“Rough ride” for Guyana if proposed measures pass – Ram & Mc Rae

Budget 2017

If the A Partnership for National Unity/Alliance For Change (APNU/AFC) Government disregards the cry of the masses and its political opponent in the National Assembly and moves ahead with the passage of the $250 billion budget, Guyana can look forward to a “rough ride” in 2017.

christopher-ram
Accountant Christopher Ram

This is according to chartered accounting firm Ram and McRae, which via a statement following the presentation of the budget on November 28, gave a detailed analysis of Government’s fiscal plan for the country.
The entity said the budget measures, if implemented as they are proposed, will certainly have a negative impact on the economy and growth. It said the achievement of the projected growth will be extremely difficult, if not impossible to achieve.
“If the measures are passed as proposed, we can expect a rough ride in 2017,” Ram and McRae said in the report.
According to the accounting firm, the budget’s measures are substantial, revolutionary and probably unprecedented.
“It is presented at a time when the Government has to defend itself against accusations of corruption and cronyism. The reception to this budget can strengthen the bond between the Government and citizens but must mark the end of any honeymoon period for the APNU/AFC coalition Government.”
The accounting agency said while some of the “first 100 days” promises have been kept, there has been widespread disappointment about the perception that the Government has been taking care of itself while ignoring matters like “significant salary increases” for Government workers and a code of conduct for parliamentarians, Ministers and others. Indeed, the agency, the President himself recently described the VAT reduction promises as hasty.
“The main take away from this budget may not be the wind farm initiatives, the infrastructural programmes or the increase in Police manpower. It is about the 57 tax measures set out in 30 pages of the speech. In introducing his budget measures for 2017, Minister Jordan said that “we are about to embark on a new generation of tax reform, starting from Budget 2017.”
It said the proposals in relation to VAT are substantial but represent a substantial rejection of the main principle of a VAT system. Noting that items such as medical services and prescription drugs will now be subject to VAT, it is hard to believe that this is what was intended. The agency said the Minister only focused on water and electricity. Testing the proposals, Ram and Mc Rae said it found them to cause an increase in prices, including on a most basic food item – bread. At the practical level, these proposals will therefore be inflationary.
“The projected cost and revenue of the budget measures are in many cases not provided and where they are provided, they seem to be doubtful. The overall impact of budget agencies having to pay VAT makes comparisons with the prior year difficult and reduces the effectiveness of any analysis”.
The agency said some of the budget measures were inarticulately communicated or were misconceived. For example, the 40 per cent tax rate combined with the alternative personal allowance it said will lead to regressively and not progressivity in the tax system.
“Higher income tax payers will actually pay a lower rate than lower-middle income tax payers. In other words, instead of a progressive system, we will have one that is regressive. When combined with the changes in VAT, our tax system becomes totally regressive, which can hardly be what was intended”.
The report continued, “Some measures, such as the reversal of the minimum Corporation Tax into a maximum Corporation Tax for commercial companies, can hardly be described as feasible and we do not see any other choice for the Minister than a reversal of the proposals. Other proposals seem unnecessarily penal, disproportionate, and unfriendly and can drive some taxpayers underground at a time when the call is for a widening of the tax net.