COMMENTARY AND ANALYSIS
It is difficult to detect any real vision in this
Budget. If the Minister is awaiting the completion of the National
Development Strategy he
should have stated that. That omission leaves the reader to wonder about
the wisdom of allowing an economy that has slowed to run on autopilot.
For those individuals, organisations and groups who
made submissions to the Ministry of Finance, the Budget 2000 will be a
major disappointment. Except for the teachers and the members of the
disciplined services the Budget offered nothing to anyone. The
Government has clearly and rightly made housing a key pillar of its
social programme. In 1999, it was announced that it would allocate
10,000 house lots. Unfortunately without offering any information on how
successful that has been, the Government now proposes to double that
number without indicating whether the Ministry or the Central Housing
and Planning Authority has the capacity to execute this and whether the
allocation for infrastructure is adequate. The capital expenditure
proposals indicate otherwise.
Every Budget leaves a trail of unfinished business
much of which represents promises to the private sector. Critics of
course blame the government for over-commitments and under-achievement.
Much of the blame however must be placed squarely at the feet of the
leaders in the private sector who seem afraid to hold the government
accountable. Too many of our private sector leaders prefer cozying up to
the Government for favors to their own businesses rather than lobbying
selflessly for the sector they represent and the economy as a whole. The
Guyana Manufacturers Association in a letter to the Private Sector
Commission noted “ its grave disappointment in not being afforded a
reply to its submissions over the years.” The Association continued
“ Our Association sees this (the Budget Consultation) as being an
exercise in futility and is seriously considering the advisability of
future submissions for the purpose of consideration within the National
Budget Estimates.” It is unlikely that the Private Sector Commission
did anything about the complaints.
The leadership of the Trade Union Movement has
equally failed to make representations on behalf of workers. Whilst the
personal deduction has been eroded and NIS contributions increased, the
Trade Unions have by and large been extremely silent, more concerned
about protecting turf than about defending the living standards of the
The macro framework calls for single digit inflation,
and perhaps slightly optimistically but dangerously close, the inflation
target for the year is 9.5%. This no doubt depends on the exchange rate
remaining fairly stable, an assumption that cannot be taken for granted.
Elections are due to be held very early into the new year. These are
seldom without contention and disruption, which could destroy just about
every one of the targets set for 2000.
Whilst projected growth is perhaps realistic, the
economy is far too dependent on the traditional areas when Guyana is a
price-taker. The performance of the economy in the past two years is
well below that of the early years of the Economic Recovery Programme.
The modest growth projected for this year will barely help us recover to
the situation we were in two years ago. It certainly will not produce
the transformation required if Guyanese are to see a future here.
Tourism continues not to rank high on the priority
industries despite Guyana’s unique product. In 1999 the Government
committed itself to the establishment of a Tourism Board and an
allocation of G$15M. One year later we are told “during this year the
Government expects to complete legislation governing the establishment
and operation of the Board.” This must be most disappointing to the
operators in the sector but do not expect them to complain.
Six years ago then Finance Minister Asgar Ally tabled
a State Paper on Policy for Tax Equity and Reform. Religiously in every
Budget Speech since we have heard plans to reform the tax system only to
be repeated one year later. Yet we appear to play lego with the tax
system. Bits stuck on when needed not only stay there but make serious
changes later more difficult.
Focus and its counterpart Business Page have always
been convinced of the benefits of the Revenue Authority if not for the
reasons often advocated. That Authority will take no less than 3-5 years
to fully establish itself. It would be a major risk to impose VAT on the
Authority during that time.
Capital Gains tax, a small Corporation Tax rate and
Property Tax cry out for action. Why can’t these be addressed as a
matter of urgency?
Two additional points are worth making. Tax rates are
too onerous and need to be reduced. Second, tax policy will have to
change in response to e-commerce, tax treaties, removal of controls and
the ever-changing business structures. High rates of tax make evasion
attractive and discourage effort particularly when the income is taxed
both when it is earned and when it is saved.
Concerns about corruption are widespread and were
recently rated as major by respondents to the Business Outlook Survey
2000. The Tender and Procurement policies of the Government have for
years been criticised for the ease with which they can be corrupted.
Hopefully, those procedures will now be seriously addressed.
It is interesting to note that the budgetary
allocation or the overworked and understaffed Office of the Auditor
General is being increased in the year 2000. Nothing will inspire more
confidence than constitutional changes that will enhance its
The PPP/ Civic has been particularly successful in
obtaining debt relief and the external debt has now been substantially
reduced. However the Government has to ensure that the arrangements for
long-term debt write-off do not cause onerous debt servicing in the
Institute of Private Enterprise and Development
The Budget seems to place much faith in IPED to
assist the small entrepreneur. It should be aware that IPED’s interest
rate policy is often the subject of adverse criticisms similar to those leveled
at the banks. That same organisation will be managing the
Guyana Youth Business Trust. Youth unemployment is too serious a problem
to leave almost entirely to one organisation.
In 1999 President Jagdeo had announced plans to
assist distressed companies. Widespread bankruptcies have to be avoided
by creative restructuring which allows those companies to return to
viability while providing higher recoveries to the lender than they
would otherwise have received.
No New Taxes?
Whilst the Minister spoke confidently of no new
taxes, workers and employers are only too well aware that NIS
contributions have doubled over the past three years. Even if this is
not theoretically a tax, it certainly reduces the take-home pay of
Issues Not Addressed
The Acting Speaker of the House and indeed all women would have been
disappointed at the absence of any women-related issues. The same is
true of Amerindians and in the Budget to a lesser extent youth and
technology. These are rather unfortunate oversights.