1. Support to the Sugar Industry
$1 billion to support the company’s transformation plans on top of $39.5 billion which the Minister notes was injected to recapitalise the industry and to support its operations over the years.
2. Support to the Guyana Power and Light Inc.
$5.8 billion will be provided to support the company’s cash flow requirements while $5.4 billion will be provided to support key projects. This is on top of $6 billion injected in 2012.
3. Linden Electricity
$2.9 billion will be provided to meet the cost of maintaining the electricity subsidy in Linden and Kwakwani which the Government unsuccessfully tried to remove in 2012.
4. (a) Old Age Pensions
Increase from $10,000 per month in 2012 to $12,500 per month from May 1, 2013.
(b) OAP Electricity Assistance Programme
Assistance of up to $20,000 per annum to each old age pensioner to pay GPL for electricity charges incurred. A similar scheme is already in place with GWI.
5. National Insurance Scheme
A 1 percentage point increase in the contribution rate for both employed and self-employed contributors with the Government meeting both the employer’s and the employee’s share of the increase where employed persons had income of not more than $50,000 per month. The increase is effective June 1, 2013 and is expected to generate $890 million in revenue for the Scheme per annum.
6. Property Tax on Companies
With effect from year of assessment 2014, companies will be charged at the following rates: the first $10 million of net property will be taxed at zero percent, the next $15 million of net property will be taxed at 0.5 percent, and the remainder of net property will be taxed at 0.75 percent.
The valuation date for the purposes of the property tax will be revised from January 1, 1991 to January 1, 2011.
7. Property Tax on Individuals
With effect from year of assessment 2014, individuals will be charged at the following rates: the first $40 million of net property will be taxed at zero percent, and the remainder of net property will be taxed at 0.75 percent.
The valuation date for the purposes of the property tax will be revised from January 1, 1991 to January 1, 2011.
8. Mortgage Interest Relief
With effect from year of income 2013, first time home owners who are holders of mortgage loans of up to $30 million granted to them by commercial banks or the building society will be permitted to deduct the interest they pay on such mortgages from their taxable income for the purposes of personal income tax. In other words, that portion of taxable income used by a first-time home owner to pay interest will be exempt from personal income tax.
9. Personal Income Tax
Reduction in the rate of income tax paid by individuals from 33⅓% to 30 percent but no increase in the income tax threshold.
Ram & McRae’s Comments
Subsidy to GuySuCo in 2013 at $1 billion compares with $4 billion in 2012. Whether this amount will meet the requirements of the ailing Corporation depends on the entity achieving its 2013 production target.
The National Assembly should insist that the Minister present up-to-date financial statements.
Linden
The amount of the subsidy in 2012 was $2.66 billion and the Budget is presented on the basis that the current arrangement will stay in place.
Old Age Pensions
A 25% increase in OAP would be welcomed by pensioners but we believe that age should not be the only consideration in the granting of this pension. Too many retired businesspersons and even remigrants with the means to live a comfortable life unfairly collect this benefit. The Government should discourage this impropriety.
Electricity rebate
The Speech suggests that the payment of the assistance will be made to the pensioners. We anticipate a less cumbersome arrangement such as that which operates with GWI where the money is paid to the company which credits the account of the pensioner. The presence of others in the household who benefit from this subsidy or the fact that some accounts end up in credit does not factor in the allocation making the assistance more of a subsidy to the utility.
National Insurance Scheme
The 1 percentage point increase in the NIS contribution rate to be borne by the employer and employee amounts to a 7.7% increase in the amounts payable. For workers earning under $50,000 per month, the Government is actually subsidising and rewarding employers who pay their employees a barely living wage.
The Minister did not indicate how the system will operate and will probably add to the recordkeeping nightmare of the NIS with repercussions for the employees for benefits purposes. This also means that there will now be two rates of NIS placing additional administrative workload on employers.
The Minister did not mention the increase in the NIS ceiling for employees that became effective March 1, 2013.The ceiling increased by 5% with insurable earnings being set at $150,628 (monthly) and $34,760 (weekly).
Property Tax
The exemption for individuals at $40 million means that the majority of individuals who probably do not file Property Tax returns or pay property tax now will be exempt from paying the tax.
The downside is that the value of properties is moved from 1991 to 2011 and is likely to result in significantly higher property values and consequently higher taxes. There is also an administrative obligation to revalue all assets, raising the possibility of undue pressure on our limited number of valuation officers to provide a convenient value. We expect strong resistance from the business community to these proposals. We also think that there is need for the GRA to employ its own valuation officer.
The Minister did not indicate whether the rate for filing of Property Tax Returns (currently $1.5 million for individuals and $0.5 million for companies), or the exemptions such as $100,000 for household furniture would change. Neither did he indicate whether the new valuation date would apply for Capital Gains Tax purposes.
In our view, sufficient advantage was not taken of this opportunity to reform the application of the property tax.
Mortgage Interest Relief
Like the property tax and the NIS changes, we will have to wait on the draft legislation to understand how the relief would apply. It appears to be one in which refunds would have to be issued by the Revenue Authority and we are not confident that they have the capacity to adequately manage the review and refund process in a timely manner.
We hope that the process would be one in which cheques are sent to the taxpayer or their accounts are credited at a commercial bank or set-offs are granted against other liabilities as opposed to the system used in 2012 where taxpayers were asked to visit the Authority’s Offices to uplift payments between $500 and $1,000.
Personal income tax
For persons earning up to $50,000 there is no benefit. For every $10,000 earned above $50,000 the tax saving is $333 per month. For anyone to save $3,000 per month the person must earn $140,000 per month.
