Slow pace of tax reform frustrating private sector

– Re-elected PSC Chairman

The protracted delay in the implementation of wide-ranging tax reforms remains “a matter of acute frustration for the private sector” and the Private Sector Commission (PSC) is targeting the end of 2009 as “the outside time frame” for arriving at a common position with government on tax reform, re-elected PSC Chairman Captain Gerry Gouveia told Stabroek Business yesterday.

PSC Chairman Captain Gerry Gouveia
PSC Chairman Captain Gerry Gouveia

“The fact that the private sector was not consulted on the deliberations that led to the outcomes contained in the proposals prepared by the (US) Millennium Development Corporation was a matter of great disappointment to the PSC. In fact even when we saw the document several months later we were not comfortable with it. What has been agreed is that the consultant who prepared the original submission will return to Guyana and that this time around there will be consultations with the private sector,” Gouveia said.

The PSC Chairman said that while he believed that the government was committed to tax reform, approaches to the issue by the administration and the private sector were informed by two different perspectives. “The government tends to take an arithmetic view of tax reform in which it looks at the possible losses to the public treasury that would result from a lowering of taxes. The position of the private sector is that if you widen the tax net while easing the tax burden on those already paying high taxes you can actually create the conditions for increased economic activity as well as the incentives for increased production and productivity which can actually increase revenue collection. The government has to believe in the power of the private sector,” Gouveia added.

The PSC Chairman also told Stabroek Business that the private sector continued to monitor the various corruption- related revelations in state entities and will continue to insist that the various law-enforcement bodies investigate these revelations “in a manner that persuades the public that the government is serious about its professed zero tolerance of corruption.”

Asked to comment on the view held in some quarters that the authorities have been less than diligent in investigating some allegations of corruption, Gouveia said that it was the view of the PSC that issues that had bearing on trust and confidence and the integrity of people assigned to serve in the public interest must be investigated to the satisfaction of the public. “I hear what you say about public satisfaction and about the thoroughness of such investigations and I am uncertain as to whether these deficiencies have their root in lack of evidence, speculation or political interference in the processes,” he added.

Meanwhile, Gouveia told Stabroek Business that he did not believe that the dramatic collapse of Clico earlier this year had shaken public confidence in either the insurance sector or in the private sector as a whole. “What concerns us is the fact that Clico resembles – in the region-wide nature of its operations – what companies in Guyana and the rest of the Caribbean are more and more likely to look like in the future. We believe, therefore, that arising out of the Clico debacle there is a need to do more to harmonize the respective financial regulatory frameworks of the Caribbean territories. What occurred was a failure of the regulatory system or, more accurately, failure on the part of the functionaries who were responsible for managing that system. Our concern at the level of the private sector is, first, that the assurances that have been given to investors in Clico by the government be honoured and, secondly, that we do what is necessary to create a more effective regulatory regimen.” Meanwhile Gouveia told Stabroek Business that the agenda of the PSC in the period ahead had to be shaped, increasingly, to take account of “the role that the private sector had to play in fending off the ill effects of the ongoing, and, in some respects, worsening” global economic and financial crisis. “The events of the past few months, particularly, have underlined the central role that the private sector will have to play if Guyana is to be spared the worst effects of the crisis. By this I mean that local businesses must, perhaps as never before, demonstrate a   capacity   for   shrewd   management   and   sound business  decision-making,”  Gouveia told  Stabroek Business.

Meanwhile, according to Gouveia, the recent World Bank assessment of the state of the global economy and its prognosis for the period ahead had served as “a timely reminder” that for developing regions like the Caribbean there are still tough times ahead, “I have noted, particularly, the World Bank’s concerns over issues like dwindling commodity markets, reduced access to bilateral loans and the increasing difficulties that developing countries will face in accessing levels of multilateral lending that are adequate to compensate for limited budgetary allocations in poor countries. What this means, – and the World Bank report says so – is that any meaningful economic growth in developing countries in the period ahead will depend heavily on the private sector,” Gouveia told Stabroek Business. According to him the consequence of dwindling global markets resulting from decreased demand in developed countries had already manifested itself in Guyana, “and moreso in the manufacturing sector,” where there had already been job losses and shrinkage in production in some sectors including the bauxite and wood products industries. “These are examples of circumstances that are, in large measure outside of our control since shrinking demand in global markets is not a factor that lies within our power. In a sense, however, these developments challenge the ingenuity of our business community. The fact is that we must continue to search for creative ways of responding to the crisis.”

Commenting on the focus placed by Agriculture Minister Robert Persaud on the need for the private sector to direct more attention to the agricultural sector during his address to this week’s PSC Annual General Meeting Gouveia said that he was satisfied that the PSC had been “very responsive” to the importance of the sector in a situation where self-sufficiency in food had become one of the key concerns of the Caribbean. “We have put an agriculture sub-committee in place and the body has been working with potential investors and with government to create “an enabling environment that will facilitate a stronger private sector presence in the agricultural sector,” Gouveia said. Noting that “decisions by private sector entities to invest in the agricultural sector was an involved process that necessitated the addressing of a number of issues that will be of concern to investors,” Gouveia said that he expects that there could be “significant movement” in that area quite soon.” He praised the initiative taken by Neal and Massy to launch its 10-acre agricultural pilot project at Mon Repos. “I believe that what Neal and Massy has done can actually turn out to be a beacon of light for the private sector,” Gouveia said. According to the PSC Chairman the “necessary infrastructure, including capacity to generate project proposals and technical and market research would have to be created” if the private sector is to be encouraged to invest in the agricultural sector. He said that during a visit to the National Agricultural Research Institute at Mon Repos he had seen evidence of a need for the private sector to assist in the upkeep of the Institute.
Meanwhile, the newly elected executive of the PSC will be seeking to strengthen its links with the regional private sector in the period ahead “in order to try to accelerate the single market process.” He said that what the period since the introduction of the single market had proven was that “The creation of a single economic space among the countries of the region was never likely to be an immediate success” and that “the acceptance of a regime of trade unhindered by individual insecurities” can only come “through a continuous process of effort and commitment” on the parts of Caricom countries.