The Issues - Sugar workers’ wages & VAT

The Issues – Sugar workers’ wages & VAT

Nov 26, 2008 Features / Columnists

Peter R. Ramsaroop, MBA

INTRODUCTION
This week, the IMF Chief Economist, in speaking about the global financial crisis, said that the worst is yet to come and a lot of time is needed before the situation becomes normal. This is crucial, as Guyana depends on the IMF for major life-support funding.
We are seeing around the world — and it will be no different here — that many companies will be withdrawing investments from emerging countries such as Guyana. The President now blames the current financial problem on the failure to start the hydro project, even though it was supposed to start two years ago, according to the concessions given to the company.
Banks around the world, except for Guyana, are lowering their interest rates to borrowers. The rate to borrow money here is about 17%. The banks in Guyana are putting up the newest, nicest and largest buildings in the city, yet refuse to cut our borrowing rate.
WAGES
It was very disappointing that the sugar workers only received a 6% pay increase. If you add up the last two years’ increases, it cannot even cover the cost for the 16% VAT, much less inflation and cost-of-living increases. The Minister of Agriculture said he was very pleased with the increase. I thought he was supposed to be the advocate for these workers, since he claims exports have surpassed other years. Billions of these workers’ tax dollars have been spent to modernise the Skeldon factory, yet we can’t give them a decent pay increase to cover their cost-of-living increases. This same factory now sells electricity to GPL, which in turn charges the consumer a very high cost, yet these same workers that paid for this with their taxes from their payroll and from VAT have not seen any reduction in their electricity cost. The option is, if they can’t afford more pay increase by the company, the Government should then reduce the VAT to offset.
VAT
I shop myself for groceries, and the difference in prices from just last year to now is significant. Many have had to cut spending in areas such as eating out and entertainment. One owner of a restaurant and bar in the city said that his operational cost since the implementation of the whopping 16% VAT has risen above his revenue, and he may soon need to close down, which would cost 40 jobs alone. Government needs to be working at keeping these jobs by giving tax breaks to all of us. We have called many times for the reduction of VAT to 7-10% but the Government refuses to budge. Why, they are not feeling the pain; they benefit in so many ways, so no need to budge.

CONCLUSION
I have called for the comprehensive review of all the taxes we pay to the Government. In some instances, many of us didn’t even realize we were paying so much taxes on fuel, in addition to VAT and payroll taxes. I will ask Christopher Ram, Guyana’s most renowned chartered accountant, to help me craft a column on all the taxes we pay. Some will be direct to us and some will be indirect. The Government, in my estimation, currently receives about $0.46-$0.53 on every taxable dollar we earn. This is in addition to property taxes some may have to pay.
Government’s strategic decisions are needed to reduce the effects of an economic downturn in Guyana, as is occurring in large, medium, and small countries around the world. England is cutting VAT aimed as an encouragement for consumers to spend more, remembering that one dollar spent creates economic activities between ten to twelve dollars in ancillary goods and services.
Government’s spending to upgrade roads, refurbish schools, and general infrastructural work is strongly recommended, to create jobs. There are concerns of Guyanese about loss of jobs, banks’ safety, savings accounts’ safety, high cost of basic food items, and high cost of basic transportation.
Assurances from our President and Minister of Finance that, “Guyana is not affected by the global crisis,” are impossible to understand, since Guyana is not a global economic power with huge financial resources, and so will most definitely be affected by the global crisis. To quote the IMF’s Chief Economist, Oliver Blanchard: “The worst is yet to come, and the global financial situation will become normal again in 2010.”
We hope our President and his Team are not sleeping at the wheel. Until next time, “Roop”.

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The Issues – Sugar workers’ wages & VAT

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