The 2016 budget was about beckoning the ‘good life’, and we saw what happened: a rising cost of living, the drastic decline of rice and sugar production, contraction of the manufacturing sector, a decline in the livestock sector, a decline in the forestry sector, a decline in construction, rising unemployment especially among youths, rising crime, a wage freeze in the sugar industry, a paltry wage increase in the public sector, increased taxes and a reduction in the real growth of the economy to 2.6%. In contrast, ministers and other government officials enjoyed salary increases ranging from 50% upwards! This has been compounded by the massive and shameless squandermania which the government at all levels has been engaged in. You do not have to be Einstein to see who enjoyed the ‘good life’ in 2016!
Well, we must give the Minister of Finance some credit for the 2017 Budget’s theme; he informed us that this budget will be ‘…bringing a better life for all Guyanese’. So it is implied that if the 2016 Budget failed to give us a ‘good life’ (which it did) then this one will surely bring it!
However, the Leader of the Opposition, Dr Jagdeo made an accurate assessment when he lamented that the 2017 Budget will not benefit the working class and will “kill the private sector”, and its ominous signs forbode a gloomy future.
Firstly, we have the exact opposite to what the previous government did to alleviate the sufferings of the pensioners. Pensioners were given electricity and water subsidies which went a long way to ensure a ‘good life’ for them, unlike this government which has introduced a 14% VAT on those two vital utilities. Many pensioners who own their own homes had complained bitterly with regards to the removal of the subsidies, but these complaints fell on deaf ears. It must be noted that increases in pension do not have to be at the expense of those benefits already enjoyed. Similarly, it is not a valid argument that pensioners will not be affected by the imposition of VAT simply because 105,000 residents pay less than $10,000 per month. How many pensioners are in this category? It is beyond doubt that pensioners would have been better off with the electricity and water subsidies. Moreover, how will they be better off when they have now to pay VAT on staples such as milk, potatoes and many other necessities? These items are consumed on a daily basis. Therefore, how can no subsidy on water and electricity plus VAT on necessities result in a ‘better life’? Will a meagre pension increase of $800 provide this? The minus is far more than the plus!
Secondly, the negligible reduction in VAT will not result in any tangible gains for the consumers since items which are normally consumed by the working class and were previously zero rated are now vatable. What will happen to sugar workers who have been denied any form of wage increase for the past 2 years? An ever increasing inflation rate will spell disaster for them and their families. This reduction in VAT will only serve to benefit the wealthier class of people who consume expensive luxury items. The ministers and government officials will now enjoy further savings on their already humongous salaries. It does not matter that they have to pay VAT on milk and potatoes since that will just be a negligible percentage on the princely amounts they are getting.
Thirdly, what will the cumulative effect of an imposition of VAT on electricity and water be? Will these not increase the production costs of goods and services? Most definitely they will, and the commercial sector will have to recoup these costs and of course the final consumer will bear the burden. On the other hand, negligible reductions hardly ever benefited the final consumer. How has the reduction in the Berbice Bridge toll benefited commuters traversing that bridge? This reduction was never passed on to the final consumer and the government is aware of this. Moreover, the $5,000 increase in the income tax threshold will hardly give any tangible form of relief to the majority of workers who are earning less than $100,000. This will translate to just above $1,000 per month. Will this not be eaten by the removal of many necessary food items from the zero-rated list?
Lastly, the 2017 budget shows clearly that the Minister of Finance is just an adroit juggler whose main intention is to squeeze as many taxes as possible from the poor working class of people of this country and ensure that the excesses of this government can be sustained and not the country’s socio-economic development. Monetary and fiscal policies which can stimulate the economy are sorely lacking in this budget. Next year definitely will be worse than this year. I am sure that the opposition will expose the inherent weaknesses of this budget.