The recent policy to charge VAT on all and sundry and to reclassify many items from zero-rated status to exempt status has literally added more burden on the shoulders of the poor.
These new tax proposals in the 2017 Budget, especially the VAT on education, water and electricity, finally started to hit home in February on the poor and the vulnerable. Guyanese people are now realising the real impact.
Only recently at a protest against VAT on education in front of the Guyana Revenue Authority (GRA) building, one of the protesters said he saw the cost of his children’s education bills jumping by some “00 every single month”, since the implementation of these tax measures.
Another said his family was now paying 23 more per month for electricity, thanks to VAT.
The tax measures in the 2017 Budget are now actively starting to push more poor families into bankruptcy. Unfortunately, there are few alternative outlets for the poor in this high-pressure economic environment. These new tax measures will have an adverse effect, because if the workers have a smaller disposable income, then it means they will spend less. This will result in the decline of sales for the business community. This decline has already taken effect as many in the local business sector has publicly spoken of the effects of the declining economy as a result of the exploitative tax measures, that is, the tax on water, electricity, education and other basic life necessities.
In addition, these new measures are also regressive. Today after these new measures, Guyanese are spending more of their income on basic necessities. This, therefore, means Guyanese are being asked to pay for the same products with a smaller after-VAT income. But what compounds the situation is the fact that Finance Minister Winston Jordan continues to give the impression that these new taxes are needed for his Government to broaden the country’s tax base. The purpose of taxes is to fund Government services and when a Government is increasing taxes, it, therefore, means the Government is getting more expensive to manage. The question that begs to be answered is why has the Minister not consider rescinding the 50 per cent increase in salaries for Ministers so that those funds can be applied to partially filling the gap in the budget?
The International Monetary Fund (IMF), in one of its recent publications, “Fiscal policy and long-term growth,” advised that cutting taxes stimulates an economy and with such a narrow fiscal space available to Guyana, these increased tax measures will take the wind out of the sail of the entrepreneurial class. However, at present, it is this same entrepreneurial class that is being called upon to grow the Guyanese economy. An in-depth look at the Budget and its measures shows that all that was done in this 2017 Budget was mere shuffling around of money from one set of people to another in an environment of a declining tax basket. Therefore, the Government must act with more restraint and with more consideration for the practical realities that are involved in managing an economy like Guyana.
At the end of the day, the final consumers will pay more for the same products or services. No taxpayer will want to support these tax measures. In that regard, support for the protest movement against the VAT on education can be deemed justifiable.
