Working class should avoid being sandwiched
Peeping Tom
Kaieteur News
January 16, 2007
It is unfortunate that the working class is being used to oppose the Value Added Tax, because this tax was intended to benefit the working class and not to pit it against the Government.
The working class of Guyana , comprising the average consumer, is finding its members in the same position as in the early sixties when Cheddi Jagan introduced the Kaldor Budget. At that time, tax measures aimed at redistributing income from the rich to the poor were introduced, but the introduction became the occasion to pit the workers against the Government.
Jagan's tax measures announced in the 1962 Kaldor Budget were not directed at the poor, but were mainly against the rich. They were, however, not punitive, and by today's standards could be considered quite reasonable.
But how dare a national seek to impose a tax on the rich so as to fund an increase in workers' salaries and reduce the Budget deficit? Who was Cheddi Jagan to dare to implement increased taxes on the propertied class during those, the dying days of colonialism?
The reaction by the business class was way out of proportion to the slight burden they would have faced from the increased tax measures which, it has been estimated, would not have increased the cost of living by more than one per cent.
We all know the terrible things that happened in the country between 1962 and 1964. Sadly, the working class sided with big business against policies that were primarily aimed at aiding the working class.
At present, in our country, the same thing is unfolding that was played out in 1962. Consumers are being led to believe that the Government is imposing a tax that is against their interests. Just like in the sixties when we heard the chanting about, “Axe the Tax,” we are today hearing similar chants about, “Axe the VAT.” Just as in 1962, when there were cries that this tax will kill us, today we are hearing cries that, unless VAT is removed, we will all die from hardships, in six months.
I want to tell the working class and the consumers this: Do not be deceived by what you are being told. This nation will not crumble because of VAT. It will only get better because, for years in this country, tax evasion has been rampant. For years, too heavy a burden has been placed on the workers of this country, while the rich have escaped from paying their fair share of taxes.
VAT is intended to redress this situation. But like the Kaldor Budget in 1962, it will be stoutly resisted by the capitalist class, because there are large sections — not all of them — but large sections of that class that have, for decades now, enjoyed the sweet from not paying their fair share of taxes.
Many of them who like to cry how hard things are in the country are still able, as Uncle Freddie mentioned, to enjoy the good life, both in Guyana and outside of Guyana, because they do not pay their fair share of taxes.
Uncle Freddie has been telling us about some rich people in this country who pay less taxes than ordinary public servants, yet they own fancy assets in Miami and other parts of the world; are able to educate their children aboard; and enjoy the best that life has to offer, while complaining about how bad business is in Guyana.
Business is so bad in Guyana , yet many of them are not leaving permanently, because it is simply not bad enough.
VAT is not going to eradicate tax evasion, but it is a step to help. VAT will force many businesses to declare their true sales. It will, over time, (not overnight) eliminate the practice of businesses having two sets of books -- one for their accountants and one for the taxman.
It will, over the long term, ensure that the Government can bring more persons into the tax net, and therefore can eventually reduce the tax burden faced by workers, while reducing the effective tax rate in Guyana .
It is precisely because VAT will force the tax evaders to come clean or drop out of business that there is going to be strong resistance to VAT. For those who, for years, were telling the tax man that they were making no profits; for those who continue to understate their sales, VAT will ensure that they become uncompetitive, because VAT rewards honesty and provides benefits such as input tax write- offs for making accurate tax submissions.
VAT is collected up front. But if you want a tax credit, you have to show how you have disposed of your stock and remit to the Government the tax that you have collected. It will therefore level the playing field for businesses, and many businesses do not want that.
The real resistance to VAT is yet to come. The business community will go through the usual rituals of seeking to meet with the Government to extract some more concessions, while the consumers will feel the pinch from those who are unfairly increasing prices.
In the end, the business community knows that it will either have to ensure the death of VAT, or face a future in which tax evasion will be reduced.
Consumers must struggle for their own relief. They must ask the Government to take off the VAT on items such as soap powder, margarine, cooking oil, and biscuits.
The working class should not get caught up in the struggle of those who want VAT axed, because some people know that VAT will expose just how much tax evasion was taking place in the country.
The working class should not pit itself against the Government or, for that matter, businesses, because as sure as night follows day, the Government will, this week, announce measures that I predict will bow to the wishes of the bourgeoisie class. As Karl Marx said, the ruling ideas are the ideas of the ruling class.
The business community will get what they want, and the workers will be, as always, asking why they got in between the Government and business.