Push for reduced Govt. spending, then press for reduced taxation

May 12, 2008 Letters

Dear Editor,

According to the 2007 data from The World Factbook, the amount of revenues collected by Governments (taxes) for the countries in the region around Guyana is compiled below (in order of highest percentage first):

1) Trinidad and Tobago 44%
2) Guyana 43.5%
3) Jamaica 38.5%
4) Venezuela 35.3%
5) Suriname 28%
6) Barbados 27%
7) Brazil 23%

So Guyana ranks second highest in taxation per GDP, with Trinidad and Tobago being the worst (even though it is wealthier).

According to the 2007 data from The World Factbook, the amount of expenditures by Governments (future taxes) for the countries in the region around Guyana is compiled below (in order of highest percentage first):

1) Guyana 52%
2) Jamaica 41.5%
3) Trinidad and Tobago 37%
4) Venezuela 35.8%
5) Suriname 30.5%
6) Barbados 28%
7) Brazil 28%

We can safely say that Guyana is one of the highest taxed nations in the region, but not in the world. Some countries have VAT at 25% and some have personal income taxation at 50%.

There is an argument that says that Guyana needs to lower its taxes to be competitive in the region. I disagree, as Guyana already has lower wages to be competitive, as well as we are not really in competition with the countries around us.

Guyana trades in mostly agricultural produce and extractive resources.

Trinidad and Tobago trades in oil and tourism. Barbados is mainly a tourism industry. Suriname is more closely aligned with Guyana. Brazil is more of a manufacturing economy with tourism. Jamaica trades in tourism. Venezuela trades in oil mainly.

So the industries of Guyana are not really in competition with the rest of the region.

The only reason that taxation should be reduced is if it improves the country’s economy and helps in job creation. Competitiveness is not the issue for reducing taxation, as I have already highlighted that Guyana labour costs are lower than the regions around us.

Government spending does need to be reduced before taxes can come down, and this is what the Private Sector needs to address before it pushes for reduced taxation. I suggest the Private Sector plays a more important proactive role (this may prevent political opportunists from hijacking the process) by ensuring those companies and/or individuals that they do business with are registered for VAT (if they qualify), are paying VAT, and are paying their Corporation Taxes.

The money for the reduction of Government Expenditure will/may come from those businesses that are not paying their taxes now. And, this is what the Private Sector needs to push (that is, better collection from businesses that are not paying or are understating their profits so that they can pay less taxes).
If the Government can bring down the Government Expenditure to $90 billion per year, by cutting back on some non-essential development, then it may be in a stronger position in 2010 to raise Government Expenditures. Or, it may decide that some development projects may be better financed by the Private Sector, thereby reducing Government Expenditures.

Reduction in Government Expenditures is not going to change the pace at which Guyana is developed by reducing growth, as the Government may be more able to ensure that they are getting the best value from contractors for Guyanese monies.

Sean Brignandan

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