The debate on one of the most contentious Budgets will begin today and it is our hope more light than heat will be generated. The Guyanese people do not just need to know just what is wrong with the programmes and projects of the budget but for suggested alternatives to what are being criticised.
There have been criticisms, for instance, that the 2 per cent reduction on VAT is insufficient to positively impact significantly on the working and unemployed poor. The Opposition should state clearly whether they, in fact, would have reduced VAT and if not, in what way they would have ensured greater relief was offered to the poor.
From our perspective, the greatest failure of Budget 2017 is it does not appear to be guided by a clear strategy to address the challenges that confront Guyanese society today; and inevitably it therefore lacks coherence in its proposals and projects. Take for instance, the several actions proposed on VAT and their impact of the poor in the short-term. While the 2 per cent reduction might be seen as “better than nothing”, the benefits were not only wiped out but actually the burdens increased by removing so many basic items from the “zero rated” basket to the “exempt” one. The manner in which that is effected has been explained ad nauseum and does not bear repetition.
But it is in the medium- and long-term that the incoherence of the Budget is most manifest. With taxes, this is a direct result of the PNC-led Government not following up with its Manifesto promise to review the tax regime of which VAT is but one component. The Manifesto declared the Government would “Commission a comprehensive review of current taxation systems and policies, including the VAT, to identify and recommend fiscal innovations that would not only address adverse consequence of the current structure taxation, including hardships effects, but would create incentives that could attract needed investment in critical sectors of the economy.”
There was, in fact, a “Tax Reform Committee” (TRC) launched and it submitted its report back in May. It is ironic that the 133-page report suggested on the “zero rated” VAT category, a large number of items that are used by the poor, which were removed, be retained. On the other hand, it recommended that a withholding tax of 5%-10% be imposed on contract services rather than the 2 per cent specified by the Budget. Another lack of coherence was clear when the Budget ignored the TRC’s recommendation to apply a “health levy” on alcohol which creates such a “range of economic, social and health outcomes”.
It would appear that, as with the recommendations of the CoI into the sugar industry, those exercises were so much window-dressing.
Another example of the lack of coherence in the Budget can be seen from the Government’s refusal to follow up on its promise to, “prepare a long term National Development Plan with consequential Programmes, based on consultation with relevant bodies and key stakeholders. The objective would be to take sustainable advantage of the vast potential of Guyana’s resource endowments.” In the absence of such a plan, the Budget inevitably becomes manifestly an exercise in “ad hocism”, especially when it comes to the economic development of the country.
We can do worse than begin with the “vast potential of Guyana’s resource endowments” specifically in energy – which we have consistently highlighted in this space for years. While the Budget identifies wind and solar energy for development, it has continued with its obdurate refusal to develop the Amaila Falls HydroElectric Project (AFHEP).
The lack of coherence is shown by the emphasis on a wind farm, which will sell 25MW power generated from wind to GPL but more insidiously will be given permission to have fossil fuel generating equipment to deal with wind lulls.
AFHEP however, would have supplied 165MW – enough to push the industrialisation of Guyana to create the jobs needed,
Budget 2017 in an incoherent missed opportunity
