ELECTIONS BUDGET

Feb 08, 2010 Features / Columnists, Peeping Tom

Today is Budget Day, a day that holds more significance for the contracting class than it does for the working class whose only fears today will be whether the government will continue to subsidize water and electricity.
It is a sad indictment of the government that years after it entered into a structural adjustment program which demanded the phasing out of Budgetary support for the utilities, the companies that provide these critical services are still unable to stand on their own. Instead of being young vibrant entities being full of energy and overtopping with profits, the electricity and water companies constitute a tremendous drain on the national coffers.
These coffers however are not short of cash. Last year alone we are told that some eight billion dollars was collected in excess of the amounts projected to be collected under VAT. With that sort of surplus being showed by just one category, there may be persons who would expect that one of the key measures contained in this year’s Budget would be a reduction in the income tax rate for workers.
Unfortunately, we do not have a working class government and thus any tax relief that is offered will mask its true intention which is to support the capitalist class. The government has instead of reducing the onerous rate of income tax rate, opted instead to increase the non-taxable threshold. This it is claimed, excludes thousands of workers from paying taxes, which given the size of the threshold, is an indictment against the government. But the real beneficiaries of these measures are the capitalist class which no longer has to bother about paying improved wages to their lower-paid workers since the rise in the threshold provides them both with a disincentive to pay a living wage at the lower scales.
This year, there is not going to be an increase in the threshold and if per chance there is, it will not make any meaningful impact on disposable incomes since most of the Public Service employees work for below the threshold and in any event this threshold gives but only a marginal increase in take home incomes.
There is also not likely to be any reduction in income or corporation taxes this year. The government prefers to collect all that it can collect and then return the benefits to the capitalist class in the form of concessions. With the miners protesting the six month notification edict, the government will have to appease this and other sectors. It will do so by offering concessions which have to be paid for by the tax payers of this country.
The gold miners love to boast about how many ounces of gold they produced last year and their contribution to national income. What they do not tell you about is that the sector is heavily floated by subsidies from taxpayers and that most of these subsidies are granted to large and medium size operators. It took a meeting recently in Bartica for government to admit that each year it grants billions of dollars in concessions to miners.
But it is not just mining that is being floated. Most of the major sectors of the economy, including agriculture are being floated by billions of taxpayers’ dollars which will be directed to reducing the production costs but which ultimately are borne by the very persons who will not receive a reduction in their income taxes this year. Billions of dollars are spent each year on drainage and irrigation, and this trend is likely to continue despite the obvious need for farmers to bear a greater burden of these costs.
But the main beneficiary of this year’s Budget is going to be the construction sector. This year’s budget is expected to provide another bonanza for contracting firms. In fact, the greatest interest in the Budget would be just how much is going to be spent by the government to prime the economy which despite the growth rates would suffer were it not for increased public sector spending.
The people of Guyana can expect increased spending this year because Local Government Elections are around the corner and General Elections are not far ahead. The spending spree therefore has to begin this year. It would be dangerous for the government to leave the impressive public works, so necessary to woo voters, for next year. And thus instead of directing the tax surplus this year into the hands of the working poor, we can expect that it will be contracts, contracts and more contracts for 2010.

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