Why would a government undermine two fundamental pillars of growth?

Dear Editor,

Drive from Crabwood Creek to Charity: What strikes you most deeply? Certainly the huge houses that cannot be built on a government salary ‒ Pradoville I and II are perhaps the most outstanding examples. Numerous abandoned houses, incredible filth all around, septic tanks draining into clogged trenches, an abundance of grass and bushes, massive employment, especially that of youths, and the rise of a more conning mentality; all these and more testify to poverty, inequality and squalor in the midst of tiny islands of wealth, conspicuous consumption, huge houses and over-sized vehicles.  Squalor coexists with splendor, even if the necessary public infrastructure to support splendour is non-existent. Rising prosperity for a handful of privileged people coexists happily in an ocean of filth, deprivation and misery.  This is what ethnic politics has delivered to Guyanese during the last half a century, and apparently this is how ethnic politicians wish to see Guyanese live.

The first PNC regime delivered lukewarm growth and rising inequality, while the first and only PPP regime delivered strong growth and strong inequality.  Both regimes were marked by corruption, which reached unprecedented levels under the PPP. Both ethnic parties catered to ethnic interests, although this was more widespread and deep under the PNC.  That is, both discriminated and marginalized the ‘other’ ‒ one of the two largest ethnic groups whose loyalty  was either with the PPP or PNC.  Both parties were short-sighted, driven by tribal interests and personal aggrandizement.

It is against this background that it is difficult to explain why, for example, the government  levies a punitive VAT on private health care and private education. It is even more puzzling when it is recalled that both public health care and public education are broken.  Why would a government want to fix what is not broken rather than fix what is broken in the Guyanese economy? Public health on the Essequibo Coast, for example, is characterized by a heightened sense of fear by anyone – and his family – who goes to the Suddie Hospital for an illness.  Just as bad, is the mortuary, which is housed in a dilapidated building.  The freezers are broken (or at least were so until recently).  Consequently,  relatives of the deceased had to purchase ice and port it to the mortuary at least once daily.  Worst of all is what beholds you when the freezer pan is pulled open: the deceased floated in 3-4 inches of water.  Her clothes were wet and clung to her skin, her hair was wet and scattered and she was bloated, apparently helped by being water-logged.  Have you even held a ‘pine-toe’, a little fish from the Atlantic Ocean between your fingers and shaken it vigorously?  That was how the deceased, drowning in water, looked: bloated, dishevelled and stomach-turning.

Exactly, what is the explanation for such a short-sighted and apparent vindictive VAT policy? No one knows for sure; the argument that VATing these two services will widen the tax base may be true, but this benefit has to be weighed against the harm ‒ the cost ‒ it does to growth and human development. If the need to boost tax revenue is the issue, why VAT the parents of students?  Why not go after private schools and private health care facilities? Instead, the present move seems to be an example of double taxation: taxing the parents as well as the institutions that provide private education and health care. The government seems to be engaged in moves and policies that are not supported by critical thinking, analysis and common sense.

Good health and good education are a requisite for growth and human development. Has the government done a comparative benefit/cost analysis of its depressive tax on private education and private health? How much revenue does it expect to derive from VATing private education and private health care? Granted these two services perhaps have an inelastic demand, meaning that price changes have little effect upon demand, but are they the most appropriate goods on which to impose a punitive tax that will encourage migration and eat away at the foundation of economic growth?  It would have been more socially beneficial to VAT other inelastic goods such as beer, rum and cigarettes. It appears that the government prefers to ruin the minds and bodies of Guyanese instead of developing them.  That is a recipe for economic disaster.

Widening the tax base is a legitimate issue, but it must be accompanied by accountability and transparency.  The government needs to make public tax revenues and expenditure by region, which is necessary for comparative analyses.  Do regions get a fair share of the public purse or do some lose and some win? Does government expenditure in Region 4, for example, exceed revenue from taxation?  Just as importantly, what criteria does the government use to distribute its expenditure across regions?

Concluding, growth and inequality in Guyana seems to be a function of ethnic political cycles.  Longer cycles exert a more depressing impact. The present government seems bent on pursuing policies that are inimical to growth and the just sharing of the fruits of such growth. For example, there is no clear rationale for imposing a highly repressive tax on private health care and education.  This is but a misguided experiment in economic disaster. Why would a government impose a punitive tax on two cardinally important services it cannot provide? Why would a government undermine two fundamental pillars of growth?

Yours faithfully,

Ramesh Gampat

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