TAXATION AND FEAR: A recipe for economic decline

It was Winston S. Churchill who said "I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." Recently, Finance Minister, Winston Jordan, reported that Central Government's revenues totaled $53.4 billion at the end of April 2016. According to him, this represents an increase of $3 billion compared to revenue collections during the same period last year. The Minister attributes this increase in revenue collection on "tightening up at ports, new focus on the regions and a clampdown on illegal activities." The Minister reports that tax revenues increased by $2.1 billion when compared to the same period in 2015. According to the Minister, VAT revenues, however, continued to decline. For the period under review, that is, January to April 2016, these revenues showed a decline of 6.3% compared to the levels achieved during the same period in 2015. Apart from increased revenue in the collection of rent and royalties in the gold mining sector, there is no other report from the Minister regarding the productive sector.

It is painfully obvious that this Government places an over-reliance on taxation. In its first full budget, the 2016 budget, it increased one hundred and forty (140) odd public taxes, in certain instances as high as 1200%. They have removed Vat exemptions from all capital equipment in the major productive sectors which hitherto enjoyed VAT exemptions, namely, agriculture , mining, and forestry. They have imposed duties on imported raw materials for the manufacturing sector that were free from duties under the PPP Government. The President and several of his Ministers have publicly expressed the view that the regime of tax concessions put in place by the PPP/Civic Administration to attract investments is too generous and will be reviewed with a view to downsize them. In fact, GOINVEST and the Guyana Revenue Authority have been instructed to put these concessions "on hold." In regions 5 and 6, employees of the GRA are doing house to house inspection and if it is found that there are more than two "banks" of vegetables under cultivation in any yard, the head of the household is documented as engaging in a "commercial activity" presumably, for the purpose of taxation. This same mentality has polluted their representatives at the level of the Georgetown City Council, hence the parking meter fiasco and the public announcement that their will soon be an increased in rates and taxes. Against the backdrop of this emphatic pursuit to tax the populace, one quickly realizes that this Government's obsession with the GRA is not an aberration but the interference is deliberate and institutional.

Lest I convey the wrong impression, I wish to make it clear that I appreciate the importance of taxation in the economic equation of a nation. However, the cold hard truth is that real economic growth comes not from taxation but from production, productivity and job creation. The economy of every great nation was built not on taxation but by production, commerce, trade and industrialization. The taxation policy and system must be such that it encourages, facilitates and engenders the growth and expansion of these sectors. As these sectors grow and expand they will yield increased taxes but in the process they create jobs and generates all the benefits which come with job creation. In order to fully encourage these sectors to achieve their optimum potential, there are economies in the world which offer tax free regimes to the extent that even personal income tax is not payable. This Government's policy is situated at the other end of the spectrum.

So while the treasury boasts of increased collection of taxes, there is a decline in production, trade, commerce, manufacturing and service oriented industries - all of which are integral to real economic growth and job creation. Significantly, since this government assumed office, Guyana has seen not a single investment of worth. None is on the horizon, either. Every productive sector has either declined or performed indifferently. Not a single new job created. In fact many companies have been forced to lay off employees because of a decline in their business. Trade and commerce have significantly reduced. Businessmen who imported 10, 40 feet containers, annually before 2015, are now now importing less than 5, annually. These businessmen tell you that money is not circulating and therefore, the consumer has little purchasing power. One cannot doubt them. This state of affairs is the natural consequence of increased taxation in an economy where there is no commensurate increase in wages coupled with loss of jobs. As a result, the Minister of Finance was forced to disclose a decrease in VAT revenues. This is because of reduced economic activities and consequently, spending. Expectedly, in this contracting and depressing economic atmosphere the Guyana dollar continues to hemorrhage in value against the US dollar. Rather than conceive stimulus incentives to invigorate and energize the economy from this state of sloth, the Government keeps driving nails into its coffin by its taxation and other anti-developmental policies. In the end, every citizen becomes poorer, daily.

This economic paralysis is exacerbated by frightening statements emanating from the head of SARU, Dr. Clive Thomas, weekly about who will be charged and who will be jailed and the actions of SOCU, which conduct unconstitutional and arbitrary searches of business premises and seize therefrom large amounts of cash, jewelry, and confidential financial information. These are two rogue organizations operating from within the Ministry of Presidency, without any legal bases whatsoever, carrying out the political directions of those in government. The once powerful Private Sector Commission which was so ready to publicly pounce on the PPP/C administration at the drop of a hat, has now become mute in fear. A businessman wants to legally challenge the new imposition of a parking fee of $20,000 by the City Council of Georgetown in respect of containers, which is charged even where the container is there only for a few hours to discharge cargo. However, he is afraid to use his name in the legal proceedings because of reprisals. Fear has returned to Guyana. This time it's not generated by the bandits but by the Government.