The state raked in a total of $36.7 billion in the Value Added Tax (VAT) and Excise Tax in 2007 in the first year of their implementation – way above projections – paving the way for a budget nearly 20% higher than last year’s.
Minister of Finance Dr Ashni Singh yesterday gave the figures in the National Assembly while making his presentation of the 2008 National Budget in the amount of $119.3 billion, which he said was 8.5 per cent more than the 2007 latest estimate and 19.3 per cent higher than the 2007 budget.
According to the Estimates of the Public Sector: Current and Capital Revenue and Expenditure, the take for VAT for 2007 was $21.3 billion while for the Excise Tax it was $15.3 billion. VAT had been projected at $12.1B for 2007 but ended up being $21.3B.
The Minister said that for 2008, the Government is aiming to collect $41.4 billion in VAT and Excise Tax revenues.
The budget also provided for the expansion of the list of VAT zero-rated items from March 1 including wheaten flour and has made hefty allocations for the security sector in the face of an escalation of violent crime.
The ceremony was presided over by Deputy Speaker of the National Assembly Clarissa Riehl, who said that Speaker of the National Assembly Ralph Ramkarran had been excused from yesterday’s sitting. This budget should have been presented on Monday but was put off because of the slaying of 12 persons in Bartica on Sunday night.
The Minister said that real growth for 2007 was measured at 5.4 per cent, reflecting a sustaining of the growth measured at 5.1 per cent in 2006 and comparing favourably with the 4.9 per cent projected for 2007. Inflation was 14 per cent last year, compared with 4.2 per cent in 2006 and the 5.2 per cent projected for 2007, the Minister said in his speech.
Total tax revenues collected by the GRA amounted to $77.3 billion compared to $58.5 billion in 2006. Collections from internal revenue amounted to $32.4 billion, an increase of 6.2 per cent over the previous year, reflecting significant increases of 20.7 per cent in income tax from self-employed persons and 11.8 per cent in corporation tax from private sector companies.
Customs and Trade taxes yielded $8.2 billion, reflecting a 45 per cent increase in import duties and including $1.4 billion of residual consumption taxes received in 2007.
Dr Singh said that in 2008, the Government will conduct a study of the country’s tax system to determine how much further tax reform could be implemented.
In outlining the targets for 2008, the Minister noted that the economy is projected to grow in 2008 by 4.8 per cent, mentioning that the growth is expected to be broad-based and is to reflect expansion in both traditional and new and emerging sectors.
Agriculture
He said that the sugar industry is projected to achieve output of 290,000 tonnes, an increase of 8.8 per cent over 2007. “This reflects an increased acreage under cultivation, increased productivity, and the coming into operation of the new Skeldon factory,” the Minister said. He said too that rice output is targeted at 321,000 tonnes, representing 7.6 per cent growth and a recovery from the adverse conditions experienced in 2007.
The Minister said that the forest industry is also set to recover, with a projected growth rate of 3 per cent based on anticipated increases in the production of both logs and higher value products. The fishing sector is budgeted to increase by 3 per cent, while livestock and other agriculture are both projected to grow at 2.5 per cent.
Industry
The mining and quarrying sector is targeted to grow by 5.8 per cent, the Minister said, and the bauxite industry is expected to continue its robust performance with output increasing by 17.1 per cent to 2,626,000 tonnes, reflecting sustained returns to the investments being made in the sector. The Minister said too that gold declarations are however projected to decrease by 2.7 per cent to 231,750 ounces, “reflecting some moderation to a more steady growth path”. The Minister said that engineering and construction is targeted to increase by 4 per cent, reflecting the continued growth in housing and in the services and commercial sectors. Also, he said that the manufacturing sector is projected to grow by 4 per cent.
Services
Dr Singh outlined that growth in the transport and communication sector is projected at 8 per cent for this year, reflecting strong activity in both the domestic transportation and the telecommunication sectors. He said that distribution is targeted to increase by 5 per cent, financial services 5.5 per cent, rental of dwellings 2 per cent, and other services 4 per cent. “In this regard, the hosting of CARIFESTA X is expected to provide additional impetus to the levels of economic activity in several sectors during 2008,” the Minister said.
He added that monetary policy will continue to be aimed at maintaining price stability while facilitating private sector expansion through lowered interest rates and a reduced fiscal deficit. “The inflation rate is targeted 6.8 per cent reflecting ongoing imported price pressure,” he said.
The Minister said that for 2008, the overall balance of payments is expected to return a surplus of US$3.6M.
According to the Minister, the current account deficit is projected to deteriorate marginally to US246.3M, due mainly to the projected higher costs of oil and global commodity price increases. He said that merchandise exports are projected to increase by 8.2 per cent to US$736.9M.
Continued growth is projected in export earnings of bauxite by 28.1 per cent, sugar by 6.7 per cent, rice by 6.2 and the resurgence of timber by 22 per cent. Merchandise imports are projected to grow by 5.9 per cent to US$1,125M and private transfers projected to decline by 3.3 per cent, attributed to lower inflows in the form of worker remittances. “The capital account is projected to improve by 4.7 per cent to US$249.9M,” the Minister said.
Among the monetary policies the Government has included in the budget are the personal income tax, old age pensions and public assistance, VAT and excise tax. “Madam Speaker, Government has already announced an increase in the income threshold by 25 per cent from $28,000 to $35,000 per month with effect from year of income 2008,” the Minister pointed out.
He said that the increase will cost an estimated $3 billion and remove some 36,000 persons from the requirement of paying taxes. He said as a result of the measure, every taxpayer will benefit from a higher take home pay.
“Government has also announced, and has already implemented, an increase in old age pensions from $3,675 to $6,000 a month, and an increase in public assistance from $2,470 to $4,500 per month effective from January 1, 2008,” the Minister said.
The Minister added that Government will introduce legislation to enable the Minister of Finance to amend the regulations to the Excise Tax Act by way of negative resolution instead of affirmative resolution as currently obtains.
“Madam Speaker, still on the Excise Tax, alcoholic products are currently subject to this tax. This has the effect of an impact on the cost of producing medicinal, pharmaceutical and similar products which use alcohol as an input. In an effort to reduce the cost of these products we will introduce legislation to exempt from Excise Tax alcohol purchased for use in the manufacture of medicinal, pharmaceutical and similar products,” the Minister said.
He said that the Government intends to introduce legislation to restructure stamp duties and fees paid by companies when they incorporate or increase their share capital in Guyana. “The specific objective of this exercise would be to remove the variable element of the charges incurred and therefore reduce the cost of registering a company and of increasing share capital,” said the Minister.
He added that this will have a direct and favourable impact on company costs, especially i
n the case of companies starting up or expanding their equity, and will complement all of the other actions being taken to reduce the cost of doing business in Guyana.
