Dear Editor,
The article, `Catholic Church sees need for national healing amidst divisions’, published in the Sunday Stabroek of 2022.05.29, piqued my interest. In this fractious society of ours, one hastens to read anything that recognises the problem and provides credible, workable solutions.
Having read about 75 percent of the article, I came upon the following statement that was attributed to Gerry Gouveia, Chairman of the Governance and Security Sub-Committee of the Private Sector Commission: “The private sector will have to work with whichever government is in power. The private sector will like the government in power who pays attention to the things conducive to private sector development. If you have a government that is raising taxes and refusing to meet the PSC then the PSC will not like you. You have to also earn the respect of the PSC.” He claimed that the APNU+AFC government dropped the value-added tax (VAT) from 16 percent to 14 percent on certain items then placed VAT on everything else, including interior flights. He did not end there. He continued, “’When the PSC tried to talk to the government, they would not entertain us…”’
I am happy to offer a response. For reasons best known to themselves, but which many people have attributed to their close relationship to the PPP/C, the PSC adopted and exhibited a hostile posture with the Coalition government. It became increasingly evident that, in spite of the Coalition’s entreaties, in spite of efforts to engage the PSC, there were elements within that private sector body who were on a mission to ensure that the government did not succeed. On Friday, February 17, 2017, the Government of Guyana was forced to issue a press release denouncing the PSC for its “thinly veiled attempt to embarrass and discredit the Coalition government” ahead of the hosting of the 28th Inter-sessional Meeting of the Conference of Heads of Government of CARICOM. The press release went on to add that it was unsurprising that the PSC would not even acknowledge that “since the change of government in 2015, Guyana has embarked on a challenging task of restoring confidence in governance and repairing the country’s tattered international image”.
Four days after the Government’s press release, it was Dominic Gaskin, Minister of Business who, on Tuesday, February 21, 2017, was expressing disbelief that the PSC could have issued a statement articulating a “‘lack of confidence in the manner the Government is managing the economy.”’ He said that the PSC’s statement came after a prolonged period during which the PSC was extremely reluctant to even offer the mildest of criticisms against the PPP/C administration. Minister Gaskin was peeved that he had sent a formal proposal for the establishment of a public-private dialogue body to examine matters of economic importance but had not been favoured with the courtesy of acknowledgement nor response from the PSC. Is this what is meant when Mr Gouveia talked about the private sector having to work with the government of the day?
As I indicated earlier, it was not the entire private sector that was hostile to the government. Many private sector individuals approached me or other government ministers and related their praises and concerns with government’s policies and offered several recommendations. We sought them out, frequently, as we understood their genuine desire to contribute to the development of the country and their sectors of operation. I can state frankly that a number of measures introduced in our five budgets came as a result of these quiet engagements.
I gained Cabinet’s approval to establish an Inter-Ministerial Committee to engage the Guyana Manufacturing and Services Association (GMSA) in a structured manner. We met frequently at the Ministerial and Technical levels. The Ministers of Finance, Natural Resources and Business were permanent members. Other Ministers were co-opted depending on the sector being examined. Technical support was provided by the Ministry of Finance with inputs from other sector ministries and agencies such as the Guyana Revenue Authority (GRA). The meetings were always frank and cordial and, most important, produced results that were of immense benefit to the constituents of the GMSA. For example, as a result of the engagement, the following measures were announced in the 2018 Budget:
a) Restriction on the importation of pine wood and pine wood products
b) Increased tariff on importation of pine wood, from 5% to 40%
c) Exemption from VAT of logs and rough lumber to the sawmilling industry
d) The financing of a forest inventory with an initial sum of $120 million
e) The setting aside of an initial sum of $50 million to partner with the private sector in a public-private partnership to establish a Dimension Stockyard
Again, working with the Guyana Gold and Diamond Miners Association (GGDMA), we were able to agree on the:
a) Reduction of the Tributor’s Tax from 20% to 10%
b) Replacement of the “2% of the gross proceeds” regime with a sliding scale percentage based on the price of gold
c) Nine-month Amnesty, which was extended to all taxpayers, instead of only those in the mining sector.
It was the PPP/C administration that introduced the VAT at a rate of 16%, on January 1, 2007. Mr Gouveia grudgingly admitted that the Coalition government reduced it to 14%, but goes on to claim, erroneously, that VAT was placed on everything else, including interior flights. Within the last decade, three tax studies have been done in Guyana. The Duke Report, commissioned under the PPP/C, detailed the deformed nature of the tax system and pointed to the need for critical and urgent reforms. The recommendations went unimplemented. The other two studies – IMF and a Local Committee on Tax Reform – were done under the Coalition government. They highlighted the same deformities and offered extensive recommendations, including reduction in marginal rates, reduction of exemptions (to be replaced by a system of tax credits), broadening of the tax base and improvement in the administration of taxes.
It was in that context that the reduction in VAT and other tax measures took place. Along with the VAT reduction was the increase in VAT threshold from $10 million to $15 million. Importantly, and this is perhaps what Mr Gouveia should have adverted to, the list of exempt items was expanded while all zero-rated items were eliminated, with the exception of those pertaining to exports and manufacturing. While the private sector persistently represented that this change was affecting them adversely, several requests by me and/or the Commissioner General, GRA for concrete evidence to support the allegation were never honoured. Yet, the complaints persisted. By way of illustration, during a meeting with the PSC, in 2018, a well-known businessman complained that the introduction of VAT on water was stifling his business. I knew what he was claiming was false because Guyana Water Inc (GWI) required changes to their software before they could have applied the VAT. They were not going to be in a position to do so until later in 2018 when they were hoping to acquire the expertise from England to effect the changes. Nevertheless, in January 2019, the Income Tax Act was amended to give exporters a tax credit equivalent to the applicable VAT paid in relation to water and electricity.
Mr Gouveia mentioned that VAT was placed on domestic flights. Obviously, it would not have made his case were he to say that passengers who were residents of the interior were exempted from the payment of the VAT. He would have made a compelling case about the incorrectness of applying the VAT to domestic travel were he to show that passenger traffic declined as a result. I should note here that, as part of the early set of measures to help citizens cope with rising cost during Covid, the Coalition government removed the VAT on domestic travel, electricity, water and several food, sanitising and cleansing items. Your readers would not be amused that in spite of this removal, domestic fares remained high, forcing the present government to issue a rebuke to the aircraft owners and operators. A similar occurrence took place when the Coalition government removed the VAT on private education. Instead of declining to take account of this removal, fees at many private schools either remained the same or increased. Parents were forced to approach the Coalition government for redress, after the private sector body claimed that they could not intervene in private contracts formed between the parents and the school.
Every request by the PSC for a meeting was accommodated within my busy schedule. I established a ready entrée to the Commissioner General to enable pressing problems to be highlighted and solved and bottlenecks to be cleared. I found it disingenuous for Mr Gouveia to claim that his attempts to talk to the government were rebuffed.
As I looked back on the five budget speeches of the Coalition, I marvelled at the extensive list of concessions that was extended to the private sector over the period mid-2015 to mid-2020. From the reduction in the company income tax, from 30% to 25%, to the dramatic reduction in excise tax charged on indigenous wines and other local fermented beverages, the list represented an impressive and diverse array of concessions to all sectors; to businesses, whether micro, small, medium or large; and to individuals, whether in the public or private sectors. And all of this was done without the benefit of oil resources and within the context of a very low inflation rate (averaging under 2%), a manageable fiscal deficit, and a low debt/GDP ratio (33.2% at end of 2019). The economy grew every year, with the highest growth rate of 5.2% being recorded in 2019.
I continue to dream of a Guyana devoid of the rancour, discrimination and disunity that exist currently, where genuine collaboration and partnerships replace the suspicion and partisanship that characterise important stakeholders in the society. Together we aspire, together we achieve!
Yours faithfully,
Winston Jordan
Former Minister of Finance
