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The New Guyana Company has not filed annual returns for nearly two decades

Today I had a conversation that I cannot help but link to two telephone calls I made yesterday. If in fact today’s conversation is linked to my calls yesterday, then we have the frightening possibility of illegal wire-tapping of telephone calls made by law-abiding citizens.

The calls were about the New Guyana Company Limited, the publishers of the Mirror newspaper. I am aware that my mother, of whose estate I am the executor, was a modest investor in the company which was launched some time in the 1950s or ’60s. Indeed,according to ancient records in the Companies Registry, her name, Mrs Jankie Ram, is recorded on Folio 859 of the company’s share register, the same folio on which appears the name of my late brother Ivan Ram.

My examination of these public records was revealing. The New Guyana Company Limited has not been filing any annual returns for close to two decades, and from all appearances has not been holding any annual general meetings, as I am sure my mother would have notified me. To make matters worse, under the Securities Industry Act 1998, the New Guyana Company Limited is a public company with stringent reporting obligations. I can also say that I saw no evidence that the company was continued under the Companies Act 1991 although that may reflect deficiencies in record-keeping rather than non-compliance.

These point to a form of serious corporate fraud on the investors in the company and a disregard of the companies and securities laws of the country. As executor of my mother’s estate, I am consulting with legal counsel on options to restore and protect the rights of what may turn out to be approximately two thousand investors and to ensure that our laws are observed.

On the wider issue of wire-tapping, it is would seem that politically connected persons who might have an interest in concealing the malfeasances of the company might have intercepted my telephone conversation.

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The annual ritual of the Auditor General report

Introduction
Sometimes around now, sometimes later, the press and the public are excited when the report of the Audit Office on the accounts of the ministries, departments and regions is tabled in the National Assembly. They feed on reports of Contingencies Fund abuse, unreconciled bank accounts; single sourcing of drugs from the New Guyana Pharmaceutical Corporation; vehicle log books not maintained and improperly kept stock records. More recently a disproportionate amount of time was devoted in the 2008 and 2009 audit reports on expired air fresheners and Baygon and overpayments of $30,000 and $50,000 for the acquisition of purchases.

Not that these things are not important. They are. But the danger to which the press and the public fall prey is that they displace some of the really crucial issues of accounting and accountability that cost the nation billions of dollars annually, paid for by exorbitant rates of VAT and personal taxes. Perhaps a bit too subtly to be noticed, the Audit Office has been downsizing the report even as the causes and cases of wastage and misuse of public funds become more obvious. Not that size alone matters, but compare the report of 2005 with that for 2009. In 2005 the report ran to 1822 paragraphs, this year it is down to 437 paragraphs, and as the accountants would add, “a reduction of 76 %”! The 2008 report ran to 575 paragraphs so the report is well and truly trending downwards.

Strange contracts
Consider too that in 2005 the Audit Office considered it necessary to address audit issues in the Office of the President – one of the serial offenders when it comes to misuse of public funds – in fifty paragraphs running over twelve pages. This year it is down to seven paragraphs over two pages. One of those seven paragraphs is entirely informational with comments, and its inclusion not quite an audit issue.

The information was useful but a bit confusing. It reveals that two contracts were signed in 2010 (sic) in connection with the Lethem to Providence E-Government Project without identifying the other party(ies). The first for US$1.020M was entered into in April 2010 for the supply of aerial and direct burial fibre optic cables and the second, signed on March 23, 2010 was “for the connection of the Globenet System with the terrestrial fibre network in Guyana.” The report notes that the initial fee of US$1M was to be paid in three instalments. It does not say whether these contracts conformed to the Public Procurement Act.

An amount of $353.6M was provided under supplementary provisions in 2009 for which four cheques were drawn by the Ministry of Finance to the attention of the Office of the President! Except for this the only other current year issue with which the 2009 audit report takes objection was in respect of a procurement by GO-INVEST for which the approval of the National Procure-ment and Tender Administration Board could not be located. Is this for real?

In respect of the Ministry of Finance every one of the fourteen paragraphs was a “prior year matter which has not been resolved.” In the Ministry of Local Government it is five out of six issues identified. For the Ministry of Works under current year issue – Roads and Bridges – $5.894 billion, no contract register was maintained making it impossible to validate the expenditure on projects undertaken.

Conspiracy of silence
Under Customs and Trade Administration the report has quietly dropped information on remissions of duties which in 2008 amounted to $70 billion! In fact there is no evidence that the Auditor General has carried out its duty under the Investment Act of 2004 to carry out a process audit of incentives granted under section 2 of the Income Tax (In Aid of Industry) Act or to point out that the government has failed to publish in the Gazette information regarding all fiscal incentives under that act. Readers have to be forgiven for believing that there is a conspiracy of silence when it comes to such matters.

In 2008 the Audit Office found it necessary to highlight in the Executive Summary of its report the failure to appoint the Public Procurement Commission mandated by Article 212 (W) of the Constitution. In 2009 that matter has been quietly dropped while the stage is also being set that could see the elimination of any comment on the unconstitutional accounting and misuse of the Lotto funds. The 2008 report repeated a decade long, strong recommendation that the Ministry of Finance take appropriate measures to comply with the Fiscal Management and Account-ability Act and pay the government’s share of the Lottery proceeds into the Consolidated Fund. This year the report informs the nation – without comment – that the Attorney General has given a legal opinion concerning the deposit and use of those funds in which the AG states that, “There is no legal obligation to transfer moneys therefrom to the Consolidated Fund.”

If the Audit Office had been following the news he would know that this is a matter that is currently and actively engaging the courts in an action brought by citizen Desmond Trotman against the same Attorney General! The AG must therefore be aware of the case and it would seem self-serving, improper and unprofessional for the AG to have ventured an opinion in this matter. This fact should not escape the Audit Office which at the very least should have sought some independent advice on the matter.

Dormant accounts
One issue that caused me some concern is the way two long-dormant accounts were treated in the report. When I did a four-part series earlier this year on that 2008 Report I noted that there were several billion dollars lying in “Static Accounts.” Among these were two rather significant sums: one in Account #201210 EPDS – Buy Back Programme with a balance of $560.9 million and the other in Account # 201360 with a balance of $2.617 billion. The total of these two accounts of $3.177 billion had been lying idle, in the first case for more than ten years more and in the other, for six years.

Here is a background to these accounts taken from the 2008 Report:

Account № 201210 – This arose out of a 1998 grant agreement funded by the World Bank for a “commercial debt” buy-back programme. When the programme came to an end in 1999, the Bank of Guyana which had administered the programme opened a special account in the name of the Government of Guyana with this sum.

Account # 201360 – The amount of $2.617 billion was the proceeds of a loan from the International Development Association (IDA) in December 2003 for Poverty Reduction Support Credit in (a) investments in human capital under the health and education sectors; (b) strengthening of public institutions and improvement of governance; (c) expansion and improvement in the provision of basic services under the water sector; and (d) broad-based job-generating economic growth.

What troubled me was that in the corresponding table in the 2009 report, the amount does not appear and that only a total of $1.6 billion dollars was held in statistic accounts. This is explained by a statement on page 8 of the report that “The (unidentified) Head of the Budget Agency indicated that… accounts No. 201210 and No. 201360 were closed in July 2010.”

Lax controls
Forget for a moment that proper auditing methodologies would not accept a mere “indication” for even three million, let alone $3.2 billion, why are the amounts not shown in the table of special accounts at December 31, 2009, more than six months before they were supposed to have been closed? Audit is about verifying satisfactory documentary evidence, not acceptance of unsupported explanations or indications. Not even a junior auditor or someone with barely passing familiarity with banking and accounting would describe the disposal of dormant accounts with combined balances of $3.2 simply as “closed.”

My concern was partly assuaged when I saw Note 2 to the Statement of Current Assets and Current Liabilities that showed Total Inactive Accounts at December 31, 2009 with balances of $5.1 including the two that the Auditor General omitted in his report. Given the lax controls over bank accounts with no reconciliations having been done for several years, it is dangerous to the citizens of this country for billions of dollars to be left idle and unsupervised for so many years and for them to be casually closed. Think what the $2.6 billion could have done for the Women of Worth project recently introduced!

The Public Accounts Committee
Part of our problem is that the persons who have the duty to oversee the report do not understand finance and accounting. The Public Accounts Committee is chaired by a member of the opposition party in the National Assembly but the majority of the members of the committee are from the ruling party who seem, like most people, to have the capacity to grapple with issues involving a few thousand dollars but not the billions of dollars spent by the government.

We will not have proper accounting and accountability if we do not have a proper PAC that insists on better and more comprehensive audits by the Audit Office. NICIL which manages billions from the GGMC, privatisation, sale of government assets and dividends does not get a mention in the report. No wonder it can show such contempt for the law.

The information on the spending of $3.5 billion dollars from Lotteries proceeds since 1996, has been sketchy. For example, in 2009 $54.2 million was spent by the Ministry of Culture, Youth and Sport “to meet expenditure for PYARG adventure journey, Independence Anniversary etc.” and $1.2 million on the Dr Jagan Memorial football knockout tournament.

Conclusion
Unlike its approach to the 2008 report, Business Page will not examine in any detail the 2009 report which is unfortunately riddled with errors of various types. The extensive analysis on the 2008 report is posted on chrisram.net for those who are interested. Instead next week I will return to the issue of taxation.

Meanwhile this column shares with the Murray family its concerns about his illness and prays for his return to good health. He is absolutely indispensable to the debate on the finances of this country.

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VAT no burden: A different perspective

Introduction
Last week’s column addressed President Jagdeo’s astonishing, unfounded and uninformed statement that VAT was no burden and therefore in no need of revision. For a newspaper column, it provided an exhaustive and hopefully convincing case of President Jagdeo and Dr Ashni Singh’s broken promise to make VAT revenue-neutral. And so I did not think it was necessary or useful to return to this topic this week.

Let us not be naive. The President could not possibly admit that VAT is a burden. If he did, then being the considerate leader he claims to be, he would have had to do something about easing the burden on “his people” by reducing taxes, something he has never done across the board.

He has found it easier to grant vast sums in concessions to friends, without regard for the laws of the land, than to honour a commitment to the nation. To change the law to pay emoluments to the Chancellor, the Chief Justice and the Auditor General tax free, making some more equal than others. And yes too, to increasing presidential benefits with no limits and no taxation, defying Benjamin Franklin who wrote more than 200 years ago, “In this world nothing can be said to be certain, except death and taxes.” But to the poor, the only yes is to the insensitivity of their plight.

Too poor to ‘pay’ attention
My reason for returning to the question of the VAT is because of the level of feedback on the column, including the wag who said that after paying income tax at 33⅓% and VAT at 16%, the ordinary person cannot afford even to “pay” attention to their own plight. Another asked me whether there was nothing that could be done to ease the burden of the high rate of VAT. I had to say that I could not be optimistic. Given the unlawful and increasingly outlandish things the Jagdeo administration does without any hint of embarrassment, there must be few things that it would not do. But another reason for the absence of any optimism is because others who might be expected to challenge, are themselves challenged, emasculated and supine. The consumer movement and the TUC, effectively leaderless and non-existent, have lost both their appetite and capacity to advocate, let alone to protest and defy. The first for fear of losing its government subsidy; the other having lost its credibility. The private sector has chosen the path of least resistance; the rest of society that of apathy.

And of course, everyone wants to be a president, even if they, like Jagdeo, do not know and care whether VAT at 16% on top of a very low threshold income tax rate of 33⅓% is indeed burdensome. Apparently knowledge of such mundane matters is neither an asset nor a requirement for the job of president.

The promise and the reality
In 1992 the PPP/C came to power on a promise of socialism and social justice. Then in the face of the IMF it made an about turn, adopting free market economics, the essence of capitalism. Ever since the IMF programme came to an end, the economy has had no central theme or philosophy. The President may have been educated in Russia but he seems to have an antipathy to both the word and the philosophy of socialism. Even the area in which this government has had its greatest success, housing, contrast the policy of land distribution between the poor and the powerful. Compare Pradoville 1 with Plastic City, or Eccles with Bare Root.

And consider the more blatant, in your face Pradoville 2, at Sparendaam, East Coast Demerara, where the elite are setting up one of the most exclusive communities in Guyana.

What would the Norwegians think of his much touted fear of rising sea levels submerging our coast when there is building right on the banks of the Atlantic Ocean?

The taxpayers of the country would like to know how the land was advertised, allocated and valued; who approved the community and the housing plans; who the money is being paid to; whether there are any conditions and covenants?

If our Audit Office was not so unqualified and compromised, these are the questions it would seek answers to, not whether a few hundred dollars a day spent on the residents of the Palms is value for money.

New brand of economic policy
In a country increasingly run not for a class as capitalism or socialism does, but rather for a handful of individuals, nepotism becomes too charitable a label to describe the economy’s direction. Under this new dispensation, the assets of the state are at the disposal of a few, in which no less than the President adds to the debate about evasion and avoidance, even as a covenant about the period of ownership prior to sale is dispensed with. Another word that comes to mind is oligarchy, a term that is favoured by Dr Tarron Khemraj.

If we were serious about running a national economy, our Finance Minister would not be publishing a statutorily required mid-year of so little moment and equally little practical use.

And this is not criticising simply for its own sake. Where does the Minister tell us, as he is required to do, about the impact on the country’s finances of the delay in the receipt of the Norwegian funds, or where further sums will come from to buy additional generating capacity for GPL? In 2009, GPL received more than three billion dollars from the state, Guysuco many times more, offering in return, blackouts and excuses respectively.

Instead the mid-year report was replete with national income data which could, with more authority and authenticity, have been published by the Bureau of Statistics. And in the process of that delay, the Bank of Guyana, like the Bureau of Statistics, withholds its highly useful half-year report so as not to steal someone else’s squib-like thunder. Under current economic policy and management, it is so much more necessary to satisfy the ego of one or two than the needs of the nation.

Is tax reform dead?
Now that the President has spoken on the tax system all the talk about tax reform might be considered academic and meaningless. A couple of weeks ago I declined an invitation to meet with a consultant ostensibly retained to advise on tax reform.

When the appointment of a consultant to carry out the same or a similar study came up at the level of the Private Sector Commission some time ago, the clear inference was that the appointee must be ‘anyone but Ram.’ I wish the study well even as I recognise that for eighteen years this government has promised tax reform in one breath while delivering regressivity of the tax system that causes the poor to flee into the underground economy or abroad, in another. Nothing will happen before elections 2011, since according to Jagdeo’s thinking it ‘ain’t broken,’ what is there to fix?

Perhaps the consultant can do with some numbers and statistics. Between 1992 and 2009, tax revenues have climbed from seventeen billion dollars to ninety billion dollars. The employed category has seen its contribution to those revenues increase by 860%, from $1.3 billion to $13.2 billion. For companies, their contribution to tax revenues has declined from 26% in 1992 to 20% in 2009, with most of the taxes coming from the commercial banks, GT&T and Banks DIH and DDL. The self-employed that now dominate the country’s economy contribute less than 2.5% of its tax revenues.

And in the invoice example I gave last week, some businesspersons actually benefit by stealing VAT under a system that puts the cat to mind the milk. An economy in which the illegal and criminal are major components must by definition have elements in its tax system that are also illegal and criminal.

And as we think of the tax system and its components, consider that VAT and excise taxes alone contribute more than 50% of total tax revenues.

It is trite to state that VAT and Excise Taxes are borne by consumers including the employed, retired and unemployed. While I have never subscribed to the straight maths of adding the rate of income tax (33⅓%) and VAT (16%) to arrive at the tax burden on the poor, the tax revenue data suggest that the 50% tax burden on the working and non-working poor is not too far fetched.

Reducing the personal allowance
Even before 1994 when I presented a paper Tax Reform – A Vehicle for Economic Recovery, I was convinced that our tax system badly needed reforming. Yes, we have taken some major actions such as the unification of the revenue collection agencies and sporadically have increased one element of the personal allowance.

But what we are asked to forget is that overall we have reduced the personal allowance from the high of a dollar value and one third of taxable income, which prevailed under the late Desmond Hoyte. This means that if a person’s salary was $150,000 per month, their personal allowance was $50,000. It is now only $35,000.

Conclusion
So does tax reform really mean lowering taxes? The answer is an unambiguous “not necessarily.” It is not something that can be easily dealt with in these columns, but I will try to do so. When the father of modern economics Adam Smith set out the four cardinal principles of a good tax system – equity, certainty, inconvenience and economy in collection costs, the question of big, bloated and wasteful governments was not an issue. It is very much so in the Guyana context. Of Adam Smith’s four principles, equity is the single largest question for us. But in a more practical way, it is the level of taxation that is stifling our economy, or sections of it, as some pay and others do not.

We will explore this further in the next fortnight since next week’s Business Page will take a brief look at the 2009 Auditor General’s Report that really tells us nothing that we do not already know.

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Cents were abolished by statute

I no longer believe that Mr Rajendra Rampersaud is engaging in a coherent, sensible discussion. He writes a letter (‘Ram’s analysis in relation to the exchange rate was flawed’ SN, October 27) in which he refers to “fifty Guyana cents.” I pointed out that “cents” as part of Guyana’s currency had been abolished by statute (‘Business Page statement derived from Bank of Guyana report’ SN, October 29). Obviously forgetting or not understanding my point, he then volunteered the information that the Bank of Guyana had long before 1998 withdrawn cents by way of a circular! (‘Exchange rate movements cited by Mr Ram were taken into consideration under the Real Exchange Effective Rate’ SN, November 1)

I must therefore withdraw from further engagement with Mr Rampersaud who thinks others’ “conclusions are based on superficial feelings and political spin in total disregard for fundamentals.” I am not interested in his brand of fundamentals.

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VAT no burden? What does Jagdeo know

Introduction
In his press briefing on Friday, October 22, 2010, President Jagdeo said that he does not see the Value Added Tax as a burden and therefore there is no need to revise it with a view to lowering the rate. He sought to divert calls for a reduction in the rate of VAT by spinning the consistent increases in the VAT collection as a result of widening the tax net and because of the better performance of the economy over the years. This to me demonstrates how little respect Jagdeo has for the nation and its intelligence.

At one level Jagdeo is right, that he personally does not see VAT as a burden. Indeed he would have been just as right had he said he sees no tax as a burden. And for one very simple reason. He pays no tax in Guyana. Under section 13 of the Income Tax Act, his official emoluments are exempt from income tax. And section 6 of the Property Tax specifically makes that act inapplicable to the President while section 5 of the Capital Gains Tax says that if Property Tax does not apply, then neither does Capital Gains Tax.

Presidential tax planning
Because rental income is not official emoluments it was not tax efficient for President Jagdeo to lease his Pradoville One house, since the net rental would have attracted income tax at the rate of 33⅓%. So what did the President do? Instead, he reportedly sold the property for $120M that no more than two years earlier he had valued in a division of property matter with Ms Varshnie Singh at $10 million. On that transaction alone President Jagdeo saved in Capital Gains Tax approximately $22 million! If the property had been rented over a period of time to earn the same $120 million, then assuming that the maintenance costs were borne by the tenant, he would have had to pay $40 million in taxes.

In other words, the sale by President Jagdeo of his property, the land for which he received at a subsidised value from the state, has cost the tax system between $22 million and $40 million! See why everyone wants to be a president? And on a salary of $1.5 million per month, the state forgoes income tax of close to $10M each year.

In fairness to President Jagdeo, he did not write the tax laws of which he is now the major beneficiary. That was done by Mr Forbes Burnham, whom many describe in unprintable language. Despite their socialist claims, neither of the Jagans thought of repealing this generous piece of legislation. But what Mr Jagdeo has done is made what was a temporary, ex officio benefit into a life-long benefit. Below are the benefits under the former presidents legislation he signed.

Presidential burden
For the rest of his life, President Jagdeo – and all future presidents as well – will enjoy, at the expense of the state, a free and unlimited supply of water, electricity and telephone services to his Guyana home; unspecified numbers of clerical and technical staff, gardener, maid and personal staff; fully paid medical attendance and treatment for himself and family, without limitation; full-time personal security and services of the Presidential Guard Service; unspecified number of vehicles to be provided, all expenses and costs paid by the state; two first-class return airfares provided on the same basis as that granted to serving members of the judiciary.

Most of these benefits would be considered taxable for the rest of the Guyanese. But not for the President. And if you think this is bad, consider that under this act, he will never again have to pay capital gains tax or property tax in Guyana, not ever! The one good thing is that this legislation exists in an act which any later Parliament can amend or repeal. It is worth speculating whether Mr Jagdeo could take the country to court if the Parliament were to repeal this immoral and colossally expensive act. In fact, that is itself a burden.

Clearly then the President does not have to bother personally about the impact of taxes or even VAT. While Mr Jagdeo is a consumer and would therefore suffer VAT on some purchases, unlike other ordinary Guyanese, his take-home pay and his gross pay are about the same. For the average Joe, VAT at 16% would have to be paid out of income already taxed at 33⅓%.

Selling VAT
Not being subject to the country’s wide, deep and draconian menu of taxes, the President may have honestly felt that the VAT is no burden. But let us remember that for practical purposes, he is also the country’s economist-in-chief, is a big spender and knows something about money and the nation’s finances. He played a big role in selling VAT to the nation, the architect-in-chief of a VAT system introduced under his watch four years ago. Yes, we may have adjusted and adapted to VAT and its sister, Excise Tax, but let us not forget that they only came into existence on January 1, 2007.

Having pronounced on the non-burden of VAT, the President then makes what he considers a natural progression in his line of reasoning: there is no need to revise it to lower it. But here he is being disingenuous. He and his Finance Minister have been reminded about his own sweeping, unqualified and oft-repeated commitment to VAT being “revenue-neutral.” So memory lapse is not an excuse. The nation has helped to remind him even as the people plead for relief.

But it did not need an economist to know that VAT was almost instantaneously a burden. Ram & McRae had said in its Budget Focus 2008 that “at some point the law and the tax can become excessively burdensome.” The accounting firm added that “if this point had not been reached, we certainly are very close.”

Remembering GUYEXPO
There was however no need to consider what others said or felt. Just consider what the President and his Finance Minister have said and how they have danced in delicate step on the question of VAT. The President needs no reminder of his speech at the opening of GUYEXPO 2006 during which he repeated his government’s commitment to the revenue-neutrality of VAT when he announced: “We said from the very beginning that VAT should be revenue-neutral, we are not looking to increase the collection of taxes, increase taxes or the revenue base with the introduction of this tax.”

Or that on its introduction, the government was adamant that the rate of 16% was arrived at after careful consideration and that any concession to the pleas of the trade union movement, consumer groups and civil society would undermine the Value Added Tax. Finance Minister Dr Ashni Singh insisted in his mid-year report of 2007 that the tax was revenue neutral. In fact, if we go back some months before the presentation of that report, Dr Singh, rapidly demonstrating all the schemes and skills of a politician, and disparaging the members of the opposition for suggesting that there would be a windfall, made it pellucidly clear how the government had computed “revenue neutrality.”

On page 206 of the Hansard records of the February 15, 2007 sitting of the National Assembly dealing with VAT he said, “If we turn to table VI of the Estimates, we see that the actual collections from the taxes that were abolished with the introduction of VAT, generated a total revenue of $24.3B last year, and so if the actual collections for these taxes were $24.3B for last year, and the projected collection for VAT is $24.8B, I have great difficulty in understanding where, Mde Speaker, is the windfall? These are facts of the matter.”

Well, if revenue neutrality was the goal and commitment, Jagdeo and Singh have gouged the people of this country more than fifty billion dollars.

Dancing with the facts
Dr Singh had to slither a bit when the results for full-year 2007 became public. It showed that VAT and Excise Tax had exceeded budget by $12.6 billion, or 49%. In fact for VAT alone the excess was a staggering 76% but since the two taxes were linked by the government in its revenue neutral commitment, the correct measure was the 49% excess in the combined rate.

By then of course, both the President and the Minister of Finance were aware that the rate of 16% was in fact the result of a mistake which his government had discovered very soon after VAT’s introduction. But instead of correcting the mistake, the government, under pressure to modify the rate, extended a deceptive compromise by agreeing to monitor implementation and make adjustments as necessary to bring relief.

Pity the Poor
For consumers, this was no theoretical matter. VAT is a tax on them. If the tax is not properly formulated, it is a hugely regressive system of taxation because it is imposed on expenditure. The poor do not earn enough to save; they are more affected by VAT than those who earn enough to save. Let us forget for a while that the business class has also exploited the VAT and are the biggest VAT cheats. I have in my possession a single invoice issued earlier this year by a Berbice businessman that was not only in breach of the VAT Act but cheats the revenue of close to $100,000! And that is one invoice for one businessman on one customer.

Sorry about the digression. By the time of VAT’s introduction, the government had removed the lower rate of 20% for the first band of taxable income. The wretched poor and not so poor therefore found themselves in the same tax bracket as the better off folks, paying the same rate of personal tax on income – 33⅓% – and out of the balance were then forced to pay the incorrect, immoral rate of 16% on the VAT-able items of goods and services they consume, including the meal at the corner restaurant.

With all the cheats and cheating, VAT even with poor administration is a huge tax gatherer. And the IMF and the government tried their best and placed considerable resources in ensuring that the poor did not get away. Pity that the same effort was not placed against the VAT cheats that dominate our commercial centres and rural areas. VAT has continued to be a major revenue source and even in 2010 when we expect the economy to grow by less than 3%, VAT takings over the first half of 2009 were 9%. Despite this, the Minister expects the full year increase to be only 5%!

Table: Central Government Abstract Revenue by Head
G$ Millions

Source: National Estimates and Mid-year Report 2010

Conclusion
When the first year results of VAT became known, Ram & McRae confidently and generously said in its Focus on Budget 2008 after the size of the windfall became known that “it would now be immoral for the Government to renege on its commitment to adjust the rate of the tax to make it revenue-neutral.”

Since the year of VAT’s introduction, the economy has grown by 5.4%, 3.1% and 2.3% and for this year it is projected to grow by 2.9%. Compare that with the growth of VAT collection for the same years: 47.82%, 1.06%, 20.4% and close to 6%. But if you take what he said at GUYEXPO 2006, those things had nothing to do with revenue neutrality.

Once again President Jagdeo and Dr Singh have been caught out. I am not sure they care, however, well looked after as they are and with the peoples’ taxes available to silence critics and buy support. My own view is that VAT should be made into an election issue. I am prepared to consider casting my vote for a party that commits itself to correcting the dishonesty that has characterised VAT.