A budget that augurs well for Guyana’s future
Editorial
Guyana Chronicle
April 2, 2004
THE National Budget presented to Parliament on Monday represented the largest to have ever been presented to the National Assembly.
It is estimated at $75.6Bln and represents an increase of 5.3 per cent over last year in nominal terms. This is a commendable achievement given the constraints the economy faced last year that contributed to lower-than-expected economic growth and the fact that there were no new taxes, nor any increase in existing taxes.
The budget is premised on a return to robust economic growth and a low level of inflation for the current year. This is in itself a commendable objective given the continued uncertainties and the economic downturn in the world economy. The budget serves as a complement to the Poverty Reduction Strategy Programme (PRSP), a medium term framework for the reduction of poverty and achieving the Millennium Development Goals (MDG’s), the first of which is to halve poverty by year 2015.
The budget announced that work has begun on reforming the tax system. As a result, the present consumption tax will be replaced by a Value Added Tax (VAT) by 2006. The present consumption tax is reportedly regressive, with very high marginal tax rates. It also discriminates against goods as opposed to services. The Value Added Tax will tax both goods and services and create the basis for a reduction on the high marginal tax rate on goods. A VAT system will tax consumption instead of production. This broadens the tax base and gives a future budget greater financial flexibility to reduce the very high tax rate on income.
The budget highlights that “Guyana ranked 17th out of 140 countries on the Foreign Direct Investment (FDI) performance index”. The budget identifies a number of new investment initiatives that would create a more enabling business environment, one of which is a new investment law passed recently by Parliament. The main objective of this new law is to offer legal protection to investment, increase the predictability and transparency of the legal regime for investment, promote the development of international best practice for investments; and provide a framework for fiscal incentives for investors and direct investments.
The budget also makes reference to enactment of the Small Business Act that will pave the way for the establishment of a Small Business Council, which will promote and monitor developments in the small business sector. The Council will be supported by a Small Business Bureau, which will offer assistance to the sector in areas such as marketing and management. In addition, a Small Business Development Fund will be set up as a source of financing for small and micro enterprises.
These are some but only few of the policy initiatives that have been identified in the budget speech on Monday. These new policies will definitely serve as a catalyst to speed up the investment response for sustained economic growth and development. With new investments, new jobs will be created. After all, employment is the only sustainable way to reduce poverty. The 2004 budget under the theme “Investing for Sustained Growth and Enhanced Social Development” certainly augurs well for the future of our country.