While US President Barack Obama may have intended his remarks about inequality in the USA he could have been speaking of anywhere when he said, “over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk.” That widening inequality is often the result of the choices governments make in how they allocate resources, their perception of reality and their own personal circumstances. It is also the result of a powerful and troubling shift in market rewards for a small minority relative to the rewards available to most citizens.
It is unfortunate that there is a paucity of quality and relevant statistics even on the most basic of information. On the few occasions when stats are available they are suspect. No one, not even the Minister of Finance believes the only indicator of employed persons in Guyana. The National Insurance Scheme has only 116,000 active employees in 2012. The Minister of Finance in his Budget Speech suggested that it is more than twice that number. The Minister says hotel occupancy is 75%. The industry says he is joking. And one would look in vain to find how much taxes are contributed by the various sectors in the economy.
Even in the absence of data, evidence all around points to the wide disparity of income levels in the society. We live in a society where a $2,500 per month increase in pensions is a cause for celebration. That is the equivalent of $80 per day and can buy nothing.
The Economic Recovery Programme was absolutely necessary to reverse the decline in Guyana’s economy in the eighties. Inevitably it was expected to benefit some more than others. When the individual elements are disaggregated the winners and losers became very apparent. The Estate Tax was one of the first of the taxes to go followed by a drastic reduction of the marginal tax rates. Those whose income derived from capital such as shares or deposits were taxed at a lower rate than their employees. Adam Smith’s theory of tax equity was discarded as was the notion that one of the objects of taxation was the redistribution of income.
If it a feature of our tax system that it allows dining at the top restaurant as a non-tax benefit but the meal allowance to the junior staff is taxable. The all expenses paid motor vehicle and driver provided to the manager is tax free but the $4,000 per month travel allowance to get the driver home in the evening is taxable. The capital gain on the sale of one’s house is taxable but not the profits from disposing of shares in public companies. And if a self-employed accountant buys books for $1 million that is tax-deductible but not if a single mother buys a $500 book for her child.
The government has for close to twenty years resisted the pleas for the restoration of personal allowances to reflect particular circumstances. It just never seems fair that a single person in his twenties is entitled to the same personal allowance as a person with several children. The government would not budge. Yet under the influence of the private sector the same Government has reversed its 20 year policy for persons who can own a house valued at more than fifty million.
It is not that society should penalize success. In fact success should be rewarded. But the opportunity available to anyone should not be based on the fortunes of one’s parents. Prior to the ERP we had the parallel market and economy. Now we have parallel everything: the chances of a child attending St. Sidwells making it up the ladder are infinitely smaller than a child attending Marian Academy. A person attending a public health facility will not receive the same quality of treatment as a person going to a private hospital.
Much is made of how much is spent on the health sector but it is clear that the individual who benefitted most is the supplier of the drugs; the same is true of the contractors who receive the contracts to build the schools, roads and bridges.
It is no coincidence that the rise of inequality has been accompanied by the loss of the collective rights of the workers. After all, wealth leads to influence and power with and often those at the bottom rung are pushed off or out. The widening really started by the government’s privatisation programme when it chose to sell public property to individuals friends and controlled companies. Now it is by way of contracts to individuals.
It is late in the day but not too late to try. We have seen how the tax system can help the better off. Let us now make it help those at the lower rungs of the ladder.
The government must discontinue facilitating inequality by rewarding the wealthy with special concessions. It must strive for pro-fairness, pro-growth tax reform and avoid, especially in a period of sharply rising inequality to provide tax changes that do nothing for those at the bottom. Most importantly it must ensure that quality education is available to all and that there is a decent national minimum wage.
