Overview
We the citizens must have a tax cut in 2010. As you all know by now, I am a major advocate for tax reduction. One senior diplomat told me that we must show how we intend to accomplish our goals of tax reduction, while stimulating our economy for growth. It sounds simple, but I agree.
Our Blueprint for the nation includes a well thought out vision, but resourced with less taxes and a stimulated economy that will create jobs. We believe in the P3 model, private/public sector partnership. The type of programmes we are advocating for are about providing jobs for all Guyanese.
There are a number of industries that contribute to a project. For example, in building of the deep water harbour which I wrote about in last week’s column and the road to Lethem, we are talking about trucking and hauling, raw materials, transportation, engineering, and so on so that a variety of industry and skills would now be employed which would have otherwise been unemployed. More people in jobs mean more money being circulated. People will start to spend slowly, confidence would improve in our economy and we would be on our way out of the trough steadily climbing towards the peak of a new economic cycle.
There are also small projects which are labour intensive, which therefore means jobs. The point of the tax reduction stimulus is to create jobs. Businesses will respond to rising aggregate demand and will respond by turning their businesses around. Those which were closed would reopen and those who downsized will start to gradually call back staff.
Taxes and incentives – Minister of Finance must listen
The government has always been pedestrian in responding to developmental needs and therefore has been unable to create jobs for our people. The stimulus packages in the more developed economies are geared towards increasing aggregate demand from their diversified domestic production base. Guyana’s production base is mighty narrow and is still biased to basic goods.
Tax cuts aimed at stimulating production from the private sector certainly is an option we must aggressively embrace. The aim is to encourage both retooling and investing in new equipment to increase productivity and also encourage saving jobs and job creation.
We believe that the personal income tax threshold must be increased to $75,000 and VAT should be reduced by 6 percentage points to 10% in 2010. This would impact the majority of the people. It is also important to re-examine the profit tax, which is too high. Given all the constraints businesses face the last thing we want to do now is charge a 45% tax on profits. We can have an across-the-board reduction in profit tax, which also sends a business-friendly signal to foreign investors and those from the Diaspora. As jobs are created, it means more income taxes being paid and spending on goods and services which attract VAT.
As Dr Tarron Khemraj noted in recent writings, a rigorously managed State Development Bank will offer loans to business proposals at below market value that are solid and serious, I would add in selected industries only. Therefore, we have here an effective tax cut for our promising investors. In simple terms, the budget has to carry new spending programmes and tax cuts all designed to save and create jobs. In broad terms, the budget should affect/help the people in the following areas:
Increase in tax threshold means more disposable income
Reduction in VAT means cost of some selected goods will come down
Support for the extremely vulnerable
Unemployment assistance and retraining support to recently jobless workers such as those from the bauxite industry.
Lowered profit tax cut will stimulate business formation, employment and therefore a higher tax intake.
Cutting tax rates does not mean we have less tax revenue. Instead we will have more revenue as the tax reduction creates more businesses that employ people who pay more income taxes and spend more on goods and services which attract VAT.
Conclusion
It is so apparent that the PPP/C politicians have lost touch with what we the citizens need, such as reduction in our taxes, (income and VAT). We must be able to stimulate our economy. We have said many times that every dollar we spend turns our economy over ten times.
We need a government that understands our needs. As we reduce taxes, we must work on initiatives that create new jobs. When we read of the demise of sugar, our hearts sink because we know that it’s not just our government that has failed but we have failed also, because we have allowed them to.
We have lobbied hard for diversification of our sugar industry. We all now have experienced the incompetence of those put in charge of this major industry.
As you think of 2011 and what is needed from a new government, reflect on what the cup has done for you. If we all focus on the Guyana we want, we will be able to achieve a better nation. It is not about the party you instinctively vote for without thinking of your best interests, it is whether or not you believe how you vote can help solve Guyana’s economic problems.
We all realize we must change our approach to politics and voting, or else our children will inherit a land that they will not be proud of.
Until next time, “Roop”
Send comments to peter.ramsaroop@gmail.com
