Another budget and the usual complaints

Jan 15, 2011 Editorial

Come Monday, the nation will once again be presented with a budget detailing expenditures undertaken last year, and proposals for this year.
There is so much that makes budgets these days nothing for people to fear. They do not have to fear currency devaluations and the concomitant price hikes in just about every quarter; they do not have to worry about pay increases because that is done outside the budget; and they do not have to worry about higher taxes.
There is no need to hoard or to panic buy before the presentation of budgets these days. Budgets these days are no longer frightening.
The 2011 budget will explain the shortfalls in economic planning over the past year and the focus will be on the performance of the sugar industry.
Sugar, one of the mainstays of the economy, has been in dire straits ever since the year 2009. Then, there was the problem of inefficient sugar factories, the full impact of the European Union price cuts and inclement weather.
But observers had been eyeing the performance of the new Skeldon sugar factory which was supposed to help the nation slash the cost of production and to be more competitive on the world market. However, the factory is still to be as productive as it should and to compound the issue, the sugar workers are withholding their labour.
In 2009, the prolonged dry spell hit rice and other agricultural crops hard. Production declined drastically and the government was forced to pay public servants a cost of living allowance to cushion the impact of rising prices.
But from an economist’s point of view, the level of taxation more than compensated for what would surely have been a budgetary shortfall. Finance Minister Dr Ashni Singh was hard-pressed to justify the increasing taxation. And he refused to adjust the income tax threshold. The result is that over the four years that people have been getting increases on their pay they could only look forward to paying more in income tax.
The 2010 budget, which captured all the revenues earned in 2009 and the expenditures in that year, showed that the value added and excise taxes had reached unprecedented proportions. What was supposed to be revenue neutral became a cash cow. More than 65 per cent of the budget comprised these taxes.
And so budget 2011 comes and again the nation would be told that there would be no new taxes, that the budget would be revenue neutral as far as increased taxes are concerned. But they would find that what started as a revenue neutral scheme is raking in more money than any other export, even gold, which is fetching its highest price on the world market and the production of which has reached unprecedented proportions.
But there is more to all this. The budget will show higher excise tax revenue because the government is simply milking the cash cow by virtue of its high tax on petroleum products. The cost of gasoline to motorists is higher than the cost to his North American counterparts. His pay is nowhere near to his North American counterpart but his expenditure certainly is.
Indeed, there is a reduction in external funding ever since Haiti and in fact, even further back to the days when famine, floods, earthquakes and tsunamis devastated Asia and parts of Africa. But Guyanese taxpayers have been providing the cushion in the absence of the foreign funds.
In the area of expenditure, the nation would be regaled with the new level of social services. And indeed the government has spent on roads, schools, and medical facilities and in areas like water and electricity. There is a massive expenditure on the preparations for the generation of hydroelectricity. This multi-billion-dollar project is designed to reduce the nation’s dependence on fossil fuels.
A lot of the money is going to come from the agreement Guyana reached with Norway and the project would benefit the nation immensely.
The budget will also have to make big on the return of some 300 doctors from Cuba. This will be no ordinary expenditure if the nation is to keep its doctors and enhance the health of the nation. There have already been massive expenditures on hospitals and health centres.
The budget will also detail massive expenditures on schools and pure water systems. But there are the contracts that make some of these projects appear to be more costly than they are. This is an area that must be addressed and it will examine the shortcomings of the contracts.

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Another budget and the usual complaints

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