Not a single new idea is offered
Ramon Gaskin looks at the 2004 budget
Stabroek News
April 2, 2004
In times past, budgets and budget day in Guyana were major events. Large numbers of citizens used to gather outside of the National Assembly to hear the budget speech, which invariably included important measures of interest to the general public.
Those days are no more, and this has been so for a long time. The recent set of budget speeches are long-winded which no one pays any attention to, secure in the knowledge that it is a long reconfiguration of irrelevant plans, programmes, projects, borrowings, promises and boring statistics that mean nothing to ordinary people.
The fact that such an inconsequential presentation takes such a long time to prepare is a mystery. Huge numbers of bureaucrats and politicians are involved, endless rounds of meetings and consultations take place with major stakeholders whose proposals are promptly cast aside after the obligatory photo opportunity. This is not to imply that the persons charged with the exercise are not capable and well-intentioned. Dr Ashni Singh, adviser to the budget, is a professional of exceptional brilliance.
But somehow, the results of all this labour end up being of poor quality, bereft of innovation and creativity and wholly lacking in any serious prescriptions to resolve the critical issues facing the economy and to move Guyana forward.
The budget is the principal tool at the disposal of the state to achieve a fair system of revenue collection and an equally equitable system of allocation and reallocation of those resources in the national interest. In both of these all-important tasks of mobilising revenues and spending them equitably, the framers and policy-makers failed.On the question of utilising the tools to tackle major issues of the day, the budget is deficient. When evaluated for innovation, creativity, boldness, intellectual depth and substance, it receives a resounding negative grade. Now why is this so? The reasons for this are located in the environment, external and domestic in which the budget is produced.
Resource mobilisation
The total current revenues for 2004 are projected to decline when compared with 2003 by approximately $3.3 billion. Income tax is projected at about $21 billion with companies expected to pay $2.3 billion more in 2004. It is not clear what is the basis for this.
In 2003, the PAYE category paid more than the companies as they have been doing for many years now and they probably will again in 2004, notwithstanding the projections. This is because they are "sitting ducks" while the companies can afford high-priced staff and resources to avoid paying their fair share. In simple language, many "cook" the books.
Self-employed persons are projected to contribute in 2004 even less than budgeted in 2003.It is clear that the revenue authority as presently staffed cannot collect the taxes properly due to the treasury from companies and the self-employed. Essentially, the great expectations arising out of the creation of the Guyana Revenue Authority (GRA) have not materialised.
In order to properly collect tax, one must first have serious, properly trained, incorruptible tax officers. Unless and until you have that, tax collection will remain a problem.
Similarly, marginal increases are set for customs, etc. The same observation with regard to the human resource prerequisite applies to this department. There is clearly serious leakage and evasion and the corrupting influence of the importers is legendary. This problem is compounded by the staggering amounts of taxes in imports waived for a variety of reasons. It is understood that the total amount waived for duties and c-tax approximates $18B. This, in plain language, means that the amounts that are waived are equivalent to the taxes collected. This is scandalous and ought to be addressed as a matter of urgency. Of course the budget fails to address this or for that matter anything else.
A further glaring discrepancy in revenue mobilisation has to do with the central government collecting revenues that are purely of a local/municipal nature that should properly go to those levels of government to boost their revenue base. These include shop and vehicle licences, cinema taxes and stamp revenues. There is no reason why in a system of governance characterised by central/regional and local levels, the central level must `hog' all the revenues for itself and force all the other levels to come to the Finance Minister on annual pilgrimages to beg for subventions like mendicants. This is ridiculous and ought to be changed.
There is also no valid reason why mining and forestry revenues should not be shared with the regional administration in those regions where they arose. Revenue sharing is a necessary element of political power sharing at various levels and a great opportunity has been missed to begin this process of dismantling the over-centralised system of revenue mobilisation. It is clear that the system of revenue collection is deeply flawed, clearly unfair to the regions, inequitable among taxpayers, too generous to tax-exempt entities, patently inadequate to fund the important recurring expenses by the state and this is turn leads to deficits which have to be covered by borrowings.
The capital revenues come mainly from foreign loans and some grants and it is clear that nothing could be attempted whether it is a road, school, bridge or health facility without a loan from somewhere. This mendicancy is pervasive. It has been elevated to policy.
The capital borrowings continue to be quite significant and when accurate value-for-money auditing will have been done, the taxpayers who have to pay back these massive loans will then be in a position to appreciate the nature of the foreign loans.
Resource Allocation
The first thing that strikes about the budget is the continuing lopsided allocation of resources to the regions. The regions are first short changed when they are not allowed access to revenues strictly belonging to them i.e. non-central government taxation and are further short changed when they are denied a fair share of the revenues. This prevents them from doing much-needed work in the regions, not only infrastructural, but also such continued things as job creation and other recurring items of expenditure. This is unfortunate. The regions face peculiar challenges, especially the burning question of unemployment, specifically youth unemployment. The Regions must be given an opportunity to deal with these matters and for that they need revenues. The Central Government, which has a propensity to overcentralise and run everything in every region from New Garden Street, must understand this. This lack of comprehension of the structure and nature of the Republic as set out in the constitution is a major cause of unnecessary friction in the society and the serious recurring problem in the budget is the unjustifiable costs - over $3 billion for the so-called sterilisation programme. This policy has been around since the commencement of the ERP and has cost taxpayers in excess of $60 billion, which could have been put to better use. This wastage is the result of stubbornness and a refusal to scrap a policy that cannot be justified.
As with many elements of the long-running structural programme, this particular policy of "mopping up" of something called "excess liquidity" has never provided any scientific underpinning for an economy like Guyana, awash with narco-dollars and a parallel economy not susceptible to that type of tinkering.
And the failure of the policy makers to articulate a single budget measure that makes sense is indicative not only of the bankruptcy of the policy itself but of the policy makers who slavishly follow a failed inappropriate model.
Much more could have been done in many areas to bring about tax reform, to reform the NIS, to create jobs, stimulate the economy and provide hope, fairness and equity. None of it was done. It is regrettable. The budget is such a total failure and has been for so many years, that no wonder Guyanese no longer congregate outside parliament to hear it.