Put money in workers’ hands not the businessmen’s pockets

Nov 14, 2021 Features / Columnists, Peeping Tom

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Kaieteur News – The President’s warning to consumers to brace for more price increases is pre-emptive. The announcement by President Ali signals that inflation is not going to be reduced anytime soon–in fact, the President projected that the situation is not likely to be restored to normalcy before the end of the first quarter of next year.
Earlier this year, the government granted extremely generous concessions to the private sector in order to help cushion the impact of increased freight charges on consumers. That measure failed because the tax savings, earned by the private sector, were not reflected in a decrease in prices.
The private sector has therefore failed and ought now to be surcharged for the taxes which were originally foregone. But we know that the government will not do so.
The government, however, is unlikely to extend the concessions to the business class since these would have already cost the Treasury billions of dollars. Instead of paying taxes on the full cost of an imported item plus the actual freight, the freight charges were reduced to pre-pandemic levels. This reduced the overall taxes which ought to have been paid. The idea was that these savings would have been passed on to consumers saddled with increased costs as a result of the massive rise in freight charges. The private sector however, did not pass on the savings as anticipated. As a result consumers were burdened with increased prices.
The government most likely will not be renewing this concession which expires in December. And it should not. The private sector has not delivered and the global supply chain problems will not end anytime soon. The International Monetary Fund has already slashed its projections of global growth by one-tenth of one percentage, citing the effects of supply chain problems.
Inflation increased in July in the United States by more than five percent, a shocking development for a country known for low to negligible inflation. And in Europe, the situation was more bleak with inflation highest in more than 10 years. All of this is being attributed to the supply chain problems.
President Ali has explained that the pandemic led to an increase in the cost-of-living due to the closure of factories, terminals, and port facilities and a logjam in shipping. The resulting delays he noted were then translated into increased costs for production, shipping and logistics and consumer items. Guyana, he noted, was not excluded from this phenomenon.
In Guyana, supply chain problems have extended beyond the kitchen table. Price increases and delays have affected the construction sector. Large infrastructural projects are likely to have cost overruns and delays.
The increase in domestic food prices continue to bite. Consumers are finding it difficult to make ends meet with the same level of income.
The government should be mindful also of the impact of the increase in food prices caused by the supply chain problems and the loss of production resulting from the floods of May/June this year. The increase in food prices alone was estimated at half year at more than 12.5 percent and was occasioned by both imported and domestic-generated inflation.
Instead of offering any concessions to the private sector, the government should offer to public servants a monthly cost-of-living allowance of G$10,000 per month. This should cover the increased food inflation and put consumers back in the same position they were prior to the supply-chain problems and the effects of the flooding.
The government should also encourage the private sector to pay their employees this tax-free cost-of-living allowance.
While workers will clamour for a higher allowance, the government should not set the figure too high lest it becomes unsustainable or fuels higher inflation. The intention should be to pay a sum to cover food inflation and not overall inflation. This should be separate and distinct from what will be offered as part of the annual salary increase to public servants.
No concessions should be offered to the private sector which should be encouraged to pay, out of their own resources, the same tax free cost-of-living allowance to their staff.
The government also needs to address the high cost of domestic-induced inflation caused by the decline in the agricultural sector. Small scale farmers who cultivate cash crops should be offered a tax holiday for the next six months – many of them hardly pay any taxes in any event.
Rice and poultry farmers – small- and large-scale – should not be offered any similar concessions because they enjoy most of their inputs free. The poultry sector is also tax free, according to the government.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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