Opposition Leader Bharrat Jagdeo yesterday accused the government of trying to play down the “humun-gous tax burdens” that the proposed 2017 national budget would place on citizens, while estimating that the measures would net an increase of roughly $25 billion dollars in Value-Added Tax (VAT) alone.
Jagdeo dubbed the figure a “conservative estimate” in a response issued last evening to a statement from the Department of Public Information in which it was claimed that new tax measures announced by Minister of Finance Winston Jordan would see the injection of $9.595 billion into the economy.
“This represents the amount which the government will forego from the national treasury and is in effect a massive stimulus package,” Director of Public Information Imran Khan said in a statement issued earlier in the day.
Khan’s statement noted that the planned reduction of VAT from 16% to 14% alone will dent the national treasury by $4.8 billion, while the loss from the reduction in personal income tax would cost another $3.8 billion.
Citing figures provided by the Ministry of Finance, Khan noted that the VAT reduction from 16% to 14% would cost the treasury $4.817 billion; the reduction of the personal income tax from 30% to 28% would cost $3.826 billion; the reduction in corporate tax from 30% to 27.5% would cost $752 million, while the increasing of the VAT threshold from $10 million to $15 million would cost $200 million.
However, Jagdeo dubbed Khan’s statement as a “lopsided and self-serving piece of propaganda” that omits to calculate the windfall in revenue that VAT will generate once it becomes applicable to utilities and services on which the government is seeking to apply the tax.
“It is nothing more than a pathetic attempt to justify and defend the humongous tax burdens that this budget places upon the back of every single Guyanese, whether in the public, or private sector,” Jagdeo said.
In his budget speech, Jordan reported that in 2017 tax revenue is expected to increase by 8.9% to $162.6 billion, “reflecting a considerable increase in collections of VAT,” due to the measures to be implemented next year.
Jagdeo noted the minister’s admission. “No amount of propaganda from any spin doctor can change and distort the very clear language of the Minister himself,” he said, while offering the conservative estimate of an increase in taxes of approximately 25 billion dollars in VAT alone being yielded by government.
He pointed to the revenue that would be generated by the application of VAT on electricity and water, basic food items, internet, education and health services, school fees, and “a host of other goods and services” that are not currently being taxed.
In addition to announcing the planned reduction of VAT, Jordan also disclosed that the tax would be made applicable to monthly electricity and water consumption bills exceeding $10,000 and $1,500, respectively. The move to tax electricity and water has attracted immense criticism, including from the private sector.
Jordan also announced plans to expand the list of exempt items and eliminate all zero-rated items, with the exception of those pertaining to exports and manufacturing inputs, which has seen a backlash from both the opposition and the business community, which said it meant that some key goods would attract taxes.
Jagdeo said Khan’s statement also omitted to recognise the billions that will be collected from the increase of personal income tax from 30% to 40% on earnings above $2,160,000 per year, and on allowances; the increase in travel tax, the increase in corporation tax, a new environmental tax and other new tax measures.
Jagdeo further accused Khan of deliberately refusing to mention the billions of dollars that will be generated by the increase of fees in over 50 different areas, including, increase fees for late filling of personal income tax, corporation tax, property tax returns, the increase in interest rate for late payment of tax, the “astronomical increase” of fines for failing to keep proper tax records, new and higher fees for passports, higher fees for driving permits, higher fees for certificates of compliance, the increase in dozens of fees under the Customs Act, the increase in a number licensing fees and the imposition of a 2% tax on contractors.
He said too that Khan’s statement further deliberately failed to disclose the billions of dollars that will be received from government spending which would also attract VAT.
No calculation of spending power
Khan yesterday also announced the availability of a salary calculator at www.dpi.gov.gy/salary, which computes salaries under the new proposed personal income tax system. He noted that the under the new system all employees will have a higher take-home salary.
Jagdeo, however, called the calculator part of an attempt to deflect criticisms. “What the calculator will never tell the citizen is what is the real spending power of his/her salary as a result of this budget. The calculator does not tell the citizen that their allowances are now subject to tax. This new calculator will also never tell the citizen by how much their cost of living has skyrocketed as a result of this budget,” he said. “So on top of a draconian and an inhumane budget, the citizens of this country at the same time have to cope with insensitive and idiotic attempts by the government to insult and mock their collective intelligence,” he added.
The opposition and the private sector have called on the government to reconsider its budget proposals.
Jagdeo last Friday called on President David Granger to withdraw the proposed budget or examine the concerns of society and remove oppressive measures that he said would devastate the lives of many poor people and lead the productive sector to regress.
One day earlier, the Private Sector Commission also called on government to reconsider proposed changes to VAT regime, which it said would hurt the business community by driving up costs and forcing higher prices on consumers.
