Budget 2019 Review – Key Elements
POSITIVE DEVELOPMENTS
Reduction of income and corporate tax rates to 25% on taxable profits for small businesses – the proposed reduction in corporate tax for small businesses is received in a positive light. This initiative, it is hoped, shall stimulate confidence in the economy in respect to further investments by small businesses and should also boost spending in the economy.
Reduction of manufacturing and non-commercial rate to 25% from 27.5% - This initiative, again–must be commended. The manufacturing sector in Guyana for many years is largely inhibited by high cost of energy. This limits the capacity to which the sector is able to be innovative and the creation of more value added products. Hence, with this further, but marginal reduction in corporate tax, it is anticipated that this will yield positive results in the area of increased investment and stimulate innovation in the sector.
The budget proposed several exemptions in the following areas - pesticides used in the agriculture sector from Custom Duty and VAT; limestone used in the agriculture sector from Customs Duty; aircraft engines and main components/parts; concrete blocks used for housing and construction; equipment and chemicals for water treatment and production plants among others. These measures particularly geared towards incentivizing agricultural activities are quite crucial –especially with the impending oil & gas industry, to avert the risks of the so called “resource curse”. It is good to see that efforts are being made, viz-a-viz, in the national budget to keep our traditional sectors and commodities alive especially at a time when other Caribbean countries are experiencing mediocre economic growth and structural reform programs of their economy.
AREAS FOR IMPROVEMENT
Measures in support of Green Agenda: while the measures proposed in this respect in Budget 2019 are in good spirit, when we speak of a green economy, it requires much more substance than these incremental initiatives. To this end, it would be good, in the interest of the entire country, to revisit the hydropower project. This project, long envisioned in Guyana to massively reduce the cost of energy supply to the Guyanese people and businesses which in turn, can only result in a ripple effect and position our economy to becoming an ever industrialized economy.
Depleting foreign reserves at the Central Bank and Balance of Payment Deficit: the expansion of the country’s balance of payment position (deficit) and depleting foreign reserve position is a cause for concern in the short and medium term. Despite being poised to earn foreign exchange from oil revenues in the year 2020; we cannot overlook this situation which could, in turn, place pressure on our exchange rate which can drive up inflation in the medium term. As such, it would have been good to see more substantial policies designed to address these concerns.
Small Businesses and Entrepreneurship: It is recognized in the Budget that government is making efforts in the form of loans and grants among other initiatives to promote entrepreneurship within the economy. However, there needs to be a paradigm shift in the administering of entrepreneurship education; such that, it should not be confined to teaching contemporary approaches and theories in a classroom setting and presenting case studies and empirical analyses and discussions. Rather, the paradigm shift should be designed to focus in the actual developing, teaching, and facilitating a manifestation of real entrepreneurship ventures.
This would therefore mean, that each student, after completing the theoretical training designed to develop their skills and knowledge base, should be guided to develop their own projects, business projects that is, and being able to see it through to becoming a reality with the support of the training centre. One critical component to achieve this is the acknowledged difficulty in the access to financing options for new ventures.
Entrepreneurship schools should therefore seek to establish collaborative arrangements with financial institutions and other similar agencies that would normally allocate resources in the form of grants etc., projects that are usually supported and partially funded by some governments, in order to achieve such goals and revolutionizing the manner in which entrepreneurship education, teaching, training etc. are delivered.