— as government announces sweeping incentives, revised tax measures
— $330B budget to be tabled Wednesday
By Navendra Seoraj
AFTER re-prioritising and re-programming fiscal measures, the new People’s Progressive Party/Civic (PPP/C) government has managed to add $20 billion in relief to the “pockets” of Guyanese, at a time when the nation is faced with the effects of the novel coronavirus (COVID-19) and the recently-concluded protracted electoral process.
The conduits of relief include revised tax measures and sweeping incentives, which were announced by President, Dr Irfaan Ali, during a press briefing on Monday.
The broad objectives of those measures, which will feature in government’s emergency budget, are to stimulate economic activity; get persons back to work; increase Guyana’s productive capacity; reduce the cost of doing business; improve efficiency; and facilitate growth and development of businesses.
“These measures will have an immense impact on people’s welfare and well-being… as these measures would also address directly, issues of cost of living and living standards,” said President Ali.
Guyanese, between now and December 31, 2020, stand to benefit from over $20 billion in relief through direct transfers and reduction in taxes, said Vice-President, Bharrat Jagdeo.
The PPP/C, during its campaign prior to the March 2, 2020 General and Regional Elections, had promised to make life easier for Guyanese of all walks of life, by crafting a coherent economic policy, something which the new government said was absent under the former APNU+AFC administration.
Notwithstanding the “unstable” global and domestic economic climate, the new government, since taking office on August 2, 2020, was able to do a rapid assessment of the situation in the economy and establish measures which would initiate the process of getting the economy back on stream.
“To realise a number of these measures, it required re-prioritising resources and re-programming, to ensure that the priority of government and the priority of the emergency budget are to address people’s issues; issues that affect communities, businesses and the economy,” said Dr. Ali.
The new government, while in opposition, had said that the former administration extracted some $300 billion more in additional taxes over the past five years. Some persons even argued that tax measures, instituted by the past administration, were cumbersome.
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.
“In terms of VAT, we will immediately see a reversal of VAT on electricity and water. This of course would bring tremendous benefit to all aspects of the economy. It will reduce the cost of operations for manufacturing, help the poultry industry… and every aspect of economic life, and put back more money in people’s pockets,” said President Ali.
The president also announced the removal of VAT and duties on machinery and equipment to allow for the recapitalisation of key sectors such as mining, forestry, agriculture and manufacturing.
Government also decided on granting tax concessions on All-Terrain Vehicles (ATVs) for those key sectors.
“This is another major initiative and commitment in terms of the manifesto that would bring immediate relief to mining, forestry, agriculture and manufacturing, all of which have been underperforming and faced with tremendous difficulties.
“It is estimated that 65 per cent of productive capacity in the mining sector has been lost…so these measures will help to recapitalise the sector, and bring back all the medium and small miners into productive capacity and operation, create job, wealth and have the trickle-down effect,” said President Ali.
To further help the mining sector, government will be removing the requirement to register and “take out” road licences for mining equipment, and will remove the requirement for miners to have a police clearance to transport fuel in their own vehicles.
Additional help for the productive sector includes reversal of “land lease fees” which were said to have been raised by 1,350 per cent from 2015 to now. The fees were reversed to what it was in 2014.
President Ali also announced the removal of VAT on fertilisers, agro-chemicals and pesticides for the entire agriculture sector. Added to that, government has agreed to revert the poultry industry to zero-rated VAT status, a move which will promote investment in the industry, as production costs will be reduced.
Also on poultry, the government will be offering special incentives, inclusive of land, for planting of corn and soya bean to satisfy the local and regional feed-mill demands. Government will also be granting concessions on investment in agro-processing facilities, cold storage and packaging.
SUPPORT FOR FARMERS
Additional support for the agriculture sector, and, by extension, farmers, will be the reversal of increased charges for drainage and irrigation in agricultural areas. The president announced that funds will also go towards the construction of farm-to-market roads, to allow for improved access and the opening of new lands for production.
Sugar will be given an opportunity to grow with other aspects of the agriculture sector, as President Ali announced that government will be setting aside $5 billion for the Guyana Sugar Corporation (GuySuCo).
In the area of manufacturing, President Ali announced the reversal of VAT on all exports, a move which is expected to help the manufacturing sector and help exporters to become more competitive.
“We expect these measures would stimulate expansion, create jobs and open new opportunities,” said the president, adding that government will also change the export policy to allow saw millers to export logs.
President Ali also announced the removal of VAT on hinterland travel, something which businesses, air operators, and stakeholders in the tourism sector called for, as it presented a tremendous burden to hinterland communities.
Government also plans to help hinterland communities by promoting development and returning jobs lost, through the reintroduction of the Community Support Officers (CSOs). Some $800 million has been set aside for the Amerindian Development Fund.
The government, in keeping with its commitment to ensuring that households benefit from access to electricity and energy, will be providing 25,000 solar units to hinterland communities. There will also be improved communication, access and link to communities, as government will be setting aside $1.5B for hinterland, urban and rural roads.
Zeroing in on Region One (Barima-Waini), President Ali said government will be working to acquire a new ferry for the North West. The ferry will provide cold storage to farmers.
On a macro level, measures to improve the livelihood of all Guyanese include the removal of VAT on medical supplies, building material and cell phones.
President Ali also announced the introduction of a $15,000 cash grant for school children and said that government will be doubling the $2,000 uniform voucher.
The elderly population will also benefit, as the president announced that pensioners will be receiving $25,000 as old age pension and will access free water.
Every household will also benefit from a direct cash transfer of $25,000, as the economy continues to face the effects of COVID-19. The Joint Services will also receive a two-week, tax-free bonus, and $150 million has been set aside for frontline workers, who continue to be at the forefront of the fight against COVID-19.
As a result of COVID-19, and in keeping with its plan and programme to expand e-learning to help during this period, government will also be setting aside $200 million to expand Guyana Learning Channel.
Health sector improvements, among other measures, are also in the pipeline, and will be elaborated further when government presents is $330 billion budget on Wednesday.
“Apart from these immediate measures, in an emergency budget produced in a very short period, are the most significant measures and the largest number of measures in any budget I have ever seen…even for budgets that have duration for the entire fiscal period,” said Vice-President Jagdeo.
“In fact, although this is an emergency budget, we have substantively addressed most tax measures we promised to deal with in the new government,” said the vice-president.
The budget, he said, has substantially returned an incentive framework to the productive sectors, through the reduction of land rental charges, licensing fees, water and electricity, removal of VAT on inputs, assistance to the productive sectors to create more wealth and generate employment for more people.
The vice-president said the economy was having a hard time because of the lack of incentives even before COVId-19, and after the ‘arrival’ of COVID-19 the economy went into a tailspin.
Despite the new measures, Jagdeo said many sectors are expected to decline. In a breakdown, he said agriculture, forestry and fisheries are expected to decline by over two per cent; bauxite by 40-50 per cent; gold mining by 0.2 per cent; wholesale and retail by 14 per cent; accommodation and food by 32 per cent; entertainment by 46 per cent and other services by 51 per cent.
Apart from this, a significant number of public enterprises are also in decline or posting a deficit. Among those enterprises are GuySuCo, GWI, GPL, MMA, and others. Central government revenue has also been reduced by $14 billion or 5.9 per cent since 2019.
The government will be looking to initiate the rejuvenation of the economy through its $330 billion budget, which represents an increase of about $28 billion or 9.6 per cent compared to the 2019 budget presented by the former administration.
For capital expenditure, local expenditure totals $49 billion, but $27 billion has already been spent by the past administration.
“…$27B has already been spent based on roll over from 2019 when APNU+AFC went on a spending spree with money it did not have, when it gave out large contracts in 2019…that roll over plus releases of money on the capital side which is illegal since there was no budget,” said Jagdeo, adding that the new government only had room in its budget to programme $22 billion for initiatives.
A similar picture is painted on the recurrent side of the budget, with a lot of money going to goods and services, among other things.
The spending by the previous administration stymied some potential initiatives, but Vice-President Jagdeo believes that the measures will do a lot for the economy.