Last week, we concluded out review of the report of the Public Procurement Commission (PPC) on the procurement of $632 million worth of drugs and medical supplies for the Georgetown Public Hospital Corpora-tion (GPHC). Our overall conclusion was that the report provides a useful basis in giving a sense of direction to the GPHC in dealing with procurement matters as well as in improving its operations. This is notwithstanding the PPC’s attribution of blame entirely on the GPHC’s officials when the evidence presented to it showed a significant ministerial involvement and decision-making.
The report referred to the Government’s policy of acquiring generic drugs because of cost implications, as opposed to branded drugs. Despite this, the GPHC procured branded drugs from ANSA McAL which the latter also airfreighted, thereby incurring an additional $200 million in expenditure. The report, however, did not recommend any sanctions against those responsible for this breach in policy and resulting loss, as provided for by Sections 48-49 of the Fiscal Management and Account-ability Act. Nor did it address the reason for the lacuna in oversight of the operations of the GPHC during the period November 2016 to February 2017 when there was no board in place, resulting in the Minister stepping down from her policy-directive role and becoming operationally involved.
We begin today’s article with the following passage taken from our Column of 4 December 2016, the day the debate on the 2017 Estimates of Revenue and Expenditure for the fiscal year 2017 began in the National Assembly. Since the Estimates for 2018 are set for debate today, the above quote will hopefully serve as an important reminder to our legislators of the need to conduct themselves in a manner befitting of their status in society as the elected representatives of the citizens of this country.
One hopes that it [the debate] will be a civilized one, and not one that degenerates into a ruckus or “fish market” scene. The entire nation will be watching and observing our elected representatives at work in terms what is clearly the most important engagement of legislators in any one year…To the extent that there is merit in the argument against a proposed budget measure, one would expect that the appropriate adjustments will be made. After all, this is the purpose of the budget debate, otherwise we will be indulging in a very costly and meaningless exercise. We must avoid using the majority status in the Assembly to vote down well-intentioned, meaningful and justifiable suggestions for improvement. We must rise above partisan political interests and put the interest of the country and its citizens first. Yes, we can, and it is for this reason this Column advocates that when it comes to approval of the Estimates, let there be “conscience” voting rather than voting along party lines. Let us avoid defending the indefensible!
A month ago, we witnessed one of the most despicable acts in the history of our parliamentary affairs where the highest public decision-making forum of the country – sacred halls of the National Assembly – was desecrated during an address by the President. As he began his speech, placards were whipped out, accompanied by incessant heckling that prevented the President’s speech from being heard. Whatever the issue at hand, the matter should have been dealt with in a more civilized way. This unfortunate display, which speaks volumes for the level of disrespect shown to the President, should never be allowed to happen again!
Last Monday, the Minister of Finance presented the 2018 Estimates of Revenue and Expenditure. This is the second year where the budget is being presented before the fiscal year. This article provides a summary of the performance of the economy during 2017, as well as measures proposed for 2018, as contained in the Minister’s budget speech. We shall refrain, for the time being, from providing our assessment of the budget measures, and step back to observe the unfolding debate set for later in the day.
Performance of the economy in 2017
The Minister indicated that the Government was able to maintain stable macroeconomic fundamentals. This was despite constraints due to the lack of economic diversification which left key sectors and industries vulnerable to external shocks and internal meltdowns, as in the case of the Guyana Sugar Corporation.
The economy is expected to grow by 2.9% by the end of 2017, compared with a projected growth of 3.8%, due mainly to weak performance in the mining and quarrying sectors, and the sugar and forestry industries. Following the actual growth rate of 2.2% for the first half of 2017, the projection for the 12-month period was revised to 3.1%. The economy therefore did not perform against the original and revised estimates by 0.9% and 0.2% respectively. The Minister has projected that the economy will grow by 3.8% in 2018, with the non-sugar growth rate anticipated at 4.6%.
The inflation rate for 2017 is expected to be 2.0%, compared with a projected rate of 2.5%, due to a slower growth in demand and consumer spending. The actual inflation rate for 2016 was 1.3% while the projected rate for 2018 is 2.4%.
The overall balance of payments is expected to improve slightly to a deficit of US$53.1 million in 2017, due mainly to an improvement in the capital account from a deficit of US$13.2 million in 2016 to an anticipated surplus of US$181.8 million in 2017. This is despite the deterioration of the current account from a surplus of US$13 million in 2016 to a projected deficit of US$235 million in 2017. The anticipated improvement in the capital account is due to strengthened net medium and long-term capital flows for both private and public sectors. For 2018, the balance of payments deficit is projected to widen to US$79.7 million. This increase is driven by an expansion of the current account deficit to US$292.6 million, from US$235 million in 2017, due to a widening of the merchandise trade deficit.
The following table gives a summary of the key macroeconomic variables over the period 2015 to 2017 as well as the projections for 2018:
Source: Extracted from Appendices I, V and VI to the Minister of Finance’s budget speech for 2017 and 2018
Budget measures for 2018
The key budget measures contained in the Minister’s speech:
Green agenda: Exemption from Excise Tax for vehicles principally designed to accommodate LPG gas, with an engine capacity not exceeding 2000 cc and not exceeding four years old from the date of manufacture to the date of importation; and exemption from Customs Duty for machinery and equipment used for setting up refilling stations for such vehicles.
Income Tax: Personal allowance of $720,000 to be extended to persons employed only for part of the year; and extension of tax-free vacation allowance to private sector employees, subject to a maximum of one month’s salary.
Support for the elderly: Increase in old age pension from $19,000 per month to $19,500; and Increase in public assistance from $7,500 to $8,000 per month.
Forestry: Restriction of the importation of pine wood and pine wood products; increase the Common External Tariff (CET) from 5 percent to 40 percent on such products; exemption from VAT the supply of logs and rough lumber to the sawmilling industry; and allocation of $120 million and $50 million to commence a forest inventory and a dimension stockyard respectively.
Gold: Reduction in the Tributor’s Tax from 20% to 10%; and replacement of 2% tax on the gross proceeds from gold production with a sliding scale percentage, ranging from 2% to 3.5%, based on the price of gold.
Housing: Exempt from VAT, complete housing units costing up to $6.5 million, that are built by, or on behalf of, the Central Housing and Planning Authority or any other approved entity.
Transportation: Removal of Excise Tax on the importation of vehicles with engine capacity of 2,000-4,000 cc by incorporated entities and used for tourism purposes in Regions 1, 7, 8 and 9; free vehicle licences for buses and motor vehicles operating in these Regions; removal of VAT on vehicles less than four years old used to transport more than 21 persons; and removal of Excise Tax flat rate of US$6,900 on vehicles four years and over that carry 22-29 passengers, and replacing it with a VAT rate of 14%.
Small Business: Allocation of $100 million to replenish the Small Business Development Fund.
Education: Removal of VAT on the provision of education services.
Day care: Capital expenditure on day care services to be allowable as an expense for taxation purposes.
Amnesty for taxpayers: Waiver of interest and penalties for all delinquent taxpayers (corporate and individual) for filing and honouring their tax liabilities before 30 June 2018. For those who do so between 1 July 2018 and 30 September 2018, 50% of interest and penalties will be waived.
Appeals against tax assessment: Reduction in deposits on appeals to one-third of the tax in dispute, if it is less than $20 million, and the lodgment of a bond or other acceptable form of guarantee, for disputes that are over $20 million.
Filing of corporate tax returns: For corporation tax purposes, acceptance of draft management accounts, as determined by the Commissioner-general, subject to audited accounts being filed before 31 December of the year in which the return falls due.
Provisional licences for businesses: To be issued for a period not exceeding two years for grocery shops, variety stores, and snackettes.