– says Ram, but expects gov’t will reverse some taxes, in Budget 2020
By Navendra Seoraj
BUDGET 2020 will soon be presented in the National Assembly, and while government will not be able to reverse or “brush away” ‘everything’ done by the former APNU+AFC administration, stakeholders expect that some taxes will be reversed.
The emergency budget is expected to be presented within two weeks upon convening of Parliament today.
The new People’s Progressive Party/Civic (PPP/C) government, while in opposition, had said that the coalition extracted some $300 billion more in additional taxes over the past five years.
Additional taxes included Value Added Tax (VAT) on utilities and reducing the list of zero-rated items. In economics, zero-rated supply refers to items subject to a 0 per cent VAT on their input supplies.
Some persons had argued that tax measures, instituted by the past administration, were cumbersome, but the new government, in reviewing those measures and preparing the budget, also have to consider the challenges and effects of COVID-19 on the economy.
The country’s last budget, Budget 2019, was passed in December 2018 to the tune $300.7B. And, with the country already eight months into 2020, it is important for a budget to be passed soon.
“I certainly believe that they would be reversing some of the taxes. I know it would not be all because I don’t think they could just take a big brush and reverse everything that the coalition government did…though not everything from the tax measures were bad,” said Attorney-at-Law and Chartered Accountant, Christopher Ram in an invited comment, on Sunday.
Ram suspects that government is going to raise the threshold for personal income tax, which is at $780,000 per annum.
“The government may not wish to go much further than that, but I would like to see the reduction of the personal income tax rate and maybe a couple other productive, progressive plans, but I don’t like the situation where the personal income tax rate (28 per cent) is higher than the corporate tax rate for non-commercial companies (25 per cent),” said Ram.
On another issue of taxation, the accountant believes that government is going to deal with the issue of zero rating some items, which need to be restored to zero-rated status. This he believes will cost the government some amount of revenue, but it is needed.
“The government has its work cut out, they need to know the numbers and figures and I hope they will make not only right decisions, but also decisions to bring relief to the people on the lower grounds of the economic ladder,” said Ram.
STILL TOO SKEWED
The economy, in his view, is still too skewed, in the sense that it has been providing an investment climate and revenue structure that favours those who are “better-off” in society.
Government has, however, been taking stock of where the economy is, and while there is not a lot of time to do so, officials said they hope to achieve a lot.
Ram said he was disappointed that, despite the extraordinary circumstances, government did not invite any segment of the population for consultations on the budget, although it should have been done.
Outgoing Chairman of the Private Sector Commission (PSC), Gerry Gouveia, was, however, a bit more lenient, as he acknowledged that the new government has only been in office for less than four weeks, during which time it had to deal with pressing issues, while informing itself on revenue, spending and the state of public finances.
“While doing so, government has had to contend with troubling statistics relating to the COVID-19 pandemic and workplace restrictions. This means that the government has necessarily had to limit interactions with stakeholders, including with the private sector commission. This is regrettable but understandable,” said Gouveia during an interview with the Guyana Chronicle.
While recognising the challenges facing the government, keeping private sector businesses afloat and all employees on their payroll is important to minimizing the pandemic’s impact on the economy. And, the support from the government to private sector entities over the past few months has been minimal, so they would like to see some relief measures in the budget.
One such measure includes allowing “loss relief,” not only prospectively, but all together, thus having an immediate positive impact on those businesses that are directly affected by COVID-19.
“We would also like to see the immediate restoration of zero rated status on exports and all those goods and services which adversely impact on the prices charged to consumers. Some of those things include domestic flights and food items, among others. We would also like to see an increase in the personal allowance and reduction of the personal income tax rate to 25 per cent and the possibility of some progressivity in the rate structure,” said Gouveia.
For companies and all the taxpayers unable to meet their payments on time, the private sector commission would like to see a waiver of penalties and interest, and some deferral of such payments.
“We understand the challenges facing the government but many businesses need support in order to survive, to pay taxes, and continue employing staff,” said the outgoing PSC chairman.
Head of the Department of Economics at the University of Guyana, Sydney Armstrong had strongly advised that the proposed budget be “people-focused”, and especially give priority to vulnerable groups.
He feels that, essentially, it should focus on such key sectors as health, education, agriculture, infrastructure and industries, all of which should be inextricably linked to the new Oil-and-Gas Sector, which should be its central feature.
“As a nation, we are at a defining moment, given the development of our Oil-and-Gas Sector,” Armstrong said, “but it is also important to note that the road up ahead is still going to be challenging, given that we are still in a global pandemic.”
Considering the economic situation and the instability caused by COVID-19, the economist said there is need for a “stimulus package”, as this would ease the “economic hardship” faced by vulnerable groups in society.
Government will have much to consider, given that Guyana has been without a budget for close to two years and the extraordinary spending that occurred between March 2 and August 2 has left the treasury in an empty state, President Irfaan Ali said.
According to him, the mismanagement of many state institutions and decision- making processes of Guyana resulted in the tremendous loss of finances, compared to pre-2015.
“We are going to ensure that we do a comprehensive report on every aspect of the economy, every sector, so that the Guyanese population can understand what is taking place,” the President told Newsroom in a recent interview.
To generate jobs, create wealth and opportunities, the President said a series of incentives will be launched for various sectors such as the hotel industry, manufacturing, industrial development and livestock, among others.
He said when capital is raised there will be public, private partnership to deal with the housing sector which will also create thousands of jobs. As such, works have already started on the 2021 budget.
Meanwhile, he noted that jobs will also be created when the sugar industry is up and running.
Government is also committed to creating opportunities at the sugar estates with a special investment regime set aside for the Wales Estate, since all the equipment were sold out.
“This will create wealth, opportunity, build capacity and bring back life and economic prosperity to communities,” Dr. Ali said.
He said the sugar industry is not about workers working in estates but the socio-economic impact of the estates on the regions and communities, as those far outweigh any subsidies government will give.
He noted that the government will inject some $600M into the Guyana Sugar Corporation (GuySuCo) to assist with the payment of wages and salaries for employees.
The President also noted he has seen many files of expressions of interest for the sugar estates.