Private Sector, GAWU react sharply to 2017 National Budget

Last Updated on Tuesday, 29 November 2016, 13:40 by Denis Chabrol

The Private Sector Commission (PSC) on Tuesday gave a mixed reaction to the 2017 National Budget, saying the reduced Corporation Tax will help stimulate production but adjustments to the Value Added Tax (VAT) amounted to a mockery.

With consumers now being asked to pay a 14 percent VAT on water and electricity if their monthly bills are more than GYD$1,500 and GYD$10,000 respectively, PSC Executive Member, Ramesh Dookhoo said such a measure would not benefit the working and middle classes. “I see it as an additional hardship on the people… It all seems cosmetic when you draw the nexus between the reduction in VAT of 2 percent and the taxing of everybody’s electricity, it means that we are just shifting taxation burdens from one place to the other,” he told Demerara Waves Online News. The overall VAT on businesses has dropped from 16 percent to 14 percent and the ceiling increased from GYD$10 million annually to GYD$15 million

Dookhoo flayed government for doing little to collect VAT from numerous businesses including restaurants, resulting in a distortion of the food industry.

The former PSC Chairman said he has been informed that the National Milling Company would no longer be able to claim VAT refunds of about GYD$200 million per year under the new arrangements, amounting to increased taxation on that company which manufactures rather than imports flour.

He also criticized the introduction of a GYD$10 per bottle/can Environmental Tax on all beverage companies, arguing that already local companies have to pay various other fees related to environmental protection such as licence fees, level of emissions and the purchase of recommended equipment. “There are distinct differences between a manufacturer of beverages and an importer of beverages. The importer of beverages has no other obligation for environmental costs other than the now imposed ten dollars,” said Dookhoo, who is an executive staff member of the privately-owned Banks DIH Limited.

The PSC official is considering seeking a meeting with Finance Minister, Winston Jordan to discuss the fact that local beverage manufacturers have to incur a lot of recurring expenses to retain the environmental licences. He recommends that government considers allowing local beverage manufacturers to get back some of the taxes that they are paying. “We will be paying twice. We will be paying ten dollars on the plastic bottles plus we will be paying to retain our environmental licence and

The PSC executive member welcomed Jordan’s decision to issue medium-term government bonds to finance Guyana’s fiscal deficit. “I personally don’t have with the issue of government bonds. We have a lot of liquidity in the system and our capital market is not as developed as it should be and if the government wants to do that, not as an extended prolonged kind of financing, I really don’t have a problem with that,” he said. Dookhoo, however, echoed Opposition Leader Bharrat Jagdeo’s concern that interest rates could potentially climb.

He welcomed the reduction in Corporation Tax from 30 percent to 27.5 percent  for manufacturing and non-commercial companies and a reduction in Personal Income Tax from 30 percent to 28 percent for individuals earning less than GYD$2,160,000 per year or GYD$180,000 per month.  “It (reduced income tax) will fuel disposable income and I think government should be commended for that,” he said.

Meanwhile, President of the Guyana Agricultural and General Workers Union (GAWU) Komal Chand said the 2017 budget measures would see VAT being paid on more than 50 items “that are considered very close to the ordinary people.” “That means you are putting a heavier cost on those things that those people depend on that and that is why in the first place they were not VAT-able,” he said.

Chand said less tax is being paid by high-earners who could in reality pay more taxes while lowly paid people would eventually have to pay more for food and other basic consumer items.

The GAWU official forecasts that a number of workers in the sugar belt will be dislocated and be subjected to pressures, with the planned restructuring of the cash-strapped and highly indebted Guyana Sugar Corporation (Guysuco).

General Secretary of the Guyana Trades Union Congress (GTUC), Lincoln Lewis was not immediately ready to comment on next year’s fiscal package presented to the National Assembly on Monday, December 28, 2016.