Prime Minister Samuel Hinds says that the inflation in Guyana last year was not due to the Value Added Tax (VAT), but was mostly the result of high commodity prices on the world market, particularly food items and fuel.
The Prime Minister who led the debate for the government on the $119.3B 2008 budget introduced in the National Assembly on February 22, sought on Wednesday evening to explain the price increases experienced here in 2007.
The Government Information Agency (GINA) quoted him as saying: “Firstly, the increased inflation (14 per cent) we experienced in 2007 was not due to VAT but was 80 percent or more due to the high prices of commodities, all commodities on the world market, particularly food items wheat and all grains, milk and all milk products and residual fuel increases beyond our ability to cushion.” This, he said, was experienced by all countries in the Caribbean. Hinds pointed to Jamaica which he said had 16 percent inflation even though VAT was not new to that country’s economy.
Addressing the issue of the implementation of the VAT which several speakers from the Opposition had argued was the cause for the high inflation in 2007, Hinds said: “It sounds very good to call for an immediate reduction of VAT from 16 percent to 10 percent or 8 percent as if these revenues are going elsewhere than to our people, the people of Guyana.”
Hinds rejected the claim that the government had misled persons into believing that VAT was revenue neutral. He maintained that VAT was and is revenue neutral. He said further that “We all have been of the opinion that the real economy of Guyana was greater but no one knew how much it was. There were speculations, but such a critically important revenue stream could not be based on speculation.” The Prime Minister added that the VAT rate of 16 percent was within the range of VAT figures in the Caribbean.
He also told the House, GINA reported, that the introduction of the VAT had seen a widening of the tax net which led to more persons paying taxes.
And in relation to the additional revenue earned through the introduction of the new tax, Hinds said it was not a windfall but taxes that were being dodged and were now being put to good use.
Meanwhile, the Prime Minister informed that much of the additional relief and benefits in the 2008 budget are funded by the widened tax catch of VAT.
The additional revenue, he said, was used to fund the increase in the income tax threshold; increased items that have been zero-rated; the increase in old age pension and social assistance; and the cushioning of the prices for electricity and fuel which increased by six percent while inflation was 14 percent.
Accountability
On the issues of accountability, transparency and corruption raised by the Opposition during the debate, Hinds said that those claims conveniently ignored the absence of substantive evidence, and the administration’s track record in putting in place institutional mechanisms to improve accountability and transparency in government.
Focusing on some initiatives implemented by the government, Hinds noted the consistent production of audited accounts tabled in the National Assembly; publication of a Treasury Memoran-dum to respond to the Public Accounts Committee report to indicate corrective actions taken by government; introduction of open public tendering and the publication of bid awards on the National Pro-curement and Tender Admin-istration Board (NPTAB) website and publicly by the Cabinet Secretary.
Additionally, he said, the government has been insisting that the documents specifying the job to be done and the costs must be made available to all stakeholders so they could help in knowledgeable oversight of the implementation of projects.
The Prime Minister further observed that the government had strengthened parliamentary oversight through the work of Sectoral Committees which have been established. They engage stakeholders, including the political opposition, on all major legislative initiatives through the Special Select Committee Mechanism which was used very effectively in the case of legislation to introduce VAT.
Dozens of annual reports for various government agencies, and all loan agreements entered into by government have also been tabled in the National Assembly, placing these documents in the public domain and ensuring that citizens are apprised of the activities of the government.
Job creation
And responding to the criticism that the budget did not create new jobs, the Prime Minister said, “Almost everything in the budget is about creating jobs and equipping our people to do those jobs.”
Hinds then referred to the new jobs that will be created with the modernising of the traditional sectors; government’s collaboration with the private sector to establish an alumina refinery; and the implementation of the National Competitiveness Strategy to promote investment and agricultural diversification.
“When we speak about maintaining a stable and favourable macroeconomic environment, we are speaking about creating the conditions for growth in the private sector, and creation of jobs,” he was quoted by GINA as saying. He also underscored the importance of developing the private sector to create employment.
Hinds further contended that the government has been doing as much as it should in the current economic framework of a greatly reduced role for the state in the direct production of goods and services in direct employment.
“The days of government directly creating jobs are gone. Job creation is now the role of the private sector, the leading sector
