The 2013 budget – commentary

The 2013 budget

Stabroek News – On April 1, 2013 n Editorial

What separates this year’s budget from recent renderings is the clutch of budgetary measures inclusive of amendments to the tax regime. The trend in previous years had been for broad declaratory policies and statements with few if any budgetary measures.

Do these additional measures hint that the government believes it has to be at the ready for an early election? The other brooding unknown is what will happen in Parliament during the consideration of the estimates amid the clear intent of the opposition to assert the Assembly’s right to cut allocations. Will an Appropriations Bill be presented and passed and if not what happens?

Those heady unknowns aside, at the macro-economic level, the budget is of interest to just a handful. The real engagement prevails at the level of the individual and how their circumstances might be improved or not as a result of the measures unveiled.  

Finance Minister Singh’s announcement that the income tax rate will be cut from 33.3% to 30% is undoubtedly welcome. However, ranged against the other adjustments such as the increase in the contribution rate to the NIS what is the net effect of the relief? In a letter in yesterday’s issue of the Sunday Stabroek, business columnist, Mr Christopher Ram calculated that “In dollar terms, for each $10,000 earned by the worker the tax saving is $333. It means this: the worker who was earning $50,000 per month at December 31, 2012 gets nothing out of the budget; one who earned $60,000 per month takes home $333; one who earned $80,000 takes home $680 more, etc. The earliest point at which the increased take home pay exceeds $10,000 per month is for employees earning $380,000.
“Note that I have not taken the projected inflation of 3.5% for 2013 into account. If that is done the income level at which there will be a net saving is for employees earning $296,000 per month. All persons earning below that income per month will actually be worse off.”

On the tax front there are two other adjustments. Prospective home owners, many of them building on land from government’s standout house lots programme dating back to the 1992 administration of Dr Cheddi Jagan, will welcome the mortgage interest relief for first time owners with mortgage loans of up to $30M from the commercial banks or the New Building Society.

In relation to the property tax, Minister Singh has elevated the thresholds for both individuals and companies above which the property tax will be charged. It however is accompanied by a change in the valuation date from January 1, 1991 to January 1, 2011 and this is where the real sting resides and which will leave many an individual and company nervously totting up figures after the required expert valuations.

It must be said that after 20 years of budgets and a hodge-podge of tax measures, reports on taxation and reform pledges, the PPP/C government is yet to rationalize policies and fiscal requirements into an overarching and coherent framework and tax code. The clearest evidence of the ambivalence and laxity is the failure of President Ramotar’s own pledge delivered over a year ago for the establishment of tax review committee. Such dereliction in more exacting democracies would have serious repercussions for those making the promise.

The raising of the old age pension will be welcomed by the elderly segment of the population that has reeled for years under paltry increments in an increasingly brutal economic environment. Whereas in the 2012 budget, the Finance Minister had proposed a measly hike of $600 from $7, 500 to $8, 100 – then pushed it up to $10,000 as a result of a deal with APNU –   the figure will now jump to $12,500 per month; still small but welcome assistance to the aged. What irks is the arbitrariness that attends these calculations and the reality that political considerations are what can lead to an increase of $2,500 per month as opposed to $600. The electricity subsidy to the old age pensioner of up to $20,000 per annum, similar to an existing programme for water is also a welcome boost.

Provision for the maintenance of the Linden electricity subsidy reflects the reality of the government’s agreement with Region 10 following last year’s crisis and the fact that there appears to be no agreement immediately in sight.

As in the case of previous budgets it is important to note that the Finance Minister’s presentation was woefully short of any considered examination of unemployment and underemployment. While his speech included a section on the importance of statistics and a reference to the creation of Information Technology jobs for 498 youths, his three-hour presentation was bereft of any data on joblessness. Surely unemployment/employment figures are a crucial indicator of the health of an economy and are standard fare in other Caribbean economies. As asked in the letter by Mr Hamley Case in Friday’s edition and a news item in the Stabroek Business as far back as 10 years ago the questions remain: what is the unemployment figure and why are these figures hidden. Surely, the excuse couldn’t be that the census will generate them.

The other point of note is that despite assertions of progress in non-traditional sectors there are few signs of these creating jobs and impacting on the economy. Gold has outstripped the foreign exchange earnings of other traditional sectors with change to spare and while the Finance Minister had in last year’s budget speech projected job numbers for the Information and Communications Technology  sector there was conspicuously no mention of progress this year in the creation of more employment. The economy remains largely oriented in the same state that it has been for decades with sugar in an unfortunate spiral and rice booming on the back of the Venezuelan barter agreement. The outturn was mixed and tepid in bauxite, timber and diamonds.

Even in the boom, questions have to be raised about the benefits to the economy. Are gold declarations where they should be and was the infamous Curacao heist an example of the haemorrhaging of revenues from the country’s coffers?

The integrated farm at Santa Fe in the Rupununi is a fabulous example of risk capital being employed in an area where many are afraid to venture. What exactly are the projected returns to the Guyanese economy from this Barbadian investment and isn’t the pivotal question here why Guyanese entrepreneurs remain shy about this type of investment?

Minister Singh’s budget makes an effort to impress but fails the visionary sweep necessary to propel the economy and the country onto a loftier plane.

It is left now to Parliament and the likely contentious debate. The only thing left to say is to commend to our Parliamentarians the manner in which the Commis-sioner of the Protected Areas Commission Mr Damian Fernandes handled a query about the health of ponies at the National Park after a passer-by saw several emaciated ones. Instead of the vitriol and pomposity so common in today’s discourse, to unanimous acclaim, Mr Fernandes in a letter to this newspaper answered the questions posed straightforwardly and without a trace of rancour. Well done. It is a lesson our MPs should take note of as the debate on the budget and the consideration of the estimates get underway tomorrow.

Post a comment or leave a trackback: Trackback URL.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: