NO VIABLE ECONOMIC ALTERNATIVES ARE BEING OFFERED

Oct 13, 2011 Features / Columnists, Peeping Tom

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Just a few days ago, there were persons allied to the government who were accusing the Alliance for Change (AFC) of having cake-shop economists. But no sooner had one of the principal economists associated with the AFC complimented the government on its monetary policies with respect to the stabilization of the Guyana dollar, as well as on its housing drive, this gentleman’s comments were being advertised on pro- PPP websites, reproduced in pro- government newspapers and aired on national television.
The logical conclusion which can be drawn from this approach is that once you are critical of the government on economic matters you are a cake-shop economist and once you praise them you are not.
This sort of one-sidedness is a product of blind-sided thinking that has paralyzed the government from accepting constructive criticisms.
Not that everyone will agree with the AFC’s chief economist’s assessment of the government’s handling of the exchange rate or for that matter its monetary policies. There are persons who will contend that the government’s monetary policies have been anything but impressive. Others will counter than exchange; stability has not in nineteen years allowed for the appreciation of the Guyana dollar which at present continues its downward slide as a result of growing demand for Christmas.
But one understands the difficulties that persons previously associated with the Bank of Guyana would have in being more critical of policies in which they may have had a hand in developing or overseeing.
Where the government needs to be complimented is in its fiscal policies but this is an area in which the government is never going to be complimented by any of the opposition parties because those parties plan to reduce the VAT, one of the cornerstones of tax reforms under the PPP.
When it comes to tax reforms the opposition parties have not offered anything original or imaginative. APNU has been unimpressive when it comes to tax reforms. And when it comes to improving the lot of worker increasing the income tax threshold is not the solution.
In fact, increasing the proposal to increase the income tax threshold to $100,000 represents political opportunism. There has been no assessment of the impact of this measure on tax collection, and therefore it is a proposal aimed more at winning votes than improving tax equity.
What workers need is not an increase in the income tax threshold. What they need is more income. What workers need is not a reduction in VAT. VAT did not amount to an increase in real taxes for workers. VAT is the best thing that the PPP has offered in terms of taxes.
The reduction of VAT is not going to reduce the burden on the poor. It is going to increase that burden because the shortfall in revenues will force the administration to find additional ways of taxing the people. And those burdens will ultimately be felt.
Instead of tinkering with the tax system what is needed is an overhaul of the system so that everyone pays taxes and the overall rate of taxes is reduced, more so for the poor.
What is needed is a tax system that provides incentives for job creation and investment.
In relation to the stability of the exchange rate, the value of the Guyana dollar after close to 20 years of the PPP speaks for itself. The dollar is stable but has not appreciated. The economists will tell you that this is not all that bad.
Well it is not bad for exporters who will benefit from a flood of local dollars and increased exports as long as the dollar does not appreciate significantly. Exporters will earn more in Guyana dollars for their exports and these exports will be more competitive.
But for the poor man who has to buy imported goods at a rate of US$ 1 to G$205 and rising, it is not easy especially when his or her income is not increasing with what he or she perceives to be the real inflation rate.
So far none of the economic policies outlined by any of the opposition parties can be seen as superior to that offered by the PPP administration. And the PPP has hardly said much.
It just goes to show that everyone is reading from virtually the same script. No one is speaking the language of the working class. The presumption of all is that Guyana needs investment and foreign capital to drive development, which is what the PPP has been saying and doing all along.
So how about supporting a tax on the rich that will be placed to provide free lunches and buses for school children? How about a resource tax to compensate for tax avoidance in the mining sector?
How about linking any reduction in the corporate tax rate to increased and certified reinvestments of profits in the local economy? How about a tax break for the creation of new jobs?
How about dipping into our healthy international reserves and feeding this into the system so as to buoy the exchange rate?
How about a social compact with labour?
Why are none of the parties making these proposals? The reason is simple. They are smitten with free market policies and have lost their working class focus. In the case of the AFC though, they have never said they were a working class party.

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