Budget Debate Preview
Tomorrow at 2 PM the parliamentary debate on Budget 2001
begins. The Budget was presented to the National Assembly on June 15, a
session marked by a walkout by the members of the PNC-R protesting the
appointment of former Chairman of the Guyana Elections Commission as
Attorney General. All indications are that the PNC-R will participate in the
debate which will test the capacity of both sides of the House. It is the
first budget debate under the post-Herdmanston Constitution so that there
are now members representing the regions of the country. This will add a new
dimension to the debate although it has to be said that there is little
purity in the system in that the bond between the constituencies and their
representatives is not necessarily a close one.
The Budget Speech according to an editorial in the weekly
Catholic Standard ‘did not generate the usual wide interest and contention
which budgets usually do’. No wonder. The political situation in the
country is on everyone’s mind and often matters such as the Budget, unless
they contain bold, new initiatives will not retain attention for very long.
Mr. Norman McLean, President of the Guyana Manufacturers Association (GMA)
described the Budget as “not containing any dramatic positions but found
it to be a stabilising one as it continues the programme the government
embarked on last year’. Other leading members of the private sector and
some trade unionists were also critical of the Budget particularly as it
failed to offer any increase in the threshold at which personal income tax
Minister of Finance Saisnarine Kowlessar, who will be
under pressure to defend the Budget during the debate, appeared concerned
about the criticisms and must have noted that no well-known private sector
person or organisation or trade unionist has spoken in favour of the Budget.
The Minister held a press briefing to elaborate on the difficult political
and economic climate within which the Budget was constructed and used the
opportunity to address some of the issues which have drawn criticisms.
Minister Kowlessar is respected for his low-key, religious and
non-confrontational approach, qualities that will serve him well during the
debate since criticisms are likely to be directed at issues rather than
In the press briefing, the Minister noted that the Budget
was not a “one-stop document’ suggesting that his door and his mind were
not closed to the representations made by the many Guyanese individuals and
organisations which responded to his invitation to offer pre-budget comments
and recommendations. This is a very positive statement which the Minister
should reinforce with action. Mr. David Yankana, Executive Director of the
Private Sector Commission, echoing a statement made last year by top
businessman Mr. Sattaur Gafoor, noted that “this [the omission of any
recommendation by the PSC] puts in jeopardy the usefulness of the
consultation exercises as we can expect to see reservations in future on
private sector entities participation in consultation processes”.
Business Page hopes that this is merely temporary
frustration and that the private sector and the entire society will continue
to make their representations not only to the Minister but to the entire
Government offering their perspectives and recommendations on what needs to
be done. The private sector must be aware of the limited relevant experience
of the members of the Government and it is unfortunate that a leading member
of the private sector should have turned down a reported offer of the trade
and tourism portfolio. Too many Guyanese, whether in business, the
professions or the wider society prefer to criticise rather than
participate. We have to put our time where our words are and be prepared to
make the necessary contribution to the development of the society.
The Minister can demonstrate commitment to his notice
that he regards the process as continuous by a willingness to adopt
practicable suggestions made during the debate as well as the
recommendations he received during the consultation process. He would have
drawn from the series of meetings between President Jagdeo and Mr. Hoyte the
tangible and non-tangible benefits of dialogue. His own engagement with
stakeholders in the economy in a similar process can yield immense benefits
to the country since it will facilitate a better understanding of the issues
and concerns facing the government and the rest of society.
It would be unfortunate if the comments on the Budget by
the private sector are regarded as anything but constructive and sincere.
Business Page believes that there are still opportunities available to the
Minister whereby he can acknowledge the role of the private sector in the
economy and create the conditions for their effective operation. Of course
the Minister will be aware of, and make allowance for the quality of our
private sector and the sometimes narrow agenda which it pursues.
The trade union NAACIE, in lamenting the failure to
increase the personal taxation threshold, suggested that it might not be too
late for the Minister to correct the situation. The Estimates presented to
the National Assembly reflect a substantial deficit and any increase in the
threshold will increase this. It is therefore both unlikely and unusual that
he would make any changes at this stage. Ironically however, while this
column is being written there is an announcement by the President that Omai
will get a 1% royalty rate reduction on gold exports provided that the
savings from the reduction are applied to exploration activities in Guyana.
Of course, the budget implications of the two scenarios will vary
significantly and the trade unionists and others who were looking for late
changes in the threshold should not use this as a precedent.
Business Page suggests for the Minister’s
consideration, the following measures which will have no immediate budget
impact but which would send the right signals.
Cutting Red Tape
Over the past few years, under pressure from various
international conventions, the Government has introduced several pieces of
legislation which have placed administrative and financial burden on
business houses. While these legislation are indeed desirable, their
application without consideration to the size of the businesses must be
reviewed. Some legislation include the Occupational Health and Safety Act,
the Guyana National Bureau of Standards Act, the Termination of Employment
and Severance Pay Act and the Companies Act 1991 among others.
Government departments and public entities, including
National Insurance Scheme, the departments of the Revenue Authority and the
Deeds Registry, are also regarded as being too bureaucratic and slow in
dealing with issues which come before them. Business Page has called for the
establishment of Charters which would guarantee to the public certain rights
and privileges and facilitate transactions with them. With one of the
highest tax to GDP ratios in the world, Guyanese pay for and therefore
deserve a much higher quality of public service than they currently receive.
This is a recurring theme of Business Page which is
concerned with the piecemeal approach taken on taxation in Guyana. Recently,
at the request of the Government, the IMF submitted to the Government a
study “Guyana Towards a Medium Strategy for Reforming Tax Policy and
Administration”. While no formal pronouncement has been made on this
study, Business Page considers it extremely deficient in that it failed to
address a number of critical factors, not the least being how the tax base
can be increased and tax rates reduced. On the basis of its rather limited
work, the IMF proposed the introduction of Value Added Tax (VAT). Business
Page understands that the limitations have been recognised by the Finance
Ministry and now suggests that the Minister make a formal commitment to tax
reform with the establishment of a broad based commission mandated to
examine the entire economy and the most appropriate system of taxation and
In 1991, the Government had granted a limited amnesty on
delinquent taxpayers whereby outstanding returns for YA 1984-1990 were
granted a full waiver of penalties and interest if those returns were
submitted and taxes paid on or before April 30, 1991. Business Page believes
the time has come for a similar amnesty for more recent years as an
incentive to those persons intimidated by the draconian interest and penalty
charges due on late submission.
Business Page understands that the Government may be
considering a reduction in the rates of interest and recommend that these
rates be revised downwards to reflect the current rates of interest
prevailing in the economy.
We believe the current system of charging depreciation on
individual assets is unnecessarily cumbersome with no corresponding
benefits. A system where the tax depreciation rate is applied to categories
of assets known as pooling, would substantially simplify the procedures
without any loss of revenue.
In order to ensure that workers do not lose on taxes as a
result the inflationary effect on the personal allowance, Business Page
considers that it would be a welcomed gesture if the allowance is indexed to
the annual rate of inflation. For example, the annual inflation rate applied
to the personal allowance last increased in 1997 will place the allowance at
While data on the number of taxpayers are not available,
the rough estimates suggest that if the monthly personal allowance was moved
to $20,000 the loss of personal taxes would be approximately 5% and if it
was increased to $25,000 the loss would be approximately 15%. Of course, in
dealing with tax measures one looks not only at the direct revenue loss but
at the entire budget effect. Any direct loss can be made up not only out of
additional revenues from higher compliance and better enforcement, but also
from greater control of the expenditure side of the budget and overall
The number of new members of Parliament and constituency
representation will add a new dimension to the Budget Debate. Guyanese are
anticipating with interest the presentation by Mr. Mansoor Nadir, the leader
of the capitalist TUF, who is now the Minister of Tourism, Commerce and
Industry. There appears to be some archaic rule that MPs should not speak
from a prepared text which perhaps explains the ramblings which contribute
so little to meaningful debate. Hopefully the Speaker of the House will not
insist on adherence to this rule and that MPs will in fact better prepare
themselves. Business Page understands that the order of speakers has not yet
been determined which is itself a serious indictment of the management of
Parliament. This needs to be corrected.
Let the Debate begin.