Firstly, this columnist would like to take this opportunity to commend the Ministry of Finance for another early budget presentation, before the commencement of the new fiscal year. Thus this article seeks to present a review and analysis of some of the key elements contained in the budget, as outlined hereunder.
The reduction of income and corporate tax rates to 25 per cent on taxable profits for small businesses
The proposed reduction in corporate tax for small businesses is received in a positive light. This initiative, it is hoped, shall stimulate confidence in the economy in respect to further investments by small businesses, and should also boost spending in the economy.
The reduction of manufacturing and non-commercial rate to 25 per cent from 27.5 per cent
This initiative as well must be commended. The manufacturing sector in Guyana has, for many years, been largely inhibited by the high cost of energy. This limits the capacity to which the sector is able to be innovative, and the creation of more value added products. Hence with this further but marginal reduction in corporate tax, it is anticipated that this would yield positive results in the area of increased investment, and stimulate innovation in the sector.
Moreover, the budget proposed exemptions from customs duty and/or VAT in the following areas: pesticides used in the agriculture sector; limestone used in the agriculture sector; aircraft engines and main components/parts; concrete blocks used for housing and construction; equipment and chemicals for water treatment and production plants, among other areas. These, particularly those geared towards incentivising agricultural activities, are quite crucial — especially with the oil & gas industry impending — to avert the risks of the so called “resource curse”. It is good to see that efforts are being made in the national budget to keep our traditional sectors and commodities alive, especially at a time when other Caribbean countries are experiencing mediocre economic growth and structural reform programmes of their economies.
Turning now to measures in support of the Green Agenda
While the measures proposed in this respect in Budget 2019 are in good spirit, a ‘green economy’ requires much more substance than these incremental initiatives. To this end, and in the interest of the entire country, it would be good to revisit the hydropower project, which is long envisioned to massively reduce the cost of energy supply to Guyanese households and businesses; which in turn can only result in a ripple effect and position our economy to become an ever industrialised economy.
Additionally, the depleting foreign reserves at the Central Bank and the balance of payment deficit: The expansion of the country’s balance of payment position (deficit) and depleting foreign reserves’ position is cause for concern in the short and medium terms. Despite us being poised to earn foreign exchange from oil revenues in the year 2020, we cannot overlook this situation; which could, in turn, place pressure on our exchange rate, which can drive up inflation in the medium term. As such, it would have been good to see more substantial policies designed to address these concerns, and especially the sugar industry. What are the future plans for this industry? Government seems to have no clear plan ahead in respect to this industry, and it must be noted that we have lost significant foreign exchange from sugar with recent restructuring of the industry. Events are seemingly unfolding in a haphazard manner in regard to the situation with GuySuCo.
And finally, Small Businesses and Entrepreneurship
It is recognised in the Budget that Government is making efforts in the form of loans and grants, among other initiatives, to promote entrepreneurship within the economy. However, there needs to be a paradigm shift in the administering of entrepreneurship education; such that it should not be confined to teaching contemporary approaches and theories in a classroom setting, and presenting case studies and empirical analyses and discussions.
Rather, the paradigm shift should be designed to focus on the actual developing, teaching, and facilitating of a manifestation of real entrepreneurship ventures. This would therefore mean that each student, after completing the theoretical training designed to develop their skills and knowledge base, should be guided to develop their own project — business project that is — and be able to see it through to becoming a reality with the support of the training centre. One critical component to achieve this is the acknowledged difficulty in accessing financing options for new ventures.
Entrepreneurship schools should therefore seek to establish collaborative arrangements with financial institutions and other similar agencies that would normally allocate resources in the form of grants etc., projects that are usually supported and partially funded by some governments in order to achieve such goals and revolutionise the manner in which entrepreneurship education, teaching, training etc. is delivered.