Before proceeding with today’s article, two recent news items are worthy of commentary. On several occasions we had bemoaned the fact that after ten years, two important modules of the Integrated Financial Management System (IFMAS) – Purchasing and Asset & Inventory – are still to be implemented. The developers of the software had debunked the previous Administration’s claim that these modules are only suitable for mature economies. They stated that: (a) they are unaware of any case where a government bought the system and did not use all of the modules; and (b) they had implemented IFMAS in countries with a far less mature environment than Guyana. Last week, the Minister of Finance disclosed that the Government has signed up for the upgraded version of IFMAS and that all the modules will be implemented in a phased manner. He also indicated that it may not be possible for the entire process to be completed until the end of the year. This is nevertheless good news, and one expects that there will be a passionate, sincere and dedicated effort to make it happen.
There are no constitutional provisions on the issue of exemptions from the payment of income tax on the salaries of office holders. However, Section 13 (a) of the Income Tax Act provides for the President, the Chancellor and the Chief Justice to be exempted from such tax. In addition, by Section 8 of the Audit Act 2004, the emoluments and other conditions of service of the Auditor General are to be the same as those of the Chief Justice, implying that the exemption also applies to the Auditor General. I have, however, been unable to find any legal support as regards income tax exemption on the Attorney General’s salary. One also recalls the former Commissioner General enjoying a tax-free salary, as well as several other office holders receiving tax-free US dollar salaries under a World Bank-funded project administered by the Ministry of Finance.
The Minister of Finance has expressed the view that all citizens should pay their fair share of taxes since they all benefit from the same social and other services provided for by the State, a view that this Column has consistently advocated. In the circumstances, it would be appropriate for the exempted office holders to have their salaries “grossed up” so as not to place them financially in a position of disadvantage. However, this will require an amendment to the above section of the Income Tax Act.
The promised salary increases for public servants
My mother once told me to never make a promise that I may not be able to fulfill. During the 2015 election campaign, the current Administration had stated that, if elected to office, it would grant “significant salary increases for government workers, including nurses; teachers in primary, secondary and tertiary education; security personnel; and civil servants on the traditional payroll”. This was in clear acknowledgement that salaries and conditions of service of public servants needed a significant upgrade. The average salary increase over the period 2008-2014 was 5.6%, compared with an average inflation rate of 5.4% for 1995-2015, indicating that over the years, there have hardly been increases in wages/salaries in real terms. The previous Administration had neglected, indeed sidelined, the traditional Public Service in preference to a parallel service comprising handpicked persons employed on a contractual basis at salaries and other conditions of service significantly higher than those of the traditional public service. As at the end of 2014, the number of contracted employees stood at 20%. This Column had ventured to suggest that the traditional public service was dying a slow death.
In condemning the 5% increase in wages/salaries granted to public servants in 2014, APNU had demanded that the Administration respect the collective bargaining agreement with the GPSU and enter into a sincere and serious negotiations with the Union aimed at paying reasonable and meaningful increases to public servants. It called for an immediate review of the conditions under which public servants work with a view to offering “a living wage”. APNU also stated that public servants are frequently unable to afford to meet the cost of some basic household expenses and often are forced to borrow money for emergencies and to settle day-to-day expenses. It further stated that the Administration must adhere to the International Labour Organization conventions ratified by the National Assembly.
The new Administration’s first task in relation to salary increases was the approval of a 50% increase to Cabinet Ministers. Regional Executive Officers were also reportedly granted substantial increases in salaries and allowances, and the number of contracted employees has increased. However, the traditional public servants were granted a 10% increase effective from 1 July 2015, which translates to a 5% increase for the year. The Government’s explanation was that this was an interim measure pending negotiations with the Guyana Public Service Union (GPSU).
The approved Estimates of Expenditure for 2016 contains no provision for salary increases for public servants, again because of the pending negotiations with the GPSU, which are yet to commence. In addition, the pending report of the Commission of Inquiry into the Public Service is likely to contain recommendations for a restructured and unified public service as well as for a revised pay and grade structure, among others. However, at a recent press briefing, the Minister of Finance indicated that public servants’ expectations of any significant increase need to be tempered and that consideration is being given instead to a “top-up” in salaries. He referred to recent statement from the visiting International Monetary Fund (IMF) team about the need to moderating the growth of wages, as well as reforming public enterprises with a view to reducing their reliance on government support. The IMF team further stated that increasing current expenditure will “crowd out space for public investment, despite significant donor support”.
The Minister has indicated his agreement with the IMF statements. However, the significant salary increases that Cabinet Ministers and Regional Executive Officers received as well as the increase in the number of contracted employees will have a similar effect in terms of crowding out space for public investment. The GPSU has objected to the Minister’s statement which it feels is prejudicial to the outcome of any negotiations with the Union. The statement can also adversely impact on recommendations about salary increases that may emanate from the report of the Commission of Inquiry since the Commission may be hard-pressed to make any recommendation that is likely to be rejected.
Too often, we are led to believe that the solution to our problems relating to fiscal discipline is wage restraint, almost to the exclusion of other factors. What has been overlooked in these discussions is the need for increased revenue generation as well as more effective measures aimed at controlling and reducing other forms of public expenditure. The latter includes: (a) the long-awaited establishment of the Public Procurement Commission; (b) the implementation of two of the most important modules of the Integrated Financial Management System (IFMAS) relating to purchasing, fixed assets and inventories; (c) the implementation of International Public Sector Accounting Standards; (d) the introduction of an organized system of internal audit in government; and (e) institutional strengthening of the Audit Office which is yet to deliver to expectation despite significant financial support since the mid-1990s from the Inter-American Development Bank as well as the training of staff members at national audit offices in the USA, Canada, the UK and India.
Over the years, the Guyana Revenue Authority (GRA) has been performing significantly below its potential, relying mainly on the collection of income tax under the PAYE system as well as value added tax. The solution appears to be, among others: (a) the lifting of standards of performance and efficiency of operations of the GRA; (b) improved financial performance of State-owned/controlled entities, statutory bodies and local democratic organs in order for them to make a greater contribution to the coffers of the Treasury and/or to reduce financial dependence on the Government by way of subsidies and subventions; (c) comprehensive review of extent to which fiscal concessions are granted to encourage investment; and (d) a reformed and unified public service that is politically neutral and operating at the highest possible degree of efficiency and effectiveness.
The radio licences conundrum
There has been some controversy over the recent statement made by the Prime Minister about the granting under highly questionable circumstances of radio, television and cable licences within days of the November 2011 General and Regional elections. There was a total lack of transparency, as the licences were arbitrarily issued to favoured individuals and entities with strong political and/or family connections to the exclusion of well-established media houses. It was an act of unfairness, inequity, inequality and injustice, indeed the epitome of bad governance.
During the commissioning of the satellite multimedia teleport at the National Communications Network (NCN), the Prime Minister is reported to have stated that he favoured the granting of more licences in order to encourage competition rather than taking steps to honour the 2015 election promise to revoke the said licences. He did, however, indicate it was a matter that has to be decided on by the Guyana National Broadcasting Authority (GNBA) of which he is the subject Minister.
The Prime Minister’s statement attracted comments from three other Cabinet colleagues who are firm in their view that the licences were illegally granted, and as such they should be revoked. The Prime Minister later clarified the statement he had made and indicated his support for their revocation. On the other hand, Mr. Brynmor Pollard, Senior Counsel, is of the view that there are legal pitfalls in attempting to revoke the licences improperly granted. He also cited the significant costs implications should the licence holders seek judicial intervention because of their legitimate expectations of being allowed to operate their businesses.
Former President Bharrat Jagdeo had agreed not to issue new licences until new legislation is in place and a broadcasting authority is established. He, however, reneged on his promise. Mr. Pollard is of the view that: (a) the former President issued the licences in his capacity as the Minister responsible for broadcasting and the President of Guyana, and it was the State of Guyana that issued these licences; and (b) all licensees operating prior to the coming into operation of the Broadcasting Act had re-applied and were issued with new licences, as required by the Act.
On the other hand, the Minister of Public Security was emphatic that the issuing of radio licences to handpicked persons and entities is unconstitutional and repugnant to any true democracy. He stated that the former President’s calculated granting of the licences was a political act which he deemed “control freakism”. The Foreign Affairs Minister added his voice by asserting that “If beneficiaries of criminal actions by state officials can expect to continue to enjoy the benefits then corruption is unlikely to be ever stamped out. The risk of disclosure, exposure and reversal is itself a powerful deterrent”. The Minister of Education also weighed in on the issue by referring to the granting of the licences as “a most grave injustice on the nation”, while commentator, Christopher Ram, is of the view that “Legitimate expectation does not apply where there is an illegality”.
Whatever the merits for and against the revocation of the licences, a grave injustice was perpetrated on established media houses when their applications were denied in preference to the favoured individuals and groups. On the other hand, the beneficiaries have reaped an unjust reward for which remedial action is needed to avoid a repetition of similar such occurrences. For these reasons, this Column is of the view that the Administration should proceed with haste to revoke the licences. The failure to do so will send the wrong message that the Administration has no interest in remedying the wrongs inflicted on the nation and its citizens. If there are significant cost implications arising out of a possible judicial review and the Government ends up on the losing side, so be it. In the search for justice, there is no price that is too high.
