A REQUEST by Guyana Manufacturing and Services Association (GMSA) President Mohindra Chand, for a 33 1/3 percent reduction on personal income tax, has been ruled out by Finance Minister, Dr. Ashni Singh.

Speaking, Thursday, at the GMSA annual Awards and Dinner Ceremony, in the Savannah Suite of The Pegasus Hotel in Georgetown, the minister said the country’s economy can face long-term instability if such a major tax cut is implemented.
However, the business fraternity remains adamant that it should be granted because the Value Added Tax (VAT) is raking in huge revenues.
Chand said the 16 percent VAT has been earning large sums since its implementation.
In an interview after the function, he posited that, while a proper study is needed to make such a decision, he is strongly of the view that the personal income tax should be reduced; taking into consideration that the VAT has been effective in capturing all taxpayers.
He said the latest figures show that, in 2011, VAT and excise taxes raked in $53 billion and Income Tax $16 billion.
Not prepared
But the Finance Minister told the gathering, at the GMSA forum, that government is not prepared to sacrifice economic stability for political popularity.
He cautioned the business community that reducing taxes would backfire on the private sector’s growth and overall performance.
“It is not in the private sector’s interest for the country to have a large fiscal deficit that accumulates unsustainable burdens of debt which, in turn, will undermine all of the other key indicators, inflation and interest and exchange rates and end up making the environment for doing business even more uncompetitive than had those popular choices not being exercised,” said Singh.
Maintaining that huge tax reductions would amount to “reckless decisions” and “no brainers”, the minister still pledged government’s commitment to working with the Private Sector to ensure that long term solvency, viability and sustainability of the economy is preserved and protected.
Nevertheless, the GMSA President said he intends to open talks with Minister Singh, next month, to pursue the issue, hoping that the latter has not really closed the door on negotiations but has actually opened the way for them to engage him in further discussions.
Meanwhile, the International Monetary Fund (IMF) forecast that Guyana will, this year, register 3.7 percent Gross Domestic Product (GDP), 4.6 percent inflation and an external current account deficit of 14 percent of GDP.