priorities are to increase cane availability, with expanded acreage under cultivation along with higher levels of participation by private cane farmers. “In addition, the process of mechanising the operations of the company will advance, with the acquisition of additional mechanised harvesters, cane loaders, tractors and haulage units. Further, repairs will be completed to the No. 1 boiler at the new Skeldon factory, and other defects corrected, with the expectation that the factory will function at full capacity by the second crop,” he said.
The Minister added that other factories will be subjected to heightened maintenance and key equipment replacement so as to increase efficiency of operations. “In addition, the Enmore packaging plant will be completed and brought into operation increasing value added output. Guysuco is projected to incur in 2011 total capital expenditure of $4.3 billion on these and related endeavours. Taken together, these factors should enable the company to recover its production levels and restore its financial performance,” he said.
The Minister declared: “In 2011, reflecting the industry’s expectation of a recovery to production levels previously achieved, sugar production is targeted at 298,879 tonnes, 35.3 percent above 2010 level of production.”
Norway funds
The minister said that in 2011, Guyana will continue to advocate a strengthening of the REDD+ decision to include market mechanisms for REDD financing, the raising of emission reduction targets by developed countries, and the operationalising of the administrative and financial mechanisms to disburse the financing that was pledged.
“Mr. Speaker, at the national level, Government was able to further advance the LCDS and start implementation of the Guyana-Norway Agreement. In 2010, important progress was made with our bilateral and multilateral partners towards building an innovative model for payment for forest climate services. This has been a challenging process and, in the immediate term, designing this model has called upon the collective resources of all to try to adapt existing financial and other instruments to fit a model that emphasises delivery of results, while at the same time meets international standards for fiduciary, social and environmental safeguards, and is one which could be replicable for other forest countries,” he said.
The minister said Guyana’s advocacy, leadership and negotiations at the international level will see refinement of this model until one is achieved that is fully reflective of the principles of payment for climate services.
“Mr. Speaker, in 2010, the first tranche of performance-based funds, approximately US$30 million was disbursed by Norway and deposited with the trustees into the GRIF. This was one of the first payments for forest climate services received by a developing country and represents a new economic opportunity for our country. This historic milestone could not have been achieved without the vision of our President, the broad-based support for the LCDS from the widest cross-section of Guyanese society, and the important role of the broad-based Multi-Stakeholder Steering Committee which is providing oversight and guidance to the LCDS process,” he said.
Among the projects the Norway funds will finance are to provide equity financing for the Amaila Falls Hydropower Project (AFHP), support to the Amerindian lands demarcation process; rural electrification, financing for small and micro-enterprise development and support to the Amerindian Development Fund to finance indigenous community projects.
“Early in 2011, we also expect to receive the second tranche disbursed by Norway, amounting to US$40 million, to lend further support to projects under the LCDS. Efforts will continue to advance our model of avoided deforestation and to build partnerships regionally and internationally while also seeking to broaden the range of partners to provide financial support for the LCDS,” said the Minister.
“Budget 2011 therefore provides for a total of $14.4 billion, equivalent to the US$70 million from these two disbursements (2010 and 2011), to be expended on the transformational LCDS projects identified,” he declared.