Do not expect too much from the Budget

Aug 02, 2015 Features / Columnists, Peeping Tom

It has taken three months in arriving, but it is finally here. The 2015 Budget is expected to be read in the National Assembly on August 10.
The coalition did not seem to be in a rush to meet the parliamentary recess. In fact, it has had to defer the recess in order to facilitate the passage of this year’s Budget.
Why did it take so long for a Budget to be prepared? It is not as if the entire Budget-preparation system had to be reinvented. There is a system in place. It was merely a case of defining what you want to do and crunching the numbers to see what is possible.
That of course is always simpler said than done. Any new government would have wanted to assess its inheritance. It would have wanted to see what was left behind by the former administration.
A great deal of effort seemed to have been spent in trying to establish that the economy was not in good shape. That is a self-defeating exercise, because regardless of what shape the economy is in, a new government has to put things right and move things ahead.
If it takes three months for a six-month Budget to be prepared, it is frightening to contemplate how long it will take to fix some of the more terminal problems in the economy.
The situation with sugar must not be exaggerated. The bailout that the government has so far provided for sugar is far less than the sum that it voted for the industry when in opposition, and is far less than the money once took away from the coffers of the industry when the sugar levy was imposed.
The sugar levy was at one stage close to four billion dollars. Adjusted to today’s value, that would amount to be quite an astronomical sum.
Nobody is doing the sugar corporation any favour. Sugar, when it needed to be recapitalized, was denied its own resources.
Sugar took care of the rest of the economy for years upon years. Now that it has hit upon hard times, there are insinuations that somehow the rest of the country is doing sugar a favour.
The sugar levy should now be treated as an interest-free loan to the rest of the country. As such, the present value of the accumulative levy extracted from the industry should be calculated and returned to the industry. In this way, no one can claim that they are doing the sugar workers any favour or bailing the industry out.
Hopefully, the language of the Budget speech will reflect that obligation that is owed to sugar. Hopefully, it will reflect an obligation that is owed and not a favour that is being done for sugar.
There has been enough time given for those responsible for preparing the Budget to come up with a formula for VAT reduction. The coalition parties have for a very long time been promising to reduce the VAT.
During the period when the former government was in power and was engaged in discussions with APNU, it had asked for a list of items on which VAT were to be removed. APNU had balked at this proposal. It could not produce the list. It also was in favour of an across the board reduction in VAT as a means of removing the burden of this tax on consumers.
It does seem, however, as if the new government is really returning to the position of the PPP. It now looks as if there will be no reduction in the rate of VAT, as expected, but instead, VAT will be removed on a few food items. There are many people who are not going to be happy with this because, as was previously argued, VAT is a burden on consumers who have to pay this tax not just on food, but on so many other things.
The more important question that has to be answered by the 2015 Budget is the method that the new government will use to pull Guyana out of the present business stagnation. Will there be Big Government? Will there be a stimulus package? Will tax reform be announced? Which of the major projects initiated by the PPPC will go forward and which will be dumped?
These are the questions that will be answered on August 10. The Guyanese people should not expect too much from this Budget. Not only is it a stop-gap Budget – given that more than half of the year has already whistled past – it also seems with each passing day that the new government is seriously challenged to develop workable economic policies.

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