THREE weeks of heated debate and arguments wrapped up Wednesday night with the approval of Budget 2013 with amendments.

Presented under the theme ‘Overcoming Challenges Together, Accelerating Gains for Guyana’ the budget was approved by the National Assembly after the parliamentary Opposition instituted cuts to three major national developmental projects, among others.
Of the $208.8B estimates, $5.2B was slashed from the $10.2B allocated to the Guyana Power and Light (GPL); the entire allocation of $1,250.000B towards the Specialty Hospital Project was cut; the entire Transport Programme allocation of $5.63B under the Ministry of Public Works was gutted; the allocation for the Government Information Agency of $135.858M was reduced to $1; the National Communications Network’s allocation of $81.337M was also reduced to $1, and the Low Carbon Development Programme allocation of $20B was reduced to $1B.
Budget 2013 included something for all Guyanese, and was fully financed without the introduction of any new taxes. There are several measures for different sections of the population including mortgage relief, increase in pension, and electricity subsidy for Linden, income tax reduction and property and individual tax reductions.

Pensioners
With effect from May 1, pensioners will enjoy a grant of $12,500 per month, an increase of 25 percent. 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, with effect from 2013, Government will provide each old age pensioner with assistance of up to $20,000 per annum to pay GPL for electricity charges incurred. This assistance will have the effect of increasing the disposable income of senior citizens by a further $590M per annum.

Mortgage relief
Tens of thousands of Guyanese individuals and families will now be able to repay mortgages more quickly because of the mortgage interest relief provided for. The 2013 Budget provides for, effective from year of income 2013, first time home owners who are holders of mortgage loans of up to $30M granted to them by commercial banks or the 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. In other words, that portion of taxable income used by a first time home owner to pay interest on a housing loan of up to $30M from a commercial bank or building society will be exempt from personal income tax. This initiative will cost government approximately $580M.

Sugar industry support
In support of GUYSUCO’s plans to modernise the industry, Budget 2013 provides $1 billion to be transferred by Government to help the company meet the financing requirements of its transformation plans. This support by government to the sugar industry will redound to the benefit of the industry’s 18,000 workers, their families, and suppliers of goods and services to the company. Together, more than 120,000 persons will benefit directly or indirectly

Linden electricity subsidy
This sub-sector has been a sore point since the presentation of the 2012 Budget, when efforts were initiated to gradually align the electricity rates paid by the residents of Linden with those paid by electricity customers on the GPL grid.
The subsidy has subsequently been re-allocated in the 2013 Budget. Pending the completion of the work of the committee, $2.9B has been provided to meet the cost of maintaining the electricity subsidy in Linden and Kwakwani, so that 10,363 electricity customers in Region 10 can continue to benefit from the currently prevailing rates through the remainder of the year.

National Insurance Scheme
The reality for the National Insurance Scheme has been growing benefits, a beneficiary population that is aging, and therefore in receipt of pensions and other benefits for more years than were anticipated at the time they commenced participation in the scheme. There is also a contributing population that has not been growing as rapidly as it should, especially amongst the self employed.
With effect from June 1, 2013, the contribution rate for both employed and self-employed contributors will be increased by one percent. This will generate additional revenue for the NIS of approximately $890M per annum. However, in order to ensure that the vulnerable feel no impact as a result of this increase, government will meet both the employer’s and the employee’s share of the increase in contribution payable with respect to employed persons whose income is not more than $50,000 per month. This initiative will cost the government approximately $215M per annum and will benefit some 58,300 contributors.

Property Tax reduced for small businesses
With effect from year of assessment 2014, companies will be charged at the following rates: the first $10M of net property will be taxed at zero percent, the next $15M of net property will be taxed at 0.5 percent, and the remainder of net property will be taxed at 0.75 percent.
In other words, whereas the current tax free threshold for property tax on companies is $1.5M, the new threshold will be $10M, as a result of which thousands of small businesses with net property below $10M will no longer be subject to property tax.
In addition, the valuation date for the purposes of the property tax will be revised from January 1, 1991 to January 1, 2011.

Individual Property Tax reduced
With effect from year of assessment 2014, individuals will be charged at the following rates: the first $40M of net property will be taxed at zero percent and the remainder of net property will be taxed at 0.75 percent. In other words, whereas the current tax free threshold for property tax on individuals is $7.5M, the new threshold will be $40M, as a result of which tens of thousands of low and middle income earners with net property below $40M will no longer be subject to property tax.
As with companies, the valuation date for the purposes of the property tax will be revised from January 1, 1991 to January 1, 2011.

Personal Income Tax reduced
The personal income tax threshold increased from $25,000 per month in 2006 to $50,000 per month in 2012. Most recently, as a result of last year’s upward adjustment of the threshold from $40,000 to $50,000 per month, 21,000 persons were removed from the tax net. Currently, the first $50,000 of income per month, or $600,000 of income per annum, is free of income tax, and the remainder of income is subject to personal income tax at a rate of 33 percent.
With effect from year of income 2013, personal income tax will be charged on income above the current threshold of $50,000 per month or $600,000 per annum, at a rate of 30 percent instead of 33 percent.
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 $1.8B of disposable income will be placed annually in the hands of the taxpaying public.