Increase Income tax threshold, make overtime earnings tax free among PSC’s budget proposals

As the Ministry of Finance prepares to present its 2017 National Budget on Monday, the Private Sector Commission (PSC) has disclosed some of its proposals to stimulate growth in the economy.

According to a statement on Thursday, the PSC notes that it is “generally accepted” that Guyana’s economy is not performing at its optimum level and that this slowdown begun approximately two years ago.  While GDP growth is expected to reach 4% in 2016, the PSC says this growth can be primarily attributed to increased production of gold, masking the decline in performance of other economic sectors which is having far reaching implications for the business sector.

“One manifestation of this is the significant growth of non-performing loans in the commercial banking sector.  The International Monetary Fund has reported that non-performing loans increased to 11.5% at the end of December 2015 as compared to 6% at the end of 2013.  The challenge for Government, with the collaboration of the private sector, is to stimulate economic activity across all sectors.”

As such, the Private Sector Commission believes that there are several measures which would stimulate the economy and lead to balanced growth, as well as have a positive impact on Government revenue in the medium and long term.

A synopsis of the recommendations of the Private Sector Commission is detailed below.

Fiscal measures which the Commission believes should be adopted:

-A permanent reduction of the Corporate Income Tax rate, over 10 years to 20%.

-Reduce Personal Income Tax over 10 years to 20%.

-Concessions on income taxation for the creation of new employment in all value added sectors.

-Tax breaks for new tourism assets.

-Tax breaks for companies which set up operations in depressed communities.

-Concessions on export tax for businesses which export.

-Relief on outstanding loans for rice industry.

-Make security equipment free of all taxes.

-Increase income tax threshold to $100,000 per month.

-Make all overtime earnings tax free.

Enforcement of tax laws:

-Compulsory VAT registration.

-Enforcement of VAT collection on all businesses which currently do not collect this tax.

Infrastructure:

-Implementation of all PSC supported infrastructure projects.

-Urgent approval of a harbour finance model.

-Speedy implementation of all Government projects to release Government spending.

-Commence design and building of Lethem Road for completion over a 5 year period.  Raise capital on international market with tolls being used over 25 years to repay loan.

-Implement plans for alternative East Bank road.

-Dredge Demerara Harbour.

-Build an alternative Demerara Harbour Bridge.

Energy:

-Facilitate the process of ensuring reliable energy is provided at US 12 cents per KWH.

Legislation:

-Appoint an Economic Council for Guyana.  Legislate for a separate non-political Council.

-Legislate for internal audit departments in all government agencies.

-Enact mergers and acquisitions legislation.

-Introduce Bankruptcy Protection legislation.

-Finalise and table E-Transactions Bill.

-Revise Small Business Act, definition of small business.to be changed to turnover of $100m or more.

MiscellaneousMeasures:

-Target a GDP growth rate of 8%; inflation rate of 2%; unemployment rate of 8%.

-Retain system of zero-rating for selected goods for relief of lower income persons.

-Sponsor workshops on corporate governance of state-owned enterprises.

-Contractors should be graded in tiers related to their past performance.

-Revision of trading rules to introduce odd lot system.

-Outline a statement on an Economic Strategy/ Plan for Guyana.

-Devise and implement plan for industrialisation of Guyana.

-Reduce the purchase of Treasury Bills by 20% from prior year to increase liquidity and reduce commercial bank interest rates.

-Liberalise telecommunications sector; implement regulations and enforce the new Act; allocation of spectrum.

-Regularise national solid waste management.

-Complete membership of Extractive Industries Transparency Initiative.

-Utilise GGMC funds to commence set up of Sovereign Wealth Fund.

-Finalise Single Window System.

-Host investors’ conference.

-Increase spending on marketing of Guyana, especially for tourism.

-Improve Emergency Response and 911 systems.

-Fund and operationalise Procurement Commission; Integrity Commission.

-Uphold manifesto promise of increased salaries for public servants.

-Implement enabling environment to improve ranking on Doing Business index.

-Outline plans for diversification of economy away from traditional pillars of rice, sugar and gold.