Global rise in cost of living: Adjustments to income tax, relief grants among measures proposed by Private Sector

…PSC to seek audience with Finance Minister

Though the Guyana Government has already budgeted a whopping $5 billion to address the rising cost of living locally, two major Private Sector players believe a much more impacting intervention is needed in order to help Guyanese navigate these challenging times.

President of the Georgetown Chamber of Commerce and Industry (GCCI) Timothy Tucker, in an interview with this publication explained that “the Private Sector wants to stay competitive but we have to face the reality.”
“The COVID pandemic has taken shipping costs and delays in shipping to a next level…apart from that, we now have a war in a part of the world that controls a lot of the commodities that are traded…we’re looking at oil, we’re looking at gas, we’re looking at wheat…,” the GCCI Head lamented.
“So, you have a dynamic there that is affecting the prices worldwide and you may say that we don’t import fuel from Russia and people will say we don’t import wheat from Ukraine…but, the countries around the world that do import from there and no longer can, are now bidding higher prices from our usual suppliers such as Mexico and other places around the world, such as Canada and US, we now have a supply and demand issue,” Tucker further reasoned.

The prices for a wide range of commodities have significantly increased – such as fuel and flour with the National Milling Company of Guyana Inc (NAMILCO) announcing a hike of 15 per cent with immediate effect.
“The price of wheat today is 40 per cent higher than it was on February 15, 2022, just three weeks ago. During this period, we have also seen increases in the cost of packaging, additives, and just recently, fuel. Consequently, we can no longer sustain our operations at our current flour price levels,” the company said in a statement on March 11.
And though the Government this year further lowered the excise tax rate on gasoline and diesel from 20 per cent to 10 per cent – which should have resulted in major savings at the pump – global events have sent the prices up, with gas now retailing as high as $246 per litre of gasoline.
In 2021, the Government had also announced several reductions to shipping-related charges to the tune of $4.8 billion in order to bring relief to citizens and businesses.
Tucker explained that these interventions have been effective but as cost of living continues to skyrocket, more intervention is needed.
“The interventions that they have taken so far, even though the regular person would say they haven’t seen and that the price still went up, I can assure you that if it wasn’t for some of those interventions the prices would have been a lot higher than we have seen…it has really helped in keeping the price rise marginally,” he explained.

Removal of income tax, fuel excise tax & introduction of relief grants
However, the GCCI Head believes those in authority should explore the possibility of removing altogether income taxes and the excise taxes on fuel – even if just temporarily – until the cost of living stabilises.
“The Government may need to step in…we definitely think that they may need to remove entirely the taxes on fuel…we think that there are some other moves that may need to be made…you have shipping costs rising again…,” Tucker explained.
“Either give us a cash grant or they [the Government] can actually waiver income tax or something for a period of time…or reduce the income tax rate on employees for a period of time. Either one can be done and we would welcome something like that,” he added.
These points were also supported by the Chairman of the Private Sector Commission (PSC) Paul Cheong who told this publication that “definitely something needs to be done”.
Cheong reasoned that there are a number of possibilities that will need to be examined by the authorities such as the removal or reduction of taxes as well as the introduction of relief grants.
“To allow for more disposable income so people can carry out their activities as per normal and not be affected so much…you can increase wages, you can give other subsidies…,” the PSC Head expressed.

Increase in wages
When asked about the possibility of the companies increasing the salaries of their workers during this time, the GCCI Head reminded that the Private Sector has already agreed to the hike in the national minimum wage from $44,200 to $60,000.
On March 10, Labour Minister Joseph Hamilton had told this publication that he is still awaiting the approval of Cabinet in order to give effect to the pay hike.
Though the Minister had previously explained that this increase would only affect about 10 per cent of Private Sector workers, there have been mounting calls for this change in the pay scale to be implemented – the most recent being issued by the Federation of Independent Trade Unions of Guyana (FITUG).

FITUG had expressed, “given the hikes in the cost of living, most recently evidenced by the substantial hike in the cost of fuel, there is no justification to continue to perpetuate denial of the improvement. We urge, at this time, that the procrastination be brought to an end and our nation’s workers receive the deserving hike in the national minimum wage.”

Incentives
Weighing in on this discussion, Tucker cautioned that raising workers’ salaries too high can trigger inflation but he recommended the introduction of incentives by companies to help employees during this time.
“I would like to recommend to the regular Private Sector in looking at incentives or special incentives to aid or to help cushion their employees’ travel or things like that…cognisant of the fact that if we raise our wages too high, then that by itself will help push inflation up because of the more disposable income,” the GCCI Head expressed.
Notwithstanding, Tucker explained that wages and salaries paid have tremendously increased over the years and he indicated that this will continue to occur based on the law of supply and demand.
“If you ask everybody in the Private Sector, they are struggling at this moment to merely keep the staff that they currently have based on the fact that there is such a demand and a shortage of the labour force…so the supply and demand issues in terms of wage increase is very well there and is forcing wages up…what somebody would have paid a clerk five years ago, they are paying almost double that at the moment and that is without a Government intervention in the minimum wage,” the GCCI Head explained.

Not unique
Meanwhile, Tucker reminded that it is important to understand that the rise in cost of living is not unique to Guyana but in fact, is affecting countries and citizens all across the globe.
“We need to understand that this is not something that is unique to Guyana. This is something that is being felt by every country around the world and it is a direct impact of the pandemic and a direct impact of a major war…and so, we have to embrace and accept and find ways in which we can work together and keep the costs down and of course, still survive,” he expressed.
Meanwhile, the PSC Chairman explained that its Trade and Investment Sub-Committee will be meeting on Thursday to discuss the matter of the rising cost of living, after which, they will seek an audience with the Finance Minister, Dr Ashni Singh, to discuss what can be done to bring relief to the population.

Assistance
President Dr Irfaan Ali, during a press conference on March 6, emphasised that the Government is not turning a blind eye to the rise in cost of living. According to him, it is a matter that is being addressed on multiple fronts, which includes addressing input cost and issues at the consumer and market levels.
“One is that we set aside $5 billion in the budget for cost of living adjustment. We have to finalise the programme and the consultation has started on that. Secondly, we have to find a way in terms of economies of scale for example with the purchase of fertiliser, because one of the other major problems we have is the drought of the Demerara River. So, instead of one 30,000 tonne ship coming in, you can only have 7000 tonnes. So, we have an added problem in terms of transportation,” the Guyanese Head of State said.
Since taking office in 2020, the Ali-led Administration has introduced several measures to put more disposable income in the pockets of Guyanese. From the onset, Value Added Tax (VAT) was removed from water and electricity. There has also been the increase in old-age pension and public assistance, putting $2.3 billion and $432 million respectively into the pockets of Guyanese.
Additionally, the PPP/C Government reinstated the “Because we Care” cash grant and school uniform cash grant which stands at $30,000 per child in both public and private schools.
In addition, a $25,000 per household cash grant was rolled out to assist families struggling during the pandemic.
Moreover, the Government had announced a one-off cash grant of $25,000 to all pensioners where almost 65,000 persons benefitted; this measure placed a total of $1.6 billion in disposable income into the hands of the elderly population.
A one-off grant of $25,000 was also given to all public assistance recipients and persons living with disabilities. This grant benefited about 25,000 persons, and placed more than $600 million in additional disposable income in their hands.
Furthermore, a one-month free electricity for households consuming not more than 75 kilowatt per hour a month was announced – a measure that was intended to benefit some 40,000 households.
In total, these measures provided $2.6 billion worth of additional support to vulnerable groups.