Introduction

The tenth successive budget by a PPP/Civic government is expected to be tabled early next month.

Consultation on what the populace would like included in the budget has begun with the Private Sector Commission and the Guyana Trades Union Congress resubmitting their 2001 proposals, revealing that last year's budget had not taken these into consideration.

Will this year bring the long-awaited tax reform to jump start industries?

Will rice fall under the hammer of another weather catastrophe (the likely El Nino) before decisive action is taken on a rescue package?

Will the business advisory group to the President be able to influence real change? This group comprises Stanley Ming, Yesu Persaud, Clifford Reis, Paul Hardy, Brian James, Norman McLean and Eddie Boyer and is supposed to meet once per month with the president to discuss the economic climate.

As businessman/rice miller Peter de Groot points out, the government cannot afford the fall-out which will be associated with inaction if it does not grapple with crucial issues such as tax reform and a stimulus package for the industry. Already with hikes in electricity and water tariffs as well as the impending increases in telephone rates, consumers are being made to realise that service carries a price. The burden on the few businesses has to go and with the trend of dwindling revenue collection how will the public sector investment programme be financed?

Will the government be able to present a stimulus package for the economy as the private sector is crying out for?

Will it raise the income tax threshold to stimulate consumption spending to give relief to consumers while at the same time increase demand for the local manufacturing and agriculture sectors?

Will it find resources to pay teachers and enhance their remunerative package to a level to keep them here?

What is the alternative?

Below, are the opinions of key persons within the business community on what they believe should be the focus of the budget this year.

Dr Peter de Groot
Vice-President, Private Sector Commission

"All of the private sector organisations' general focus at the discussion with the Minister of Finance on Monday was that the government must give a stimulus package to get the economy going.

"The situation of post September 11 in the US and the rescue package for the airline industry facing serious crises was cited and we urge that the government provide a package urgently as it cannot afford to have the economy continue on its slide.

"You cannot worry about the cost associated with such a package as it would cost a lot more if you do not stimulate the economy because the fallout would be greater than the cost associated with a stimulus package. We have businesses going under and the government is losing more taxes that way. We urgently need a stimulus package.

"Additionally we must attempt to broaden the tax base as too few people continue to bear the burden of taxation in Guyana. The government has to bring all of the self-employed persons into the tax net to increase its collection and reduce the burden on the few.

"There is also need to increase the non-taxable income threshold to stimulate spending in the domestic economy as no one in the private sector can afford to increase salaries right now. At least with an increase in the threshold, the take home pay to workers will increase and the productive sectors will get a boost by the increased spending and this in turn will mean increased taxes for the government via increases in production.

"In the case of the rice sector, the issue of the government's apparent favour of the small farmers over the large farmers was raised and the need to treat the industry en bloc. The minister is saying that the small farmers would be dealt with en bloc and then the large farmers on a case-by-case basis. But we are saying the talks on a rescue package have been ongoing since 2000 and the small farmers cannot wait another year for relief. They need it now. It also appears that another weather disaster crop is in the making as the water in the conservancy is not at a level to allow for a flow. We are saying the government should stop talking and start acting on the rice issue."

John Willems
Willems Timber and Trading Company Ltd:

"The government has to release the system and remove all of the hindrances to business. It has to recognise that it has to put fuel into the engine of growth. The government also has to recognise that we are a developing country and if we are to have a free market it has to be truly free.

"The government needs to recognise the ownership of private property and not be interfering and seizing property, as this does not encourage investors.

"The Forest Products Association supported the Guyana Manufacturers' Association in their thrust to get recognition (with tax breaks) for the manufacturing sector to grow. The system of taxation just does not work and it has to be simplified. The petty nonsense of saying a factory can come in duty-free and when a separate component for it comes in you say it does not apply, has to stop.

"In the case of forestry, we asked for a serious look at the implications of environmental issues and for a decrease in acreage fee. We also want the two per cent commission on exports removed if exports are to be encouraged. (This commission was put in place in 1974 when there was a Timber Export Board, which charged a commission for selling forest produce. The board ceased functioning in 1992 but the commission was not removed). We were assured that this would be removed."

Yesu Persaud
Chairman
Demerara Distillers Ltd

"The government needs to stimulate the economy to have more investments, create more jobs and allow for more spending which in turn will mean more taxes for the government.

"The government has to ensure that to be able to attract investment, there has to be the enabling environment such as law and order, good governance and stability.

"We also have to go and sell Guyana as was done in the Hoyte years and was done when the late Dr Jagan came to office. In 1993 he took a balanced team and went overseas in an attempt to market Guyana. We need to get the opposition on board and market Guyana on a sustained basis.

"We have had no substantial investments in the last few years to allow for meaningful growth after 1996 and the government has to do whatever is necessary to ensure that people are prepared to come into Guyana; not into the traditional sectors but into value-added areas. The local private sector has to be prepared to find linkages to allow them to capitalise on foreign markets for their products as well. DDL recently launched Red Square [a low alcohol beverage] and is now shipping to the US and Trinidad market because of a linkage with a UK company.

"We need a Market Guyana campaign for the country to be able to move forward and I hope the government will give liberal incentives for value-added investments and for exports. We need to have tax free zones established to encourage business activities around the country. And with reliable power supply and an efficient telecommunications sector, we can even attract software companies to set up here.

"I am hopeful that the consultative process will be meaningful this year especially with the formation of the Business Advisory Group to the President. We have already had a preliminary meeting and are supposed to meet once a month with the president. This advisory group is supposed to serve as a sounding board for where the country should be going.
"However, what worries me continuously, is seeing young people packing up and leaving, as they see no future here. We need to create jobs so that they can earn reasonable salaries and for that the government has to create the atmosphere for investment."

Christopher Lalbachan Ram
Chartered Accountant
Ram & McRae

"The budget in my view has to respond to the challenges facing the economy. These include:

* Low or no growth in the past four years;
* Absence of significant new investments;
* Unprecedented business failures;
* A dysfunctional tax system;
* An increasing domestic debt;
* Continuing budget deficit and
* A weak public sector including the courts.
"The budget is not a panacea but in an undeveloped economy with no capital markets, a weak central bank and monopolistic tendencies in key areas, the budget plays a central role not least of which is its psychological impact, and the signal it sends.
"My hope is that the budget will include clear policy commitments and measures to provide stimulants to new businesses and to assist those businesses and industries, which need various forms of support. I hope it will also provide tax relief for individuals and tax reform for the entire country.
"Of course there are other issues relating to capital markets, debt management, an exit strategy from the IMF programme, unemployment and more funds for higher education that I hope the minister will also deal with in his budget speech.
"But I still believe our private sector is still too focused on control of their businesses and are not prepared to seek partnerships with anyone. That is also why we are not getting anywhere but it is imperative that we get the framework to take us forward".

June Mendes
CEO, Farfan & Mendes:

"I do not think in the past the minister of finance has taken much notice of the suggestions made by the private sector and I hope this year he will have a change of heart.

"On top of the list for me will be an increase in the non-taxable income threshold and not by a minuscule amount but really addressing the situation. I really feel that the personal income tax rate is burdensome and the first $11,166 taxed at 20% after the non-taxable threshold should be doubled.

"The government really has to look at reviewing customs duties and consumption taxes and the differentials in the case of new and used tyres. There is five per cent duty and 30 per cent consumption tax on used tyres but 30 per cent duty and 30 per cent c-tax on new tyres. Those high tariffs attract massive under-invoicing and smuggling. They also create an uneven playing field for the legitimate businesses paying taxes.

"Vehicles are also taxed heavily and when you think about the type of roads in Guyana and the government's stated objective of developing the interior, the duties on vehicles are prohibitive, especially on 4x4 vehicles. If the country is to develop and we are to get into the interior and use trails and not roads, there is need to re-look at the duties on vehicles.

"The government also has to look seriously at the issue of taxation in Guyana especially for those Guyanese who want to remain here and make something for themselves. It has been proven since the time of the Spanish conquest that a reduction in taxes leads to an increase in revenues and the minister of finance should not be too nervous about it.

"I would also like to see corporation tax reduced to 35 per cent as the government cannot afford to knock a whole lot of taxes off at one time. I am also hoping that the government will look seriously at concessions to encourage development in the interior especially where there are no government services such as ferries and health facilities."

Eddie Boyer,
President, Georgetown Chamber of Commerce and Industry:

"Guyana needs to fast track its development. It needs the type of stimulus package that will avert it from emulating the likes of Argentina. Foreign direct investment is vital since the local private sector lacks the capital to significantly boost economic growth in this country. Government policies must be aimed at strengthening the Guyana business community to facilitate the creation of wealth and a better standard of living for all.

"Despite the best intentions of the government, poverty amelioration programmes will be unsustainable if the economy continues to flounder. Guyanese would like to stop worrying about things that others take for granted elsewhere like basic foodstuff, materials to build houses, education and health facilities. No modern state can consider development within the context of skyrocketing public utilities rates and a narrow tax band that squeezes established businesses, while many categories of self-employed continue to evade paying their fair share of taxes. The government needs to implement strategies to ease the anguish experienced by the average consumers.

"The public service, police and judiciary need to be upgraded and whilst credit must be given to the government for remarkable strides in upgrading the infrastructure of this country, much more has to be done in these areas. Social services are acutely in need of investment and trained staff, adequate infrastructure and technology.

"The chamber proposes:

* Abolition of the punitive two per cent turnover tax, which is a deterrent to the service and commercial sectors;

* Raising the non-taxable income threshold from $18,000 per month to at least $36,000;
* A review of the entire system of taxation and a feasibility study for introducing value-added taxes;
* Reduction of corporation taxes to 35 per cent;
* Removal of the import duty on CARICOM-produced matches, as Lighthouse matches are no longer being produced locally;
* Reducing property tax significantly, as it is a deterrent to accumulating wealth;
* Providing tax-deductible mortgages to first-time homeowners to stimulate investment and employment.

"It is the overwhelming perception of the business community that the current taxpayers are overburdened and entire categories such as traders, hucksters, tradesmen, truckers and minibus operators to name a few do not contribute. Taxes can be included in the registration fees for hire car drivers, minibus operators, private lawyers and doctors who tend to under-declare their returns.

"The government has to enforce penalties for those caught evading taxes and must also seek creative and innovative in ways to widen the tax net. England found that by decreasing taxes, collections increased as the incentive to evade diminished.

"There is also need for budgetary allocation to strengthen the Race Relations commission and to revamp the image of the commission so as to deal with political problems associated with elections.

"Guyana desperately needs wealth creation strategies. Guyana can become a major transshipment point between Latin American and Europe. The time is ripe for the government to create export bonds which will facilitate service and commercial entrepreneurs re-exporting foreign goods at a profit. In other Caribbean states, re-exportation is the order of the day and this will inject much needed foreign currency into the local system.

"The government should also amend the Financial Institutions Act to allow banks to repossess assets within a shorter period of time so banks would be more liberal in lending to the business communities. It is also necessary for the default rate of three per cent on overdraft facilities to only apply on the amount exceeded on the overdraft and not the entire facility.

"There is also an urgent need to radically revamp the image of the customs department. The chamber wants the tariff on new tyres reduced to stop evasion in this area. Additionally, the chamber calls for the earliest possible enactment of a comprehensive investment code for Guyana. Ad hoc modifications in the legislation must be replaced by an omnibus investment code, which gives specific details on foreign investment, privatization, industrial and sectoral policies.

"Public utilities' rates continue to be of concern to the chamber. A rate of return of 15 per cent to GT&T for example, is untenable. The contract for this entity needs reviewing. We need more investments that can enhance the vital infrastructure network in Guyana but not be a burden on consumers and investors."

Jocelyn Dow
Liana Cane Interiors:

"The first thing that comes to mind is the inordinate weight that is placed on the importance of the budget - which, to my mind, is a reflection of the absence of an articulated long-term development framework. Every Guyanese knows, because we have been told time and again, that we are focused on reducing our debt and our debt payments. In like manner it would be useful for us, as a nation, to embrace a long-term development framework. What has happened to the NDS (National Development Strategy)? But there are some really pressing issues; the most important are the collapse of many businesses and the pending collapse of many more. Is the budget going to give us a menu of measures that recognises that the loss of these businesses and jobs is not merely to be explained away as `market forces' or `mismanagement'? Right now at the global level Guyana is part of a vital conference at the UN called Financing for Development. We are, along with the entire developing world, negotiating for a more `people-centred' development paradigm. This is the same framework that we need nationally. It calls for vision, cohesion, participation and accessible resources - financial and other resources - and an enabling environment. We must recognise that if business after business is in difficulty, then we have a systemic problem. Historical family-based businesses, a lack of rigorous financial systems etc [contribute to this], all true. But it takes time, careful planning and financial finesse, to change things. Look how long (and at what costs) debt restructuring has taken. And that is within an international enabling environment - HIPC (Highly Indebted Poor Countries Initiative). The internal national situation is no less important, in fact, one might argue, more so since the loss of skills and jobs etc are irreversible in the short term. Therefore, I hope that this budget will be the first part of a long-term strategy for development and that it will include measures to assess whether the failure of the many businesses over the last year or two and propose remedies for that. Minimally, the budget should encompass a package of fiscal incentives to stimulate the economy, although this might lead to a reduction in revenue in the short term, the evidence is clear from all over the world that in the medium and long term the amount of revenues is increased. This is a good reason for a long-term plan. I hope too that this budget will initiate a process of disaggregating data on such matters as gender, youth, Amerindians and other vulnerable groups so that we can measure the impact of the economic policies and better inform the formulation of future policies. I hope that people really count in the budget."

David Yankana,
Executive Director,
Private Sector Commission/Consultative Association of Guyanese Industry:

"First of all we would like to see the consultative process dealt with in a more responsive way. Private sector members are complaining that they do a lot of preparation to go into discussions with the minister, submit well-argued proposals and they see nothing reflected in the budget presentation. They therefore ask what is the value of the consultation process. The minister has said that it is not everything submitted that would make it into the budget.

"We would like to see the provision of incentives for agro processing such as tax holidays as well as the creation of tax free zones in New Amsterdam, Corriverton and Linden. We would also like to see export allowances for all companies exporting to CARICOM.

"We want to see the non-taxable income threshold move to $35,000 per month as we feel that it should be related to an index such as the per capita income multiplied by a factor as is the international measure. [In this case it is US$750x3/12.]

"We see the need for a single rate of consumption taxes and for several export allowances and a reduction of the corporation tax from 45 per cent to 30 per cent. We believe the entire tax system needs revising and the government should start the process of introducing value-added taxes. We feel property taxes should be abolished.

"In the case of the rice sector, we see the need for reduced duties and consumption taxes on imported spares and accessories and to have the rice levy abolished.

"We expect to see the implementation of the road link to Lethem and the introduction of a water authority for Linden as well as the start of the construction of the bridge across the Berbice river. There is also need to construct a bonded warehouse to facilitate border trade under close supervision of the customs.

"The government also needs to assist companies with tax incentives for vocational training and the private sector more than anything else is looking out for a stimulus package for investment and job creation this year in the budget."

Norman McLean
President,
Guyana Manufacturers' Association:

"There is need for a stimulus package to get the economy going both on the production and consumption sides. There has to be an increase in the non-taxable income threshold, as workers do not want to work more than the minimum as they are taxed too heavily. And if something is done for housing development this can also help.

"As far as manufacturing is concerned, we feel that the issue of the consumption tax should be addressed. We see the need for across-the-board customs duties of ten per cent and removal of the 35 per cent corporation tax. We also have a problem with how the consumption tax is applied and are arguing that it should be ex-factory and not on the sales prices.

"There remains much competition from un-customed goods coming into Guyana and we are saying reduce the customs duties dramatically and make it unattractive to smuggle goods. Simultaneously, we are saying there will need to be enhanced customs enforcement.

"There is also the need to promote housing development to stimulate the construction sector and encourage young people to stay on in Guyana. Incentives should be given to first-time home owners by making their mortgage interest tax deductible.

"Additionally, there is need for an increase in the non-taxable income threshold from its present level to allow people to have more money to spend. There also should be either zero rating of taxes and duties for retooling as well as an increase in the depreciation rate to allow for increases in productivity levels.

"There should be a waiver of the domestic property tax and a widening of the tax base now. All the major printing firms have now closed as the consumption tax has hit them along with unfair competition from bottom house printers who pay no taxes.

"The government has to open its eyes and see tax breaks as an investment in the economy and while it will not see immediate benefits; it will some three years down the line."

Beni Sankar
Chairman, Rice Crisis Committee (RCC), rice miller:

"The budget is usually a set of numbers the government attempts to run the country with for a given year and that includes payment to teachers among other issues. What is going to happen is the government will have to make sure it gets the revenue to make its spending numbers feasible.

"I strongly believe that because of the reduced trading, there will be a serious decline in consumption taxes and duties and also because many businesses are not generating money, the level of income taxes will fall.

"The government has to be careful in its expenditure and what I would like to see is a higher level of business activity and for this there will have to be a stimulus package. If not, there will be serious dislocations in the economy. Because of my bias towards agriculture, I want to see the government run with a package for the rice industry.

"The rice sector can be profitable and can generate taxes for the government. If the government sits and does nothing to address the indebtedness of the rice sector, we are all going to suffer.

"The RCC proposal to the government was a win-win proposal and if we are given that, I do not think we can ask for anything more."

Brian James,
Chairman, Private Sector Commission:

"We expressed to the minister that we hoped that the budget consultation process is not just another photo opportunity. There was a photographer waiting. He took it in good stride. The government has to take the private sector seriously and as I see it, the budget consultation exercise is just a meeting of two sides. In other countries, the minister of finance outlines a draft budget in confidence to the private sector and asks for their comments and suggestions. This is not how it is done here. We go each year with a list of suggestions and do not see these being taken seriously. After a while, the private sector will just get fed up of producing the same document over and over and may stop contributing to the process.

"We submitted the 2001 budget presentation to the minister and changed the date. The minister's file was dated 2001 and he changed that to 2002. But it is imperative that we start working as a team.

"In our budget presentation, we did not use numbers but tended to look at issues in a holistic manner. We in the private sector were conscious in our presentations about the problems in balancing expenses with income stream.

"The economy is in decline since after the elections and we are saying that the government has the tools within its power to stimulate the economy or retard the slowdown.

"What we find in the private sector is that a lot of people are complaining at the end of the day that there is little income left to spend on things other than basics such as rent, transportation, increasing light bill and now phone bills.

"We see as necessity the raising of the non-taxable income threshold from $18,000 per month to $25,000. That would bring a lot of people a little more take home pay. The private sector is finding it very difficult to get employees to work overtime as they say the tax deductions does not make it worth their while. We are also losing a lot of middle management staff to overseas because the grass is greener on the other side. People are saying even if I backtrack, in a matter of two to three years in the US I can start acquiring assets. It does not augur well that our policies promote this type of migration.

"We seriously believe that first-time homeowners should get tax relief on their mortgage payments.

"Conscious that the government has revenue from only two sources, the Customs Department and the Inland Revenue Department, we see the need for the government to take seriously the process of widening the tax net. Statistically, only four companies pay 60 per cent of the income taxes in this country and that is not right. We all want to benefit from social service and we must all pay our fair share of taxes.

"The two per cent turnover tax imposed a few years ago has been eating away into businesses' cash flow, as margins had to be cut as companies attempt to compete with uncustomed goods. This tax has to go.

"The government has to realize that they have to take the bull by the horns and deal with the issue of tax reform. The property tax needs to be removed. Each year your assets are taxed and this is a disincentive for acquiring assets and for businesses to make themselves legitimate. We have two economies operating and no one is doing anything about the size of the parallel economy.

"At this point in time, we are saying that the government has to look at securing investment in the future for the economy's survival rather than balancing the budget.

"Rice needs help and there is also a need for a flat tax of ten per cent on diesel. The biggest reason for tax evasion as we see it is the high rates of taxation and if that issue is not dealt with, the economy will continue to slide."

Ramdial Bhookmohan
Chairman, Association of Regional Chambers of Commerce (ARCC)

"Each of the chambers would be meeting the minister individually before the ARCC puts forward a consolidated position on the budget.

"However, we feel that local interest rates on loans needs to be addressed. We have not seen the development bank materialising so far and hope the minister will make some statement on its formation in the budget, as commercial banks cannot provide long-term lending for investments.

"There is also need to revamp the system of taxation and this issue has to be given serious treatment. The cost of living in Guyana does not match the income and I am sure the minister will focus on tax relief measures to attract investment. Taxes needs to be lowered and the base widened, as we need a stimulus package for the economy. The investment climate must be conducive. Reducing the taxes will cut down the level of smuggling substantially and the government will save resources on the enforcement side, as there will be less incentive to smuggle goods into Guyana. We also look forward to the introduction of the value-added system of taxation in Guyana.

"But of crucial importance is the issue of security for investment. We need stability and calm and stringent laws in place to allow for a stable investment environment. Cattle rustlers are rampant in the agriculture sectors and today the price per pound of mutton is $450. If the investment climate was safe and incentives are offered, people would invest into livestock and the prices would come down. The $450 per pound of mutton tells you that the product is scarce. Guyana can only develop if there is security for produce, security for homes and businesses."

Holbert Knights
Bartica Chamber of Commerce:

"We would like to see the government ensure the timely completion of the road network linking Bartica, Georgetown and Linden -- the road to Lethem to give access to Brazil and the Takutu bridge project.

"We are looking for a more comprehensive mining policy that offers protection to local investors from the influx of illegal ministers from Brazil and Venezuela. We are hoping the government would closely monitor areas around here and would allocate more resources for monitoring to ensure property security in these areas and that only licensed miners are there.

"There is also need for increased monitoring of the effects of mining on the environment. It is very important that we strike a balance between mining and the environment.

"We also hope that this year that Bartica can be upgraded to township status if it is to really and truly be prepared for tourism. We need certain infrastructure in place to make that a reality and hope that the budgetary allocation to the NDC and RDC will be increased. We think a municipality will be able to command such increased resources.

"Additionally the Association of Regional Chambers of Commerce's (ARCC) main concern is for the rice sector. The government must do something to bail the rice sector out because it is a major source of employment and foreign exchange earnings for Guyana."

Khalid Hassan
Former President, Essequibo Chamber
Headmaster/Principal Essequibo Collegiate Institution

"The main focus of the budget should be job creation and secondary and tertiary manufacturing.

"The government will be trying to attract foreign investments and would give a lot of tax breaks. The same incentives must be given to local businesses.

"Additionally, there must be hundreds of high school, university and other graduates but we have no jobs to offer them. The youths in which Guyana's future lies are giving up hope and the government has to act now.

"The government has to stop discouraging local investments by putting up road blocks and telling people that they would not be able to make a return on their investment because of competition. The government is supposed to provide the enabling environment for businessmen to take risks and not assess the risks for the businessman. The government ought to provide more incentives to encourage new investments.

"We also need better resource management from the government. Essequibo is faced with a problem of water supply to rice farmers currently and because of association between the regional officials and friends in the industry maximum use is not being made of the resource. Water, which is to be supplied when all the farmers are ready, is, in certain areas being supplied once a friend needs it and not when everyone is ready. Once you let the water out, you can't get it back."