Dear Editor,
Amid the ongoing debate over the Guyana Teachers Union’s acceptance of the government’s offer of 10% for 2024, 9% for 2025, and 8% for 2026, it’s important to examine the tax implications of this decision, especially in light of the opposition’s promise of a minimum of 35% increase if they are elected in 2025.
While a 35% raise might seem appealing, it’s crucial to consider the tax consequences that could diminish the actual benefits of such a substantial increase. For example, if a teacher earning GYD 2,000,000 annually were to receive a 35% raise, their salary would jump to GYD 2,700,000. However, this significant increase could push the teacher into a higher tax bracket, resulting in a larger tax liability. Consequently, a substantial portion of the raise could end up going to taxes, leaving the teacher with less net income than expected.
In contrast, the GTU’s decision to accept the government’s offer of incremental raises—10% in 2024, 9% in 2025, and 8% in 2026—presents a more tax-efficient option. These gradual increases are less likely to cause a sudden leap into a higher tax bracket, which allows teachers to keep more of their earnings. For instance, under the accepted proposal, a teacher’s salary would increase to GYD 2,200,000 in 2024, GYD 2,398,000 in 2025, and GYD 2,589,840 in 2026. This gradual progression helps ensure that teachers retain a larger share of their salary increases by minimizing the impact of higher taxes.
Moreover, the phased approach to salary increases allows for more predictable financial planning. Teachers can better anticipate their tax liabilities and make informed decisions about savings and investments. On the other hand, a one-time, large increase like the proposed 35% raise could lead to unforeseen tax consequences and potentially disqualify teachers from deductions and credits they currently benefit from.
From a tax professional’s perspective, the GTU’s acceptance of the government’s offer demonstrates a thoughtful balance between wage growth and tax efficiency. While the opposition’s promise of a 35% raise may sound enticing, the reality is that such a large increase could lead to a higher overall tax burden, reducing the net benefits. The GTU’s strategy of accepting gradual increases is a prudent approach that maximizes take-home pay while minimizing the risk of adverse tax effects.
Sincerely,
Keith Bernard
