One hopes that it will be a civilized one, and not one that degenerates into a ruckus or “fish market” scene. The entire nation will be watching and observing our elected representatives at work in terms of what is clearly the most important engagement of legislators in any one year…To the extent that there is merit in the argument against a proposed budget measure, one would expect that the appropriate adjustments will be made. After all, this is the purpose of the budget debate…. We must avoid using the majority status in the Assembly to vote down well-intentioned, meaningful and justifiable suggestions for improvement. We must rise above partisan political interests and put the interest of the country and its citizens first. Yes, we can, and it is for this reason this column advocates that when it comes to approval of the Estimates, let there be “conscience” voting rather than voting along party lines. Let us avoid defending the indefensible!
In last week’s article, we had stated that the 2017 Estimates tabled in the National Assembly last Monday represented the first time in post-Independence Guyana, and perhaps earlier, that such Estimates were presented before the commencement of the fiscal year. However, in his Budget Speech, the Minister of Finance indicated that the Estimates for 1976 were in fact presented on 24 November 1975. We therefore acknowledge that our statement should have begun with the words “Apart from 1976”.
Advantages of an early budget
The Constitution provides for the Minister to lay before the National Assembly Estimates of Revenues and Expenditures within 90 days of the commencement of the fiscal year, and this has been the practice up to 2016. The disadvantage, however, is that since the Estimates are approved at the end of April, Heads of budget agencies have only eight months within which to execute their annual programmes and activities in support of their individual budgets. By the time such agencies could effectively get their act together, especially in relation to major infrastructure works, the first half of the year would have been completed.
In an attempt to accelerate the execution of programmes and activities, laid-down procedures as well as legal requirements for ensuring transparency, good value for money and proper accountability were in many cases not fully complied with or were circumvented in order to meet specified deadlines. Despite such attempts, as at 31 December, there are significant amounts of unspent balances which are required to be returned to the Consolidated Fund in accordance with Section 43 of the Fiscal Management and Accountability Act. Instead of doing so, several budget agencies indulge in the practice of writing cheques in order to exhaust their approved allocations, notwithstanding the fact that value is yet to be received. It is therefore not surprising to learn of numerous instances of overpayments to contractors, defective work performed and the short-supply of goods and services, among others. In this regard, the report of the Public Accounts Committee (PAC) for the years 2010-2011 is instructive: “Across budget agencies, Accounting Officers and/or engineering staff appear to sign off on incomplete projects. Accounting Officers were not implementing appropriate measures to avoid the recurrence of overpayments.” The Minister of Public Infrastructure has also recently disclosed that steps are being taken to recover overpayments to contractors of the East Coast Demerara Road Expansion Programme
An early budget facilitates efficient and effective planning of programmes and activities as well as their execution. With 12 months within which to do so, budget agencies can now space out their activities more evenly and are in a better position to manage the related financial resources. This in turn will facilitate greater observance of the relevant legislation, rules and regulations regarding the use of public funds and assets. Additionally, since Government expenditure sets the tone for economic activities throughout all sectors of the economy, an early budget will have a significant beneficial effect on the economy.
We have witnessed the adverse effects on the economy, resulting from the prorogation of Parliament in November 2014 and its dissolution in February 2015 without ensuring that a budget was in place. This column had warned against this course of action to no avail. It was not until August 2015 that the Estimates for 2015 were presented in the Assembly. This delay, coupled with the justifiable actions to clamp down on drug trafficking and money laundering, has had a stagnating effect on the economy for which we are yet to recover. The situation was exacerbated by the existence of the sizeable underground economy which is yet to integrate with the official economy.
Concerns about certain provisions in the budget
Since last Monday’s budget presentation, there have been considerable negative public reactions from various sections of the Guyanese society in relation to the budget measures proposed, especially as regards taxation matters. This column is on record as having stated that the Guyana Revenue Authority has the potential to double its revenue collections without the imposition of any new taxes. It would be fair to state that Guyana is one of the most heavily taxed countries in the world, if not the most, though research will have to confirm this.
From this column’s perspective, the budget appears to be more of a taxation one rather than a developmental one that could assist in kick-starting an ailing economy. There is little evidence to suggest that a genuine effort was made to provide the desired level of fiscal and other incentives for the manufacturing and service sectors and for new businesses to be established. Nor is there evidence of any proposal to address the state of unemployment among youths, which accounts for as much as 40% of the youth population.
Our teachers and nurses who are trained at the expense of the State, leave our shores in droves to seek better opportunities and a way of life. A similar state of affairs pertains to over 80% of our university graduates who enjoy subsidized tuition. The brain-drain will continue to the extent of our inability to provide the enabling environment and job opportunities with reasonable compensations packages for these persons to remain in the country and contribute to its development.
A key issue relates to the imposition of a 14% value-added tax on electricity and water. While consumption below a certain threshold will be exempt ($10,000 per month in the case of electricity and $1,500 for water), from the perspective of businesses, such a tax will almost certainly be passed on to the consumer and hence will result in an increase in the prices of goods and services. One consequence is that local manufacturers and suppliers will be placed in a position of competitive disadvantage vis-à-vis overseas manufacturers and suppliers, since goods and services that are imported are likely to become less expensive compared with their local counterparts.
Another key issue relates to the zero-rated and exempt items under the Value-Added Tax regime. According to the Guyana Revenue Authority website, zero-rated supplies are goods and services that are taxable but for economic reasons are taxed at 0%. These include: basic food items, medical services and supplies (including prescription and ‘over-the-counter’ drugs), education services and materials (including books), electricity supplied under the Electricity Sector Reform Act, water and sewage services, some locally- produced building materials, motor vehicles older than four years, computers, and sports gear. Exempt supplies, on the other hand, are those that, for social or difficult-to-tax reasons, are not taxed. Examples of exempt supplies are kerosene, liquid propane gas (LPG/cooking gas), gasoline and diesel, residential rent, insurance and financial services and locally-mined raw gold and diamonds.
According to the Minister, all zero-rated items will be eliminated and the list of exempt items will be expanded, with the exception of those pertaining to exports and manufacturing inputs. What this means is that local manufacturers of existing zero-rated items will no longer be able to recover value-added tax paid on inputs. For example, the National Milling Company of Guyana (NAMILCO) has indicated that it would not be able to recover some $200 million. A similar concern was expressed by GTT when it stated that if VAT is put on broadband, internet mobile data, as well as data sold to corporate entities, the increase would be about US$6 million per year for the services. This increase is likely to be passed on to the consumer.
The level of concern expressed in relation to the negative impact of the proposed budget measures raises the important question about the extent to which there were meaningful consultations with key stakeholders such as the political Opposition, the private sector, civil society, and trade union movement. We are aware that the political Opposition declined to participate because its demand for access to certain documents was not acceded to. But were the other stakeholders not told about the sweeping changes in the value-added tax regime, among other measures, that the Government is proposing? And if so, did they not highlight the adverse effects that these measures would have on the economy, and more specifically, the cost of living?
The debate on the Estimates for 2017 begins today, and one hopes that it will be a civilized one, and not one that degenerates into a ruckus or “fish market” scene. The entire nation will be watching and observing our elected representatives at work in terms of what is clearly the most important engagement of legislators in any one year. Judging from the reactions of key stakeholders, the Estimates are unlikely to undergo smooth passage in the National Assembly.
To the extent that there is merit in the argument against a proposed budget measure, one would expect that the appropriate adjustments will be made. After all, this is the purpose of the budget debate, otherwise we will be indulging in a very costly and meaningless exercise. We must avoid using the majority status in the Assembly to vote down well-intentioned, meaningful and justifiable suggestions for improvement. We must rise above partisan political interests and put the interest of the country and its citizens first. Yes, we can, and it is for this reason this column advocates that when it comes to approval of the Estimates, let there be “conscience” voting rather than voting along party lines. Let us avoid defending the indefensible!
Finally, another important document was laid in the Assembly last Monday, that is, the Report of the Public Accounts Committee (PAC) for the fiscal years 2010 and 2011. With the presentation of the Auditor General’s report for 2015 to the Assembly, the PAC is now four years in arrears in terms of the examination of the Public Accounts. More of this, hopefully, in our next column.
