TIMING IS EVERYTHING

Jan 16, 2017 Features / Columnists, Peeping Tom

---

A few years ago, I went to register a will at the Registry beneath the High Court. The cost was prohibitive… prohibitively low.
All it cost to undertake this important legal procedure was ten Guyana dollars, less than half of one US cent. I queried why the rate was so low and was told that this was the rate which was set even before I was born. It had not changed. The cost of the registration would not even pay for the receipt on which it was issued.
The Minister of Finance has been trying in all of his Budget measures to increase those fees for public services which have not been increased for years. He is trying to update these fees, many of which cannot pay for the cost of the service.
The Minister of Finance has come in for a drubbing over these increases. His attempts have been described as an increase in indirect taxes, and perhaps they are indirect taxes but the policy of ensuring that fees and licenses meet the economic costs of providing them is well grounded.
From an economic point of view it makes sense for licenses and fees to cover the administrative costs of issuing these instruments. If this is achieved throughout the government service, it will reduce the amount of money government has to spend to finance these services. Taken to its logical conclusion, it can result in a reduction in taxes, since user charges for these licenses and fees will cover their issuance and administration.
There are instances in which a strong case can be argued for user fees to be above their economic costs. Take for example passports. People were complaining when the fees were increased to $4000. It is now higher. Yet you have a situation where people are going to pay almost $200US dollars to put a visa into that passport and then spend another US$1000 to travel on that passport. Yet these same people were protesting about the increase in the cost of a passport.
There are long lines every day for passports. There is quota as to the number of applications which the passport office will accept each day. When that quota is reached, then no more applications will be accepted. This means that many persons are turned away each day, or used to be since applications are now being received in certain Regions at police stations.
Yet, a number of persons apply for passports and never in their lifetime use these passports. They just want a passport just in case they are required to travel. They cannot afford to go on a holiday over in Suriname, yet they want to apply for passport and they complain about the cost. Why burden the passport authorities with applications for passports when these passports will never be used for travel? This is why the fees for a passport should have been no less than $10,000.
There is justification, therefore, for increasing the licenses and fees. But the opposition is also making a point which is not being heard by the government. They are making the point about the effect of all the increases in fees on businesses at a time when businesses need a helping hand rather than being burdened with higher fees and licenses.
The government has increased the fees for liquor licenses. This has erroneously been described by the government as a sin tax. It is not a sin tax. A sin tax is chargeable on an alcoholic product and is intended to discourage consumption by forcing an increase in the selling price of the product. The fees for operating a rum shop or for selling liquor are not sin taxes. They are business charges, as was rightly pointed out by the former Minister within the Ministry of Finance, Juan Edgehill. He had said that the increase in the fees will increase the burden on businesses.
No shop or store that deals with liquor should be paying less than $10,000 per year. In normal circumstances, if a liquor shop cannot make a profit to cover a license fee of $10,000 per year, it should not be in the business of selling alcoholic beverages.
But one has to examine the increase in the context of what is happening to business right now. The business community is experiencing a slump.
Therefore it is a case of ill-timing to increase fees and licenses at this time. The increase will add to business costs at a time when the businesses cannot afford any further increases. It makes economic senses for the government to place a moratorium on increasing fees when there is a slump in business activity.
It is also is sound economic practice to keep taxes, licenses and fees low on the productive sectors. This is something that is borne out in economic theory and history. You do not overtax the real sectors of the economy. You do not impose prohibitive fees on land for agricultural purposes. To do so, will make production unprofitable and will cause a collapse of the agricultural sector.
It is being alleged that the Mahaica Mahaicony Abary Development Authority is proposing to increase the fees charged for drainage and irrigation from the present high of $3,5000 per acre to multiple times this amount.
Any increase at this time when rice prices are low, will cause farmers in the MMA scheme to abandon the land and go bankrupt. Farmers have to pay for leases, drainage and irrigation according to the acreage they control. Land preparation fees are calculated per acre. Fertilizing fees are charged by acre. Sowing fees are charged per acre. Harvesting fees are charged per acre.
Right now, the small farmers cannot cover their cost of production. The large farmers are also hurting because of the depressed price for rice.
It would be unconscionable for the MMA, in this state of affairs, to increase the charges for drainage and irrigation services. This increase will destroy the rice industry. Its timing is wrong.

---

---