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Focus Guyana’s National Budget 2018

Ram & McRae i November 2017 Chartered Accountants

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Cover: Images courtesy Stabroek News and INEWS Guyana.


Ram & McRae ii November 2017 Chartered Accountants

Contents Page

Section 1 About this Publication 1

Section 2 About Ram & McRae 2

Section 3 Pre-Budget Comments 4

Section 4 Introduction 7

Section 5 Highlights 9

Section 6 Review 2017 11

Section 7 Legislation 2017 18

Section 8 Unfinished Business 22

Section 9 2018 Policy Issues and Targets 23

Section 10 The Government of Guyana Financial Plan 2018 29

Section 11 Who Gets What in 2018 35

Section 12 2018 Budget Measures 40

Section 13 Commentary and Analysis 46

Dealing with Income Inequality 47

The New Demerara River Bridge 49

Management and Investment of Oil Revenues 52

Local Content 56

Taxpayer Charter Needed 58

Section 14 Conclusion 62

Appendix A Legislation 2016/2017 (Acts, Regulations and Orders) 63

Appendix B Selected Socio – Economic Indicators 72


Ram & McRae iii November 2017 Chartered Accountants

Index of Tables and Charts Description Section Page

Capital Expenditure by Ministry Introduction 8

Sectoral Performance Review 2017 12

Key Performance Indicators “ 13

Per Capita Gross Domestic Product “ 13

Public Debt: - Domestic “ 14

- External “ 14

Balance of Payments “ 15

Commercial banks: - Financial rates “ 16

- Liquidity “ 16

Sector output “ 17

Principal & subsidiary legislation 2017 Legislation 18

Contribution to Gross Domestic Product by sector 2018 Policy Issues and Targets 25-26

Current Revenue by type Government of Guyana Financial Plan 2018 29

Internal Revenue “ 30

Expenditure Trends “ 30

Capital Revenue by type “ 31

Personal Emoluments Trends “ 33

Wages and Salaries Trends “ 33

Financial Operations of Central Government (Accounting classification) “ 34

Current Non-Interest Expenditure: By type of disbursing agency Who Gets What 2018 35

By Ministries / Departments “ 35-36

By Region “ 37

By Principal Law Enforcements “ 38

Budgeted Current Revenue for Petroleum Commentary and Analysis 52


Ram & McRae 1 November 2017 Chartered Accountants

About this Publication

Focus on Guyana’s National Budget 2018 represents the twenty-eighth edition of this Ram & McRae annual publication which highlights, reviews and comments on the major issues surrounding and raised in the National Budget. The first Focus on Guyana’s National Budget was published in the year 1991. The publication was in memorandum format and consisted of nine pages. It has been published each year since that first publication and represents one of the longest continuous not-for-profit publications in Guyana. Each year, Budget Focus is circulated among politicians, the business community and the country representatives of international agencies operating in Guyana. But most importantly for us and the general public, is the wide circulation made possible by the publication, in the Stabroek News, of an abridged but comprehensive version of Focus. We thank Stabroek News for making this possible. The contents of this publication are not intended to take the place of the text of the Budget Speech, relevant law or of a professional advisor. This analysis is prepared and distributed on the understanding that Ram & McRae is not engaged in rendering professional services to the reader. If financial or other expert assistance is required, please contact the Firm. Ram & McRae also offers the public a unique compilation of Guyana’s tax and business-related legislation (and advice thereon) including our Consolidated Tax Laws of Guyana, as at November 2017 and updated regularly (includes Income Tax, Corporation Tax, Property Tax, Capital Gains Tax, Tax, Income Tax (in Aid of Industry), Revenue Authority, Financial Administration and Audit, and Investment Acts, the double taxation treaties signed by Guyana). Other publications by the Firm, some of which are available on our website, are: Handbook on the Companies Act, Second Edition, 2017 Guyana Business Outlook Survey 1995-2010 (except 1998) Guyana Investors Information Package Focus on Guyana's National Budget 1991 – 2017 Value Added Tax and Excise Tax Handbook, Second Edition, 2017 (includes annotated copies of the

legislation) Annual Tax Planner



About Ram & McRae Established in 1985, Ram & McRae has distinguished itself in the field of professional services. Our client focus, commitment to professionalism, and continuous search for excellence, are the sources of our unchallenged reputation among professional firms. We offer a wide range of services including audit and assurance, accounting, tax, payroll, corporate/legal, litigation support and other business support services. The Firm has secured a premier place in the provision of taxation and advisory services to local and international business operators. Our continuing relationship with international partners provides us with access to worldwide resources and ensures that our clients benefit from business ideas, opportunities and solutions that place them in leadership positions in their industry. Accēdō Inc., a service company of Ram & McRae, offers a wide range of Human Resources services to bring potential employees and employers in contact with each other. Christopher Ram & Associates, Attorneys-at-Law, a partnership company of Ram & McRae, is a law firm focused on providing a complete legal service to clients in core sectors. The firm advises businesses both locally and internationally.

Our partners Christopher L. Ram, FCCA, ACMA, ACIS, LLB, LEC Managing Partner and founder of the firm with overall responsibility for quality assurance aspects of the engagement, Christopher has in excess of forty years of experience in senior positions in international auditing firms. He was Financial Consultant to a regional government for several years where he was integrally involved in Budget preparation and Chairman of the National Insurance Board. Christopher is also a practising Attorney-at-law and pursuing a masters in Oil and Gas Law. Robert V. McRae, CPA, BSc., FLMI Robert has more than thirty-five years of experience in the areas of audit, accounting and insurance in Guyana and the United States of America. Robert also practises as a Certified Public Accountant in New York. Rakesh V. Latchana, FCCA, CPA, CMA Rakesh, who is also the Firm’s Chief Executive Officer, has over twenty years of experience in audit and accounting and serves on the Technical Committees of the Institutes of Chartered Accountants of Guyana and the Caribbean. He is also a member of the SME Implementation Group of the International Accounting Standards Board. Acknowledgements The Partners of Ram & McRae are truly grateful to have been again afforded the opportunity to contribute to society through this publication. We sincerely thank those members of staff who worked so assiduously to produce this publication in such a short period of time. These persons include Lisa Moonilall, Chetram Singh, Kaziah Seunandan, Melissa Ram, Kavita Khan, Markel Mangra, Mark Sage and Joshua Benn. Christopher Ram, Robert McRae and Rakesh Latchana November 28, 2017



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Pre-Budget Comments

In October 2017, during his update on the budget preparations Finance Minister Winston Jordan stated that the opposition “has not taken part in the consultation process as yet” despite having been invited. Disappointingly but predictably, the opposition never took part in any of the consultations and later defended the decision not to participate claiming that it was unfair to ask them to participate in such a process without requested documents being supplied.

Instead, the opposition PPP/C introduced, based on their analysis of a deteriorating economy and interventions required, a motion which they urged should be debated before Budget Day. Their effort was crowded out of the parliamentary agenda but the issues raised largely represented a reversal of the 2017 Budget measures passed into law without their support. Other items proposed include reversing the planned closure/privatisation of sugar estates and the suspension of the proposed Special Purpose Unit to handle privatisation/diversification of the industry.

The opposition pointed to the movement of the overall balance of payments to negative US$46 million from a surplus of US$12 million, the US$53 million increase in external debt and the fall of foreign reserves to their lowest level in seven years. The Opposition has also raised questions about drug purchases in excess of $600 million for which the Georgetown Public Hospital Corporation acting CEO sought retroactive approval after apparent override of tender procedures. Meanwhile, the Minister of Finance also acknowledged that government spending, a major driver of economic growth was lagging, not because of incompetence or inefficiency but, if we are to believe the minister, as a necessary consequence of the government’s prioritising of transparency and accountability specifically in the procurement process.

To add more salt in the nation’s economic wounds, with all the much-bruited improvement in accountability, the Auditor General in his report identified an increase of 50% in overpayments on government contracts, amounting to tens of millions of dollars. Minister Jordan gave the assurance of no new taxes and tamped down expectations with this statement: “Anything in this budget is about cleaning up or providing an incentive or two as promised” and that the 2018 budget would seek to create conditions for small business growth. Of note was the absence of any reference, at this halfway stage of this administration’s term, as to how far along it is in implementing the grandiose 100 day plan of the coalition’s pre-election manifesto or in creating the Green Economy and Good Life For All, promised in his earlier budgets. In a direct repudiation of the success of one of the signature measures of the 2017 budget, a letter writer in the press put forward a cogent argument that consumers had not benefited from the VAT reduction. In Commentary and Analysis in Focus on Guyana’s National Budget 2017, the departure from the principles of certainty, predictability and VAT being broad-based with few exemptions and a single low rate, along with the inflationary effect of the government’s VAT proposals, had been highlighted.

In its lengthy budget wish list for 2018, the union grouping FITUG, comprising the sugar unions, had called on the Government to halt plans to close and sell sugar estates and to raise the personal income tax threshold raised from $60,000 per month to $100,000. It called for an income support mechanism for families and an enabling mechanism to promote investment.

FITUG called on the government to establish skills training programmes for sugar workers and youth, and counselling and other social programmes to assist in reducing depression and other social anxieties; provide tax relief for taxpayers with dependents; remove the ⅓ tax threshold for income earners who earn in excess of $180,000 per month and have a second tax tier set at $250,000 per month at a chargeable rate of 40 per cent;



remove Value Added Tax (VAT) on electricity, water, private health care and private education; increase the rate of Old Age Pension to $30,000 per month from the current $19,000 per month; reintroduce electricity and water subsidies for Old Age Pensioners; utilise the Government school buses, when not transporting students, to transport pensioners to uplift their pensions and to visit hospitals, and health centres; examine the introduction of 24-hour state-operated daycare for single parents; and to improve the rate of public assistance from $7,500 to $12,000.

On the public affairs program Plain Talk, Lincoln Lewis TUC General Secretary, told television host Christopher Ram (see chrisram.net) that the minister should ignore the IMF/World Bank prescriptions for balancing the budget which usually created much social dislocation and economic hardship, and instead implement a national development plan that would be geared towards job creation and improving the lives of people. He expressed the view that an increase in minimum wage, money for the hospitals, tax reductions, and reassessment of government spending priorities should all be measures included in the 2018 budget. Then, asserting that he was speaking on behalf of the labour movement, Mr. Lewis made the incredible call for government to assume control of all non-renewable resources through state-owned entities.

On the same television programme and later in the print media, President of the Georgetown Chamber of Commerce and Industry, Mr. Deodat Indar called for across-the-board tax reductions and the removal of VAT from certain inputs used in forestry and agriculture, sectors that were performing particularly poorly. Mr. Indar also expressed the hope for sectoral stimulus and for targeted government spending in areas that would result in capital formation and revenue generation.

Ram & McRae’s internet-based pre-Budget survey sought to gauge expectations on fifteen items, satisfaction with twenty-three measures presented in the 2017 budget and satisfaction on twelve other items. Respondents were also invited to submit any additional comments they considered necessary. Of 196 respondents, 149 persons completed the full Survey while an additional 47 completed the expectations section only. Of the respondents, 29 were self-employed while 111 were employed and 9 were unemployed. In terms of expectations, the top four expectations in order of priority were an economic stimulus package (4.27 out of 5), an increase in old age pensions and public assistance (4.20), an increase in wages for teachers (4.15), and fourth, restructuring of the sugar industry (4.13). Among those who identified themselves as self-employed persons, an economic stimulus package ranked eleventh with an increase in the income tax personal allowance being the number one issue. Interestingly, three of the top four issues last year, none of which made it into this year’s top four primary concerns, involved taxes, while the only survivor from last year’s top four, an economic stimulus package, is this year’s number one issue of concern. The current top four appear to reflect greater social consciousness in that they seek to address issues that have wider social implications for a larger group than the much narrower direct impact of tax issues identified in 2017. The tax issues did not disappear entirely, and increases in the income tax personal allowance (threshold) and reduction in current income tax rate occupied the next two spots. These were followed by increases in private sector minimum wage, public sector wages and implementation of tax reform measures. The 2017 budget measures with which there was the highest level of satisfaction were: increase in old age pension and public assistance (3.67 out of 5) being the item with which respondents were most satisfied, increase in income tax threshold and introduction of progressive rates (3.40), reduction in corporate tax rate for non-commercial activities (3.39), reform of system of issuing compliances (3.32), and increase in VAT threshold to $15 million (3.31). The greatest area of dissatisfaction was with the introduction of VAT on electricity, water and educational items (1.43 out of 5) where 130 of 147 respondents expressed varying levels of dissatisfaction. Increase in the



travel (departure) tax (2.01), introduction of a fee for Taxpayer Identification Certificates (2.07), and reclassification of other previously zero-rated items to exempt items for VAT (2.09) were other areas of high levels of dissatisfaction. In other matters, the top issues with which respondents expressed satisfaction were improving infrastructure (2.75 out of 5) the item with which persons were most satisfied, improving public sector salaries (2.42) and consultation on budget (2.18). There was a significant number of issues with which respondents were dissatisfied: management of the economy (1.59 out of 5) being the area of most concern, appointment of the Election Commission Chairman (1.62), handling of traditional industries: sugar, rice, gold (1.66), keeping election promises (1.71) working relationship with Georgetown City Council (1.80), handling of oil and gas industry (1.84), and handling crime (1.90).



Introduction Focus 2018 begins with a correction of a statement in Focus 2017 that Budget 2017 was the earliest national budget ever been presented in post-independence Guyana. In fact, the earliest was in 1975. Budget 2018, the fourth by the APNU+AFC Government, continues the annual trend of a bigger budget over the preceding year. Budgeted expenditure for 2018 is projected at $267.1 billion, or 7.1% over total expenditure in 2017. This represents a 20.5% increase over 2016, the first full year of this Administration. At June 30, the midyear report by the Minister of Finance had reported total revenue of $97.2 billion, expenditure (capital and revenue) of $97.3 billion, inflation of 1.1%, and real GDP growth of 2.2%. The Minister reported that real GDP growth (2.9%) fell short of the 3.8% growth rate projected in the 2017 Budget as well as the revised, lower 3.1% projected in August 2017 on the presentation of the mid-year report. The Minister attributed the shortfall to “expected weak performance” in mining, quarrying, sugar and forestry. Despite this not insignificant shortfall, tax and other revenues increased by 8.7% which suggests a deterioration in the tax to GDP ratio. The tax measures announced by the Minister were mostly positive and are unlikely to receive the kind of criticisms and hostility he received over the 2017 tax measures. The mining sector and the forestry sector will no doubt welcome the measures specific to their sectors while the removal of VAT on educational services will be seen as inevitable. While there is no increase in the personal allowance, the full allowance is available, whether or not employment is exercised for part of the year only. During the year, there were three supplementary appropriations totalling $11.9 billion. Once again, the Minister took issue with the Auditor General whose 2016 Report had commented adversely on the use of the Contingencies Fund. For 2018, current revenue is budgeted at $201.9 billion, capital revenue and grants of $10.7 billion, current expenditure at $188.4 billion, capital expenditure at $59.7 billion, debt servicing of $19.0 billion and an overall fiscal deficit of $54.5 billion, financed by domestic and external loans of $33.4 billion and $21.1 billion respectively. The revised 2017 numbers, which of course include some level of projections given that the year is incomplete, were mixed. Revenues are projected to surpass budget by $7.8 billion, offset by current expenditure falling short of budget by $1.5 billion, capital expenditure exceeding budget by $1.4 billion and the overall deficit being $8.5 billion less than budgeted. See table on page 32, Financial operations of the Central Government. Ram & McRae tested the constant complaint of substantial underspending on the capital budget against publicly available information. In 2017 actual spending exceeded budget by 2.4% while in 2016, actual spending was below budget by 10.7%. However, in both years, spending in the second half of the year accelerated dramatically. See table on next page. We find these numbers unbelievable and suspect that this is a clear case of a conspiracy to violate the provisions of the Fiscal Management and Accountability Act by senior government functionaries by leaving the Cash Book open and writing cheques on the old year well into the new year. The law requires that unspent funds at the end of the year should be returned to the Consolidated Fund.



Comparison of 2016 and 2017 Budget and Actual Analysis of Capital Expenditure

Minister Jordan favours long Budget Speeches, covering almost every area of the economy and the society and providing minute details of plans, programmes and activities. Despite its length, the Speech was short on references to gender and youth issues, on the issue of unemployment across the economy, the continuing problems faced by Linden and the National Insurance Scheme, and on specific measures to restore the economy to robust growth. With a second major catastrophe at the Georgetown Prisons in less than two years, the Minister sought to place the blame on the rioting of the prisoners and “their wanton act of violence and mayhem”. It is unfortunate that politics dictate that he could not attribute any blame and responsibility to the President and the Minister of Public Security for their failure to act on the recommendations of the Commission of Inquiry into the first catastrophe. While the Speech focussed more on tax administration than on tax reform, the tax amnesty and the reduction of the sums to be lodged as a condition for a challenge against a tax ruling were among the recommendations of the Tax Reform Committee appointed by the Minister on assumption to office. Unfortunately, this Administration does not seem to regard income and wealth inequality as serious issues and accordingly there is nothing in the Budget that could be considered a pro-poor step. Debate on the budget is scheduled to begin next Monday and the Appropriation Act passed before the end of this year. The Minister can expect the parliamentary Opposition to come hard at him, but unlike last year, he is unlikely to have a fight on too many fronts.



Highlights 2017 Facts Growth in Real GDP of 2.9% compared with initial and revised targets of 3.8% and 3.1%

respectively.

Inflation is projected at a rate of 2.0% compared with an initial target of 2.5%.

The 91-day Treasury bill rate decreased marginally from 1.68% in 2016 to 1.54% at September 2017. The Central Bank rate of the Guyana Dollar to the US Dollar remained stable at $206.5 while the

average market commercial bank mid-rates for the US Dollar, Euro and Pound Sterling depreciated by 1.6% to $211.58, 7.3% to $237.44 and 5.5% to $272.79 respectively, between the period January to September, 2017.

Overall balance of payments deficit of US$53.1 million compared with US$53.3 million deficit in 2016, improving by 0.4%.

Merchandise exports are projected to decrease by 0.9% or US$1.5 million to US$1.44 billion while

merchandise imports are projected to increase by 9.6% or US$138.5 million to US$1.59 billion.

Current account deficit projected at US$235 million, compared to a surplus of US$13 million in 2016; and a surplus of US$181.8 million in the capital account, compared to a deficit of US$13.2 million in 2016.

Current revenue of $192.7 billion compared with $177.3 billion in 2016, an increase of 8.7% and a rise of $6.7 billion or 3.6% from budgeted of $186.0 billion. Current expenditure is projected at $184.1 billion, an increase of 8.2%.

Overall fiscal deficit of $49.6 billion compared with $39.4 billion in 2016 and budgeted amount of

$56.5 billion.

Gross external reserves of Bank of Guyana at the end of 2017 projected at US$616.8 million, an increase from US$596.7 million in 2016, or 3.4%. This will represent 3.4 months of import cover.

2018 Targets Growth in Real GDP of 3.8%, with the non-sugar growth rate anticipated to be 4.6%.

The inflation rate projected is 2.4%.

Balance of payments deficit is expected to widen to US$79.7 million from US$53.1 million in 2017, a

downfall of US$26.6 million or 50.1%. Merchandise exports are projected to increase by 0.8% or US$11.2 million to US$1.45 billion and

imports are projected to increase by 5.7% or US$90.2 million to US$1.68 billion.

Current account to register an expansion in deficit of US$57.6 million to US$292.6 million. Capital account surplus of US$212.9 million compared with 2017 of US$181.8 million for 2017.

Size of the Budget: $267.1Bn, 7.1% increase



Current revenue of $201.9 billion, an increase of 4.8%. Current expenditure of $256.8 billion, an increase of 6.0%.

Overall fiscal deficit of $54.9 billion, an increase of 10.8%.

See more in 2018 Policy Issues and Targets on pages 22 to 26 and see Government of Guyana Financial Plan 2018 on pages 27 to 32. Ram & McRae's Comments There is some improvement in real GDP over 2016 (2.6%) which was the lowest in a decade. In both 2016 and 2017, the projected growth in the economy was not achieved, despite two downward revisions. At 2.4%, the projected inflation rate in 2018 is expected to be higher than in 2017 which was in turn higher than in 2016 (1.3%). Perhaps the most significant development in the economy was the Government’s successful response to what at one time appeared to be a significant deterioration in the exchange rate. In fact, fears were being expressed of a rate of anywhere between G$230 and G$250 to the United States Dollar while foreign currency was becoming scarce. Credit is due to both the Minister of Finance and the Governor of the Bank of Guyana for their decisive action in bringing down the spread between the selling and buying rates of foreign currency and controlling the rate. However, there has been no corresponding action in connection with the money transfer agencies which are allowed to charge whatever rate they wish. It is hoped that the Government and the Bank of Guyana will take action to ease the burden on the poor who depend on remittances through money transfer agencies. On the social side, there continues to be a slide in the population with a large spike in the net negative migration of 18,500 persons, a figure that has risen sharply since 2015. There is a 5% increase in reported Serious Crimes although the number of murders is projected to fall from 142 in 2016 to 116 in 2017.



Review 2017 Financial Review Current Revenue for 2017 is projected at $192,673 million, exceeding budget by $6,651 million or 4%. Internal Revenue and Customs & Trade Administration receipts are expected to surpass their budgets by $8,098 million and $2,376 million respectively, while Value-Added and Excise taxes are expected to have a shortfall of $3,983 million. More specifically, Corporation Taxes and Income Tax will exceed budget by $6,091 million and $2,082 million respectively. Value Added Tax (VAT), which was budgeted to bring in $45,180 million will fall short of that target by $4,749 million. Excise Tax is expected to increase by $806 million compared to a budgeted of $34,369 million. The Minister indicated that tax receipts from oil and gas support activities are expected to increase by $3.2 billion while international trade transactions are projected to rise to $19.4 billion, an increase of 11.2 percent. In 2017 the standard rate of VAT was reduced to 14%, the registration threshold was increased to $15 million from $10 million, the range of zero-rated items moved to exempt or standard rated with the result that the number and range of items that were exempted from VAT increased significantly. Personal Emoluments and Other Goods and Services are projected to fall short of budget by $563 million and $1,879 million respectively while transfer payments are expected to increase by $974 million over the budget of $71,094 million. Interest Expenditure for 2017 is expected to decrease by $528 million compared with budget of $6,862 million. The current balance in 2017 is projected at $10,278 million against a budget of $1,631 million, due in large measure to lower realised current expenditure. Capital revenue and grants are expected to be $14,315 million compared with budget of $13,152 million while Capital Expenditure is projected at $58,146 million which is an increase of $1,388 million, or 2% over the budgeted figure of $56,758. Debt repayment is projected to decrease by $83 million compared with budget of $8,974 with the entire decrease being on the External debt. The overall balance on financial operations for 2017 is expected to be $42,447 million compared with budget of $50,949 million. The overall balance is expected to be financed from external ($19,714 million) and domestic ($22,730 million) sources. See Financial Operations of Central Government (Accounting Classification) on page 32. Sectoral Performance The Table below shows the sectoral growth, budgeted and forecasts for 2017 and actual 2016. For convenience, we also show the projections for 2018.



INDUSTRY Budget Budget Revised Actual 2018 2017 2017 2016

% % % % Agriculture, Fishing and Forestry (0.68) 5.04 0.21 (10.21) Sugar (24.05) 13.68 (17.16) (9.63) Rice 2.50 11.24 12.60 (37.87) Other Crops 2.30 4.44 2.40 6.50 Livestock 2.00 3.12 4.38 (3.45) Fishing 2.30 (4.85) 1.04 24.70 Forestry 7.92 (2.94) (7.15) (28.90) Mining and Quarrying 4.99 0.71 (1.87) 73.14 Bauxite 23.34 18.11 (2.26) 21.35 Gold 3.27 (2.62) - 86.04 Other 3.80 9.48 (12.61) 37.89 Manufacturing 0.07 4.32 3.58 (4.93) Sugar (24.05) 12.36 (17.14) (9.63) Rice 2.53 11.45 12.65 (14.40) Other Manufacturing 2.41 (0.59) 3.10 0.90 Electricity and Water 5.07 3.47 4.50 17.62 Construction 15.00 1.93 13.50 5.78 Wholesale and Retail Trade 1.10 (0.43) 3.10 10.63 Transportation and Storage 5.30 3.86 3.86 0.36 Information and Communication 3.00 5.23 2.30 2.10 Financial and Insurance Activities 4.70 6.93 5.80 2.14 Public Administration 1.30 2.48 1.30 2.50 Education 2.44 3.00 2.00 1.45 Health and Social Services 2.42 2.83 2.49 1.52 Real Estate Activities 4.00 3.96 3.98 2.49 Other Service Activities 3.40 6.24 3.50 1.90

Source: Computation by Ram & McRae from Estimates of the Public Sector (Vol. 1 Appendix I)

The Global Economy Global Economic growth is expected to reach 3.8% for 2017. The Minister indicated that the Caribbean region and Latin American expect growth of 1.2% and 1.9% in 2017 and 2018 respectively. A significant risk to the regional economies is the unpredictable weather events such as those seen in 2017 with dire consequences to many of the countries.



The Domestic Economy

Target

2018 Forecast

2017 Target

2017 Actual

2016 Real GDP Growth 3.8% 2.9% 3.8% 2.0% Inflation Rate 2.4% 2.0% 2.5% 1.3%

Source: Annual Budget Speeches Per Capita GDP The per capita GDP saw continuous growth over the years with an increase from US$4,096.6 million in 2016 to US$4,223.5 million in 2017 as shown below.

Source: Annual Budget Speeches There are serious issues with Gross Domestic Product as a measure, including:

a. GDP is a measure of production within the country, whether by nationals or non-nationals. As foreign companies play a greater role in the economy, particularly in enclave type of activities, the value of the measure can be extremely misleading. It is not without some significance that the Minister

reported a 20% increase in the repatriation of employee compensation by foreigners during 2017. b. GDP places the same value on activities of positive benefit to the country as those that are harmful,

such as pollution. In other words, a positive GDP is not always beneficial. c. GDP is an average and can mask extreme inequality. It is not therefore a measure of human

development.

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

2009 2010 2011 2012 2013 2014 2015 2016 2017

US

$ 'M

LN

Year

Per Capita GDP



Domestic Debt The Minister announced that the stock of domestic debt is projected to decline from US$438.6 million, in 2016, to US$427.8 million, in 2017, representing a decrease of 2.5 percent. However, domestic debt service is expected to increase by 16.8 percent, from US$9.3 million, in 2016, to US$10.9 million, in 2017, primarily due to the payment of the National Insurance Scheme (NIS) debentures issued in 2016 to assist in recovering the impaired investment in the Colonial Life Insurance Company (Guyana) Limited (CLICO). Debt during the years 2009 – 2017 is shown in the table below:

Year G$Bn 2009 87.0 2010 100.5 2011 104.9 2012 93.5 2013 98.8 2014 78.4 2015 81.7 2016 90.7 2017 88.3

Source: Annual Budget Speeches The Domestic Debt includes only central government borrowing and therefore excludes any borrowings by public corporations and non-interest bearing debt, such as the Special Issue of Government of Guyana Securities by the Bank of Guyana. Debt is the principal vehicle to finance budget deficits and in an illiquid market can crowd out private borrowings. External Debt The table below shows that over the period 2000 – 2017, the stock of public debt has increased.

Year US$Bn Year US$Bn 2000 1.193 2009 0.933 2001 1.197 2010 1.043 2002 1.247 2011 1.206 2003 1.199 2012 1.359 2004 1.188 2013 1.246 2005 1.214 2014 1.216 2006 1.043 2015 1.143 2007 0.719 2016 1.162 2008 0.834 2017 1.234

Source: BOG Statistics and Budget Speech – All shown at December 31, forecast used for 2017. The external debt increased by US$72 million in 2017 over 2016. The Minister indicated that the increase was attributed to higher principal and interest payments to several multilateral creditors, one bilateral creditor and one private creditor. The cost of servicing the eternal debt is perceived to be manageable, consuming a



mere 5.7 percent of the projected central government revenue for 2017. The net international reserves as at September 2017 was US$579.5 million. Balance of payments The balance of payments is projected to show a deficit of US$53.2 million in 2017, a minor decrease of US$0.2 million when compared to 2016. The balance on the Current Account was negative US$235 million, a significant decline over the budgeted 2017 of negative US$45.3 million, a miss of US$189.7 million or 419%. The Balance on the Capital Account amounted to US$181.8 million when compared to budget for 2017 of US$65.2 million. In 2018, the capital account is projected to register growth to US$212.9 million reflecting an increase in capital inflows and foreign direct investment of US$31 million.

Balance of Payments Budget Revised Budget Actual

Stated in US$Mn 2018 2017 2017 2016

CURRENT ACCOUNT

(292.6)

(235.0)

(45.3) 13.0

Merchandise trade (net)

(226.2)

(147.2)

(137.7) (7.2)

Services (net)

(358.1)

(374.3)

(200.5)

(300.2) Transfers 291.7 286.5 292.8 320.4

CAPITAL ACCOUNT 212.9 181.8 65.2

(13.2) Capital Transfers 18.6 14.0 17.5 14.8 Non - financial public sector (net) 33.0 45.5

(43.8)

(21.8)

Private capital 195.5 143.4 137.5 (1.8)

Short term capital

(34.2)

(21.0)

(46.0) (4.4)

Errors and Omissions - - -

(53.2)

Overall balance

(79.7)

(53.2) 19.9

(53.4) Source: Estimates of the Public Sector (Vol. 1 Appendix K) Banking and Interest Rates Prime lending rate reflected a minor decrease of 17 basis points while the 91-day Treasury bills and saving rates decreased by 14 and 15 basis points respectively which reflects excess liquidity and higher demand for treasury bills. The following chart shows the spread earned by the commercial banks as the financial rates continue to decline.



Source: BOG Statistics Abstract taken up to September 2017 Falling interest rates on loans are typically accompanied by falling savings rates as lending institutions try to maintain their profitability. They can also signal a levelling off of borrowings in the economy and a fall in investments, a key driver of economic activity and job creation.

Source: BOG Statistics Abstract taken up to September 2017 Total Deposits, Loans and Liquid Assets all experienced decreases by 2%, 3% and 7% respectively. The Exchange Rate The central bank exchange rate of the Guyana dollar to the US dollar remains the same when compared to 2016 but declines are seen in market rates (see Highlights on page 7 for changes in market rates for the US dollar and other currencies).

‐ 2 4 6 8

10 12 14 16

Per

cen

tage

Year

Financial Rates

T/Bill Rate ‐ 91 days

Prime Lending Rate

Savings Rate

‐

100

200

300

400

G$

'Bln

Year

Commercial Bank Liquidity

Total Deposits

Total Loans

Liquid Asset ‐ Surplus



Ram & McRae’s Comments 1. The output for several sectors stand out in comparison with the prior year as follows:

Description Forecast 2017 Actual 2016 Change

Bauxite (tonnes) 1,417,557 1,479,090

(61,533) (4.2) Gold (ounces) 712,706 712,706 - -

Rice (tonnes) 602,087 534,450

67,637 12.7

Sugar (tonnes) 152,000 183,400

(31,400)

(17.1)

Source: 2017 and 2018 Budget Speeches Sugar production continues its inexorable decline, mired in financial, industrial relations and management issues at the operations level and uncertainty at the policy level. If current trends continue, Guyana may once again find itself importing the commodity. The Minister stated that gold declarations for 2017 are expected to remain stable when compared to the prior year. The Bank of Guyana noted in their 2016 Annual Report growth in the mining sector in 2015 and 2016 being fostered by the upsurge in gold declarations by local and foreign companies. Conclusion The economy has failed to respond to the continuing spending of ever increasing sums of money and unemployment may in fact be rising. The total capital expenditure by Central Government over the past ten years amounts to $472,735 million, a considerable sum on a per capita basis. The wish for some stimulus to move the economy to another level remains unanswered and despite the theme of A Good Life, confidence in the economy remains low. What Guyana needs is transformational management that will produce growth of real GDP in excess of 5% per annum.



2017 Legislation The following Table shows by number the principal and subsidiary legislation passed between November 28, 2016 (Budget 2017) and November 27, 2017 (Budget 2018).

Type of Legislation Total Relevant to Business Community

Appendix Reference

Acts assented to 22 12 A1

Regulations issued 5 4 A2

Orders made 26 2 A3

Ram & McRae’s comments While the records show twenty-two Acts passed and assented to between the two Budget Days, the number is flatteringly deceptive. Instead of what ought to have been a single Fiscal Enactment Amendment Act as has been the long-established practice, twelve separate amendment Acts were passed for each taxation Act that was amended. Focus 2017 had reported that up to the 28th of November 2016, Bills read for the first time and pending at the date of the Budget were the Animal Welfare Bill 2016; Food and Safety Bill 2016 and Prime Minister Hamilton Green Pension Bill 2016. Ram & McRae understands that the first two Bills have been referred to a Select Committee but that neither of these has yet been considered. Focus 2017 had criticised ad hominem legislation in relation to Dr. Clive Thomas who, as Director of the State Asset Recovery Agency, enjoys a higher legal status than the Agency itself. The Government-controlled legislature went one step further in 2017 with the passage of the eponymous Prime Minister Hamilton Green Pension Act to enable Mr. Green to receive pension based on a salary he did not “actually earn[ed]” and to grant to him the benefits and other facilities available to former Presidents, even though he had never been President of the country. Additional Bills pending at the date of the 2018 budget include the Protected Disclosures Bill 2017, Witness Protection Bill 2017, Cybercrime Bill 2016, Constitutional Reform Consultative Commission Bill 2017, Civil Aviation Bill 2017 and Petroleum Commission of Guyana Bill 2017. Apart from the tax amendment Acts, there was no other legislation of direct relevance to the business community qua business. Indirectly, there were two Acts amending the Deeds and Commercial Registry Act (to give the Minister the powers of the Governing Board where none is appointed), and the Anti-Money Laundering and Countering the Financing of Terrorism Act (to make money-laundering a hybrid offence). There were two further pieces of primary legislation – the State Assets Recovery Act No. 14 of 2017 and the Tobacco Control Act No. 17 of 2017. The stated purpose of the Tobacco Control Act is to fight the tobacco epidemic by implementing the evidence-based requirements of the World Health Organisation’s Framework Convention on Tobacco Control to which Guyana had acceded on 15 September 2005. The Tobacco Control Act proposes the establishment of a National Tobacco Control Council comprising not more than ten members, all appointed by the Minister of Public Health who is designated portfolio responsibility for its administration. Of these ten, seven are ex officio leaving a maximum of three appointed members.



With the aim of protecting the public from exposure to secondhand smoke, the Act bans smoking in all indoor public places, indoor work places, in public transport, and in certain specified outdoor places. It places a duty on the tobacco industry to report tobacco advertising, promotion and sponsorship activity and seeks to declare the rights of all consumers to be fully informed of the risks of tobacco use and exposure to tobacco smoke by requiring that 50% of tobacco product packaging and labelling display prescribed pictorial and text health warnings. Minors are protected from tobacco exposure by limiting access to tobacco products and ensuring that the sale of such products only takes place in circumstances where the age of the purchaser can be verified. In common with similar legislation, the Act empowers the Minister to make regulations as necessary for its effective implementation. No regulations have been made, thus compromising the efficacy of the Act. The State Assets Recovery Act Passed in the National Assembly on April 13, 2017, the Act provides for the establishment of the State Assets Recovery Agency (SARA) which has as its primary function, the civil recovery of State property obtained through the unlawful conduct of a public official or other person, or any benefit obtained in connection with that unlawful conduct. “Conduct” is unlawful conduct if it constitutes an offence under any of the criminal, administrative, revenue or any other law of Guyana. The Director is vested with supra statutory powers, the likes of which no other person or body enjoys in any Caribbean or Commonwealth country, including:

1) Carrying out investigations to discharge the functions of SARA; 2) Determining which particular operations are to be mounted by SARA, and how these operations are

to be conducted; 3) Contracting out his functions; 4) Considering whether the recovery of State property may be better secured by means of criminal

investigations and criminal proceedings; 5) Exercising the powers of police, customs and immigration officers and the Guyana Revenue

Authority; 6) Entering into binding memoranda of understanding with other Government or Public bodies; 7) Collaborating with any State organ, foreign government, or international or regional organisation, in

the recovery of State property; 8) Compelling major statutory and constitutional bodies to provide the Director with information and

assistance, including the Commissioner of Police, The Director of the FIU; the Head of SOCU; the Chairman of the Integrity Commission; the Commissioner General; the Governor of the Bank of Guyana; the Head of the Central Anti-Narcotics Unit; the Chairman of the Guyana Gold Board and the Chairman of the National Procurement and Tender Administration.

The effect of the Act is more than just the recovery of state assets improperly acquired. In fact, the Court may allow the seizure of property other than state property if a person is unable to satisfactorily explain the source of assets acquired over the preceding twelve years. The Government claims that the Act is in consonance with the United Nations Convention Against Corruption 2003. In fact, the Act does not include several of the recommendations made in that Convention, such as the financing of candidates and political parties; reporting by public officials of acts of corruption (Article 8.4); rules to prevent corruption among members of the judiciary (Article 11.1); and the abuse of functions (Article 19).



On July 6, 2017 commentator Ramon Gaskin filed an action in the Constitutional Division of the High Court challenging the Act as being inconsistent with the Constitution, and therefore void. Among other remedies sought by Mr. Gaskin was a conservatory order preventing the enforcement of the Act. While that request did not find favour with the Court, the Court has signaled its intention to have the matter concluded and Mr. Gaskin is hopeful that the Court will fully address his action before the end of 2017. Some of the grounds on which Mr. Gaskin is seeking to have the Act struck down are:

i. the Act’s excessive abuse of the ex parte approach to the Court without a right to be heard from the first stage of the judicial process;

ii. the refusal by the Administration to address the serious concerns about the contents of the legislation raised by the public;

iii. the rejection by the Government of appeals by the Private Sector Commission, the rest of civil society and the parliamentary Opposition that the legislation be taken to the Select Committee;

iv. the denial of citizens’ rights to equal protection of the Law; v. the unlawful deprivation of the constitutional right to property;

vi. the Act’s failure to define “state property”; vii. the definition of unlawful conduct is vague, oppressive and allows for disproportionate penalties;

viii. “recoverable property” is not restricted to state property; ix. the Act does not require a finding of unlawful conduct, a criminal conviction or a finding of guilt

as a condition for the deprivation of property and the application of the Act; x. section 41 of the Act has impermissible retroactive effect of twelve years;

xi. the purported powers to the Ministers of Finance and Public Security to designate SARA officers with the powers of the Police, the Customs and the Guyana Revenue Authority are unlawful; and

xii. that the Act is constitutionally offensive, has been enacted without regard to the rights of citizens, obliterating necessary and important constitutional and procedural safeguards of due process, fairness, privacy, the right to counsel and the presumption of innocence.

Significantly, while a British consultant played a major role in the drafting of the legislation, the Guyana Asset Recovery Agency is a more extreme model of the asset recovery agency of the UK which was such an embarrassing failure - costing five times more to operate than the revenue it generated - that the British Government was forced to abolish it after five years. (See House of Commons Public Accounts Committee Review of Asset Recovery Agency published on 12 October, 2007).

Only one single Regulation(s) was made in the year 2017, the lowest number in any year since 1966. At the very least, the respective Ministers ought to have been issued Regulations to give working effect to two of the three substantive, primary pieces of legislation passed in 2017, i.e., the Tobacco Control Act and the State Assets Recovery Act. Similarly, the Ministers responsible for four substantive, primary 2016 enactments - the Telecommunications Act, the Wildlife Conservation and Management Act, the Public Utilities Act and the Insurance Act – ought to have made Regulations under the respective Acts. In the absence of such Regulations, these Acts cannot be properly implemented and enforced.

It appears that the Government pays huge sums to consultants to bring cut-and-paste legislation to Guyana but these are never fully operationalised since the competence and interest in the real work of enforcement is missing.

There were twenty-three Orders made, a number of which deal with property by NICIL. Having made NICIL one of its bogeys when in Opposition, the APNU+AFC Government is still unable to decide on whether and in what form NICIL will continue to operate.



This has been the poorest showing by any Parliament since 1966 measured by the number of sittings or the legislation passed. After all, the principal function of the National Assembly it to make laws for the peace, order and good government of Guyana. It is truly a disgrace that a body that is projected to cost the country a total of $1,519,506,000 in 2017 and $1,578,100,000 in 2018, has so far met only sixteen times during this year. The National Assembly has become hostage to the propensity of those in control, not excluding the Speaker, the Leader of the House and the Ministers of Government for overseas travel with at best, nebulous tangible benefits for the country relative to the amounts expended.

One of the first acts of this Administration was to enhance the allowances for Ministers overseas travel. With the Government enjoying only a one seat majority in the National Assembly, parliamentary business has to wait until all ministers and members of the National Assembly are in the country. That is not how a country is run.



Unfinished Business In this section, which highlights key unresolved issues from important pronouncements of earlier years, Focus 2017 addressed the issues under two broad headings: National issues and Campaign promises. Focus is pleased to note that the Local Government Commission has now been constituted and should be advancing work on the 2018 Local Government Elections. A Code of Conduct for Ministers, public officials and politicians was also adopted to replace the Code under the Integrity Commission Act. Every Administration spaces out its programmes and activities based on priorities and resources and this Government continues to make huge promises to the people. In fact, Minister Jordan’s speeches tend to be long on commitments but short on feedback. The 2016 Budget for example committed to five pillars and various initiatives with acronyms that cover the entire alphabet. One major area where plans and promises have far outstripped achievements is Legislation. In fact, some of these are repeated in subsequent years without any explanation for delays. Some legislation still to be introduced include Deposit Insurance, Regulations for the Insurance Act and Privacy and Data Protection. Meanwhile some legislation including the Companies Act, needs amendment while several principal Acts require regulations to operationalise them (see Legislation on page 18). And it would be good to hear from the Attorney General on the now inexcusable delay in bringing the Judicial Review Act into operation. The number of initiatives and Plans are almost too many to count. The Minister has announced plans for national policies on Culture, Gender, Housing and Tourism; Solid Waste Management Strategy; National Monitoring and Evaluation Strategy; Action Plans for Hinterland Development, Plan for Municipal Development; Social Cohesion Round Table; Hinterland Housing Project; National Regional Development Consultative Committee; Ministerial Annual Performance Report; Hinterland Employment and Youth Service; Hinterland Poor and Remote Communities Project; Hinterland Housing Project; Sustainable Livelihood and Entrepreneurial Development (SLED); National Information and Communication Technology Strategy; Integrated Crime Information System; Waterfront Development Programme; Poverty Management and Analysis Unit. Other continuing issues include the role of NICIL which inhabits that grey area in the Companies Act referred to as a Government company while miscellaneous matters include the Return to Free Collective Bargaining, Campaign financing and Constitutional Reform which were fundamental policies of the Alliance For Change, a Number 2 in the Coalition Government; Investigative Commission on Corruption; Law Revision and Law Reform. Comments Without exception, no member of this Government has any experience in managing even a medium sized operation or serious, successful business experience. Those very persons are now entrusted with oversight of billions of dollars of taxpayers’ money and making decisions that affect people’s lives and livelihoods. Power is no route to competence and expertise. In fact, they do not mix well. What makes it so much worse is that Ministers know that they cannot be fired, no matter how egregiously they fail. Ministers are hardly inconvenienced by parliamentary duties. They should be directed to have an inventory done of the initiatives, programmes and plans within their ministries, to prepare a report on each of these and to measure their outcomes. That discipline may produce some result.



2018 Policy Issues and Targets Introduction The Minister of Finance, Mr. Winston Jordan, presented the fourth budget of the APNU/AFC Coalition – with “The Journey to the Good Life Continues” as its theme. In a speech that included an inordinate level of detail the Minister presented the Government’s Agenda for 2018. Policy 1. Macroeconomic Stability: Consolidation of legislation to govern debt into a draft Public Debt

Management Bill to allow for more effective public debt management.

2. Green State Development: Developing an inclusive, comprehensive strategy to harmonise the budget with the central themes of the GSDS.

3. Constitutional Reform: Being addressed by a special select committee in Parliament

4. Local Government Systems: Holding Local Government Elections in 2018.

5. Justice Reform: A Law Reform Commission will be established, a Legal Aid program introduced and

probation services will be strengthened.

6. Sustainable Development Goals: Budget Agencies to formulate their medium term budget goals around the internationally developed.

7. Social Cohesion: Government to continue to work to rebuild trust and cohesiveness by engaging civil

society groups and local and central government agencies.

8. Better Government

i. Public Sector Investment Programme and Public Procurement: Procurement legislation will be updated to and registers of contractors and procurement evaluators will be established.

ii. Budgeting for Results: introduction of an Information Financial Management Information System.

iii. Government Accounting and Treasury Management: Introduction to a Treasury Single Account, the

adoption of International Public Sector Accounting Standards and upgrading the National Payment System to a digital one.

iv. Promoting Financial Sector Stability: Developing legislation on Financial Consumer Protection, deposit

insurance and stress testing guidelines for the banking system.

v. Expanding and Deepening Access to Financial Services: The development of a bond market and the replacement of the Securities Industry Act.



vi. Business and Investment: Establishment of a $100 million revolving fund accessible to businesses whose goods and services are sustainable and environmentally friendly. Business incubators, accelerators and registration hubs will be established. A Secure Transaction Regime, will allow for easier access to financing.

9. Emerging and Transformative Sectors: Government intends to complete liberalisation of the telecommunications sector and is seeking funding of $37.6 million for a national broadband initiative to expand the e-Government network.

10. Managing the Extractive Sector The key initiatives are:

i. Gold: The use and importation of mercury in mining will be regulated.

ii. Oil and Gas: Replacement of the Production Sharing Model Contract and the development of a legal and institutional framework will be developed to support a Sovereign Wealth Fund.

11. Infrastructure for Integration Key initiatives are:

i. Roads: Upgrading, resurfacing and expansion and the installation of elevators at the pedestrian overpasses. A feasibility study will be done on the first phase of the Linden – Lethem road.

ii. Bridges: Plans for the construction of the new Demerara Harbour Bridge underway and commissioning

of a feasibility study for a bridge across the Kurupukari.

iii. River: Funds have been allocated to upgrade or renovate all the major stellings, construct a ferry for the Parika-Mabaruma route and to upgrade the fleet of river and ocean-going vessels.

iv. Air: Completion of the expansion of Cheddi Jagan International Airport and upgrading of aerodromes

and airstrips with Lethem to become a regional and international hub.

v. Energy: The first solar farm will become operational in 2018 while feasibility studies for others to commence.

vi. Housing: Government has concluded negotiations for a US$30 million loan to provide quality public infrastructure as well as the provision of housing subsidies for home improvements and core homes. In addition the Hinterland Sustainable Housing Programme has been allocated $240 million.

vii. Production Transformation and Agricultural Diversification: Government to partner with the Islamic Development Bank to update expertise and technology in rice production. In addition, funds have been allocated to construct an agricultural centre and reservoir in Lethem, and upgrade the research station in Ebini.

viii. A national agricultural census to be undertaken.



12. National Security: Several initiatives to be undertaken including the rehabilitation of police stations and the construction of a new police station in Parfaite Harmonie, West Coast Demerara.

Targets Overall real growth is projected at 3.8% in 2018 with the non-sugar economy projected to grow by 4.6% and the sugar economy projected to decline by 24%. The following graph presents the percentage of contribution to GDP at 2006 prices by various sectors:

Source: Estimates of the Public Sector The primary industry groups are addressed separately below. Construction is expected to decrease to 15.0% from the 16.9% growth seen in 2017 while the Transportation and Storage sector is projected to grow by 5.3% growth in 2018. Agriculture, Fishing and Forestry The following graph presents percentage of growth expected over the period 2017 to 2018:

Source: Estimates of the Public Sector

‐

5.00

10.00

15.00

20.00

25.00

30.00

35.00

2011 2012 2013 2014 2015 2016 2017 2018

Percentage

Year

Agriculture, Fishing andForestry

Mining and Quarrying

Wholesale and Retail Trade

Construction

Manufacturing

‐24.1%

2.5%

2.3%

2.0%

2.3%

7.9%

‐30.0% ‐20.0% ‐10.0% 0.0% 10.0%

Percentage

Forestry

Fishing

Livestock

Other Crops

Rice

Sugar



A growth rate of 2.5% is projected for Rice in 2018 while Fishing is projected to record growth of 2.3% in 2018. Other crops are expected to grow by 2.3% in 2018. Mining and Quarrying The following graph presents the percentage of growth over the period 2011 to 2017 and the target percentage of growth for 2018:

Source: Estimates of the Public Sector In the five years to 2017, Gold grew by 10.19% and Bauxite declined by 6.71%. The Other Mining sectors grew by 13.08%. It is expected that growth will be 3.3% in gold, 23.3% in Bauxite and 3.8% in Other Mining in 2018. Manufacturing The following graph presents the percentage of growth over the period 2011 to 2017 and the target percentage of growth for 2018:

Source: Estimates of the Public Sector

(45.00)

(35.00)

(25.00)

(15.00)

(5.00)

5.00

15.00

25.00

35.00

45.00

55.00

2011 2012 2013 2014 2015 2016 2017 2018Percentage

Year

Bauxite

Gold

Other

(45.00)

(35.00)

(25.00)

(15.00)

(5.00)

5.00

15.00

25.00

35.00

45.00

2011 2012 2013 2014 2015 2016 2017 2018

Percentage

Year

Sugar

Rice

Other



Growth is projected at 2.4% for 2018 in Other Manufacturing while a decline of 24.1% is expected in Sugar Manufacturing. Overall manufacturing is expected to increase by 0.1%. Monetary Policy & Inflation The rate of inflation (Urban Consumer Price Index – Georgetown) for 2018 is projected at 2.4% compared to the projected rate for 2017 of 1.3%. Balance of Payments Overall balance on the balance of payments is expected to reflect a deficit of US$79.7 million from a deficit of US$53.10 million in 2017. On the trade side, merchandise exports are expected to remain at US$1.5 billion. Merchandise imports are expected to rise by 5.7% to US$1.7 billion. With net imports of services at US$358.1 million, and private transfers of US$291.7 million, a net deficit of US$292.6 million is projected on the current account. The capital account is projected to have a surplus of US$212.9 million in 2018 (US$181.8 million in 2017). In this account, a net inflow of US$228.5 million is expected from medium and long term capital while a net outflow of US$34.2 million is expected on short term capital. Ram & McRae’s comments 1. Sugar is still the elephant in the room – Despite claims by the Minister of the Presidency that the

Government has in excess of 50 proposals for the divestment of the sugar industry, the Special Purpose Unit at work since July is yet to present any viable solutions.

2. The word unemployment was mentioned once in all 84 pages of the Budget Speech 2018. The 2012 Census reported a National Average Rate of employment of 12.5 percent. With some 1,628 and 2,000 students graduating with degrees, diplomas and certificates in 2016 and 2017 respectively, the Government’s action or rather inaction leaves a lot to be desired.

3. The Minister in his budget has put forward many commendable medium and long-term development projects which, if efficiently executed, will be of tremendous benefit to the country. However, with the economy in a slowdown mode, appropriate policies are required now.

4. The APNU+AFC Government has shown little interest in constitutional reform although to its credit it has established many of the constitutional bodies which during the previous Administration were on paper only. At the same time, the President who enjoys certain immunities under the Constitution has set himself up as the interpreter of the Constitution rather than the High Court. Given the sloth at which the Government makes decisions and the President’s attitude to the Constitution, it is unlikely that there will be any constitutional changes before the 2020 Elections.

5. Transparency and autocracy: With respect to the two most important initiatives undertaken by this Administration – the new Demerara River Bridge and the ExxonMobil contract – the Government has denied access to relevant documents. Democracy is an absolute, not a matter of convenience.



6. Social Cohesion: By almost any measure, the relations between the Government and the Opposition are as bad as they have been for a very long time. Unfortunately, this acrimony and suspicion have filtered down to their supporters. This atmosphere is most unhelpful in moving the country in a positive direction.

7. Some of the matters listed above are clearly not policy issues and many really come within the portfolio of other ministers, while still others should be left to the Regions. Central Government does not need to engage in every little activity in the regions – leave those to the regional administrations.

8. The Speech made in excess of twenty different references to studies, reviews, strategic and development plans, analyses, surveys, assessments and reports by advisory, consultative and technical committees, expert groups, and roundtables. Analysis and planning are laudable undertakings and information is integral to the decision-making process. It is hoped however that there is thorough evaluation of the significant costs versus the benefits derived from these activities and that analysis paralysis is not allowed to set in. In next year’s budget we hope that the minister is able to provide the Nation with a brief report on the costs and resultant benefits of actions taken on this multitude of studies.



The Government of Guyana Financial Plan 2018

The Government's projected Financial Plan for 2018 is summarised on page 34 of this Publication. The current balance projects a surplus of $6,741 million, a decrease of $3,537 million or 34% over revised 2017. After capital receipts of $201,860 million and expenditure of $188,380 million, the plan projects an overall deficit of $54,515 million compared to a deficit of $42,444 million in 2017, 39% of which is expected to be financed by borrowings from external sources and 61% from domestic sources. Current revenue is projected to increase by $9 billion but this is offset by an increase in current expenditure of $12.3 billion. Of the current expenditure, personal emoluments account for approximately 31.3%. Debt service as a percentage of current revenue is projected at 9.4% in 2018, up from 7.9% in 2017. The main elements of the 2018 Plan are: Total current revenues are projected to increase by $9,187 million to $201,860 million or by 4.8%. Of this, the Guyana Revenue Authority is expected to account for revenues of $181,371 million or 90% of total revenue, an increase of $12,289 million or 7.3% when compared to 2017.

Analysis of current revenue by type Source: National Estimates (G$ millions) Of the GRA’s collections, the Internal Revenue is projected to collect $80,437 million compared with $75,153 million in 2017, a 7% increase, while Value-Added and Excise Taxes are expected to earn $81,560 million compared to $75,717 million in 2017, an increase of 7.7%. Collections by the Customs and Trade Administration are anticipated to be $19,364 million, an increase of $1,150 million or 6.3%.

VAT has transformed the tax landscape of the country and having experienced its first decline since its introduction in 2007, it is projected to increase by 6% in 2018 over 2017. VAT on domestic supplies is projected at $21,407 million while on imports, revenue of $21,637 million is budgeted. A further $121 million is budgeted to come from Miscellaneous. The composition of taxes collected by the GRA is $181,800 million and is represented by income taxes $72,001 million, companies taxes $43,408 million, self-employed persons $5,314 million, employed persons $22,923 million and other current revenue of $20,059 million.

2,000

27,000

52,000

77,000

102,000

127,000

152,000

Actual 2016 Revised 2017 Budgeted 2018

Customs and Trade Taxes

Value Added and ExciseTaxes

Internal Revenue

Dividends, Other Taxes,StampDuties, Fines, Fees, etc.Miscellaneous Receipts



Analysis of Internal Revenue by type of taxpayer

Source: Estimates of the Public Sector, Volume 1. All amounts shown are actual except 2015 and 2017 being revised and budgeted respectively (G$ millions) Total current non-interest expenditure is projected to increase by $12,318 million from $176,061 million to $188,380 million for 2018. Personal emoluments of $58,952 million represent an increase of 8.6% or $4,671 million over the revised figures for 2017. As a percentage of current non-interest expenditure, personnel emoluments account for 31%, Other Goods and Services 28% and Transfer Payments 41%. Transfer payments are payments from the Government to individuals, organisations or other levels of Government made with the specific objective of furthering Government policy or programme delivery and for which the Government does not receive directly any goods or services.

Expense trends from 2008 to 2018

Source: Estimates of the Public Sector, Volume 1. All amounts shown as actual except 2017 and 2018 being revised and budgeted respectively (G$ millions)

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2009 -Actual

2010 -Actual

2011 -Actual

2012 -Actual

2013 -Actual

2014 -Actual

2015 -Actual

2016 -Revised

2017 -Revised

2018 -Budgeted

Total

Companies

Personal

Self-Employed

0

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Current Non-InterestExpenditure

CapitalExpenditure

InterestExpenditure



Capital revenue and grants in 2018 are projected to decrease by 25% or $3,596 million to $10,719 million of which HIPC and MDRI will contribute $1,485 million while Project and Programme funds are also projected to decrease by $3,586 million or 28%.

Analysis of capital revenue by type

Source: National Estimates (G$ millions) Capital expenditure of $59,702 million represents a projected increase of $1,556 million or 3% over revised 2017 of $58,146 million. The top five ministries in terms of capital expenditure are:

1. Ministry of Public Infrastructure; 2. Ministry of Finance; 3. Ministry of Agriculture; 4. Ministry of the Presidency; 5. Ministry of Indigenous People’s Affairs.

The big ticket items of capital expenditure include:

$24,186 million on the Ministry of Public Infrastructure programmes of which $2,000 million represents the provision of institutional strengthening and upgrading of electrification system for IDB/EU, $1,500 million for the completion and rehabilitation of Hinterland highways and roads, $1,167 million for the upgrade of the West Demerara Highway, $2,500 million for the rehabilitation of Sheriff Street – Mandela Road, $2,700 million for the provision for East Coast Demerara Highway improvements, $1,294 million for construction and completion of drains in urban areas, $1,133 million provision for Ocean Going Vessels, $5,000 million for the CJIA Modernisation Project etc.;

$4,427 million on the Ministry of Finance of which $1,350 million represents the provision for Low Carbon Development Programme, $850 million for the provision of buildings, software, furniture and equipment for the Guyana Revenue Authority and $380 million for the final payment to the Basic Needs Trust Fund;

$4,602 million on the Ministry of Agriculture of which $1,402 million represents the construction and rehabilitation of drainage and irrigation, $800 million for the provision of embankment, structures, pump stations and equipment for the Flood Risk Management Project, $2,071 for the allocation to the Crops and Livestock Support Services for provision of sluices, groynes, surveys and mangrove restoration etc.;

- 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Actual 2016

Revised 2017

Budgeted 2018

MiscellaneousCapital Revenue

External Grants

External Loans



$1,837 million on the Ministry of Presidency of which $135 million represents provision for the upgrade of geodetic infrastructure and surveys for the Land and Surveys, $114 million for the completion of buildings, purchases of vehicles and furniture and equipment, $238 million for the allocation to environmental management and compliance for EPA, National Parks Commission, Protected Areas Commission etc., $250 million for the cultural preservation and conservation for the Cultural Centre, Castellani House, Museum Development, National School of Dance, National Archives, National Trust and Burrowes School of Arts;

$1,183 million on the Ministry of Indigenous People’s Affairs of which $982 million represents the provision for Amerindian development programmes and projects, $140 million for the completion of dormitory and extension of buildings and $61.5 million for the provision of vehicles, boats, engines and furniture and equipment.

The allocation of current and capital expenditures allocation in Who Gets What in 2018 on page 35. Interest expenditure is projected to increase by 6.4% or $406 million to $6,740 million. Domestic interest is projected to decrease by $548 million or 28%, while interest on external debt is projected to increase by $954 million or 22%. The principal element of debt repayments is projected at $12,272 million (2017: $8,891 million), made up of domestic debt repayments of a projected $280 million (2017: $280 million), while external debt repayments are projected to increase to $11,992 million (2017: $8,611 million). During 2018, domestic and external debt service as a percentage of current revenue is projected to increase to 9.4% comparison with 7.9% for revised 2018. The projected overall deficit of $54,515 million is expected to be financed by external borrowings of $21,103 million and from domestic sources of $33,412 million. Ram & McRae’s Comments 1. The trend of major deficit financing continues with deficits over the period 2015 actual to 2018 budgeted

as follows: 2015 - $24 billion, 2016 - $38 billion, 2017 - $42.4 billion and 2018 – $54.5 billion.

2. Borrowings carry a cost not only in strict financial terms but where the borrowing takes place in the domestic economy, they may crowd out borrowings by the private sector and individuals.

3. Personal emoluments have increased from $31,345 million in 2011 to a projected $58,952 million in 2018, an increase of 47%. While personal emoluments have indeed been increasing by 47% between 2011 and 2017, the rate of increase is less than the increase for total current expenditures.

4. The danger of deficit financing is that all things being equal, oil revenues will simply go to bridging the deficit. To the extent that some of the revenues are transferred to a Sovereign Wealth Fund, and given the fungibility of money, the Government will need to continue to borrow.



Source: National Estimates 2011 to 2017 5. Using the breakdown of expenditure in table 9 Abstract of Current Expenditure by Chart of Accounts in

Volume 1 of the Estimates, we draw attention to the allocation of wages and salaries to various categories of employees as a percentage of total wages and salaries:

Wages and Salaries 2015 Actual 2016 Revised 2017 2018 Budget

6111 Administrative

15.26

14.73

13.87

14.23

6112/3 Technical/Skilled

31.43

31.93

31.44

33.24

6114 Clerical and Office Staff

11.39

12.23

13.91

14.95

6115 Semi Skilled and Unskilled

10.33

10.79

12.31

11.84

6116 Contracted Employees

30.23

29.07

26.73

23.91

6117 Temporary

1.36

1.25

1.74

1.83 The Estimates separate the costs for administrative staff from clerical and office staff while the categories of Contracted Employees and Temporary Employees will also include clerical and administrative staff. Table 9 of the Estimates shows an abstract of current expenditure of $207.4 billion, old age pensions and social assistance account for $17.4 billion or approximately 8.4%. Included in pension costs is an amount of $3.3 billion for Pension increases or 24% of the total pensions and social assistance budget, a sum that requires explanation given that the increase in Old Age pensions is only $500 per month or 2.6% of the amount paid in 2017.

-

30,000

60,000

90,000

120,000

150,000

180,000

210,000

2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8

GY$

'000

YEARS

TotalCurrentExpenditure

PersonalEmoluments



Financial Operations of Central Government (Accounting Classification)

Source: Estimates of the Public Sector 2012 to 2017 (G$ millions)

Budget Revised Budget Actual Actual Budget Actual 2018 2017 2017 2016 2015 2015 2014

CURRENT REVENUE 201,859.9 192,673.2 186,022.0 177,322.0 161,710.2 163,651.6 145,725.8

1.1 Guyana Revenue Authority 181,370.9 169,083.1 162,591.9 151,745.5 142,896.3 143,252.5 135,889.7 1.1.1 Internal Revenue 80,437.2 75,152.6 67,054.8 67,197.2 60,933.2 60,404.8 56,725.4 1.1.2 Customs & Trade 19,363.9 18,213.6 15,837.4 16,382.0 13,156.3 13,326.3 13,454.8 1.1.3 Value Added and Excise Taxes 81,569.9 75,716.9 79,699.8 67,507.0 68,806.8 69,521.5 65,709.5 1.2 Other 20,489.0 23,590.1 23,430.1 25,576.5 18,813.0 20,399.1 9,836.1

CURRENT EXPENDITURE 188,379.5 176,061.1 177,528.7 163,425.0 141,152.2 146,645.0 127,494.1

2.1 Personal Emoluments 58,952.4 54,281.8 54,845.2 49,360.5 44,661.7 45,198.8 42,305.6 2.2 Other Goods and Services 52,685.2 49,710.2 51,589.2 46,800.6 43,175.9 44,979.8 40,106.2 2.3 Transfer Payments 76,741.9 72,069.1 71,094.3 67,263.9 53,314.5 56,466.4 45,082.2

INTEREST EXPENDITURE 6,739.7 6,334.1 6,862.1 5,483.2 5,225.2 5,663.9 4,739.1

3.1 Internal 1,422.2 1,970.5 2,123.2 1,884.8 1,716.5 1,716.6 1,544.9 3.2 External (Cash) 5,317.5 4,363.7 4,738.8 3,598.4 3,508.8 3,947.2 3,194.2

CURRENT BALANCE 6,740.7 10,278.0 1,631.2 8,413.8 15,332.8 11,342.7 13,492.6

CAPITAL REVENUE & GRANTS 10,718.8 14,314.7 13,151.7 6,909.3 6,329.2 7,473.6 3,275.9

5.1 Grants 10,711.8 14,298.1 13,144.7 6,892.4 5,329.2 6,468.6 3,275.9 5.1.1 HIPC & MDRI 1,484.7 1,484.7 1,484.7 1,484.7 1,484.7 1,484.7 2,364.2 5.1.2 Project and Programme 9,227.1 12,813.4 11,660.1 5,407.8 3,844.5 4,984.0 911.7 5.2 Other (inc. Sale of Assets) 7.0 16.6 7.0 16.9 1,000.0 1,005.0 -

CAPITAL EXPENDITURE 59,702.4 58,146.0 56,758.4 46,618.1 30,664.9 39,048.6 51,013.6

DEBT REPAYMENT 12,272.1 8,891.3 8,974.1 6,750.0 15,038.8 29,721.1 29,000.7

7.1 Internal 279.9 279.9 279.9 35.5 35.5 35.4 35.5 7.2 External (Cash) 11,992.3 8,611.6 8,694.2 6,714.5 15,003.4 29,685.6 28,965.2

OVERALL BALANCE (54,515.1) (42,444.6) (50,949.4) (38,044.9) (24,041.7) (49,953.4) (63,245.8)

TOTAL FINANCING 54,515.1 42,444.6 50,949.4 38,044.9 24,041.7 49,953.4 63,245.8

9.1 External 21,103.3 19,714.3 18,243.8 12,824.7 14,710.8 25,286.1 36,752.3 9.2 Domestic 33,411.7 22,730.2 32,705.6 25,220.2 9,330.9 24,667.3 26,493.5

Total Domestic and External DebtService as a % of Current Revenues 9.4 7.9 8.5 6.9 12.5 21.6 23.2

Particulars



Who Gets What in 2018 Current Non-Interest Expenditure Expenditure in the National Budget is incurred under a number of categories. These are: statutory payments which are direct charges on the Consolidated Fund, including allocations for constitutional bodies and offices and public debt payments of interest and principal; Ministries; Departments and Regions; and Statutory bodies.

In this section, Focus looks at the current expenditure by the type of agency. The chart below shows the allocations with “Others”, representing Commissions, the judiciary and the Defence Force.

Analysis of expenditure by type of disbursing agency

Source: National Estimates A disproportionate and the largest percentage of the expenditure is controlled by ministers and the amount continues to grow, a glaring inconsistency with the Constitutional provision that requires devolution of authority to the regions and implies that adequate resources should be allocated. Note: The tables below include Subsidies and Contributions under the respective Ministry. Central Government's non-interest current expenditure (employment costs, statutory expenditure and other charges) for the year is budgeted at $188.4 billion which is 7% more than the revised 2017. The Ministries/ Departments with the most significant allocations and the largest changes between 2017 and 2018 are:

Ministries/Departments Budget 2018 Revised 2017 Budget 2017 % Inc./ (Dec)

G$Mn %* G$Mn %* G$Mn %* Ministry of Finance 23,866 12.7 22,313 12.7 21,605 12.2 7.0

Ministry of Public Health 20,947 11.1 18,903 10.7 19,509 11.0 10.8

Ministry of Education 17,116 9.1 17,088 9.7 17,146 9.7 0.2

- 20 40 60 80 100 120 140 160 180

Actual2016

Revised2017

Budget2018

$ billions

Ministries

Others

Regions

Subsidies &Contributions



Ministries/Departments Budget 2018 Revised 2017 Budget 2017 % Inc./ (Dec)

G$Mn %* G$Mn %* G$Mn %* Ministry of Social Protection 16,587 8.8 15,989 9.1 16,139 9.1 3.7

Ministry of Public Security 15,557 8.3 14,429 8.2 14,815 8.3 7.8

Ministry of Agriculture 12,256 6.5 14,513 8.2 14,635 8.2 (15.6)

Guyana Defence Force 11,513 6.1 11,167 6.3 10,996 6.2 3.1

Ministry of Presidency 8,480 4.5 5,208 3.0 5,426 3.1 62.8

Ministry of Public Infrastructure 7,879 4.2 7,189 4.1 7,295 4.1 9.6

Ministry of Foreign Affairs 5,089 2.7 4,996 2.8 4,955 2.8 1.9

Others including regions 49,089 26.1 44,264 25.1 45,008 25.4 10.9

Total 188,380 100.0 176,061 100.0 177,529 100.0 7.0

* Percentage of total current non-interest expenditure Source: Budget Estimates, Volume 1, Table 8. While the Ministry of Finance consistently ranks at or near the top, the expenditure is not all incurred within the Ministry. It includes payments for GRA of $6 billion (2017: $5.2 billion), its tax collecting agency, other subsidies and contributions of $1.5 billion (2017: $1.4 billion), “other employment costs” which includes provisions for public service salary increases of $6.2 billion (2017: $5.7 billion) and pension increases of $3.3 billion (2017: $2.9 billion). Capital Expenditure Central Government's capital expenditure for the year is budgeted at $59.7 billion which is 2.7% above the revised 2017 and 28.79% of total 2018 expenditure. The Ministries/Departments with the most significant capital expenditure allocations are:

Ministries/Departments Budget 2018 Revised 2017 Budget 2017 % change

2017-2018 G$Mn %* G$Mn %* G$Mn %*

Ministry of Public Infrastructure 24,186 40.5 30,161 51.9 27,261 48.0 (19.8)

Ministry of Communities 4,751 8.0 4,056 7.0 3,956 7.0 17.1

Ministry of Agriculture 4,603 7.7 3,697 6.4 3,513 6.2 24.5

Ministry of Finance 4,427 7.4 3,239 5.6 3,335 5.9 36.7

Ministry of Public Security 3,156 5.3 2,975 5.1 2,486 4.4 6.1

Ministry of Education 2,871 4.8 2,925 5.0 4,072 7.2 (1.8)

Ministry of Public Health 2,508 4.2 1,671 2.9 1,981 3.5 50.1

Others 13,200 22.1 9,422 16.2 10,154 17.9 40.1

Total 59,702 100.0 58,146 100.0 56,758 100.0 2.7

* Percentage of total capital expenditure Source: Budget Estimates, Volume 1, Table 10.



The regions with the most significant allocations are:

Region Budget 2018 Revised 2017 Budget 2017 % change 2017-2018 G$Mn %* G$Mn %* G$Mn %*

No. 6 East Berbice/Corentyne 5,918 17.51 5,420 17.60 5,587 17.66 5.93

No. 4 Demerara/Mahaica 5,721 16.93 5,068 16.46 5,378 17.00 6.38

No. 3 Essequibo Islands/West Demerara

4,719 13.96 4,634 15.05 4,636 14.65 1.79

No. 2 Pomeroon Supenaam 3,546 10.49 3,066 9.96 3,161 9.99 12.19

No. 10 Upper Demerara/ Berbice

2,958 8.75 2,729 8.86 2,731 8.63 8.30

No. 5 Mahaica/Berbice 2,850 8.43 2,559 8.31 2,611 8.25 9.15

Source: Budget Estimates, Volume 1, Table 8. An analysis of expenditure per person using the 2012 Census as the basis is as follows:

Region Population Revised 2017

Budget 2018

Exp. per person G$K

Change

G$Mn G$Mn 2017 2018 $K %

No. 1 Barima/Waini 27,643 2,161 2,297 78.2 83.1 4.9 6.3

No. 2 Pomeroon/Supenaam 46,810 3,066 3,546 65.5 75.8 10.3 15.6

No. 3 Essequibo Islands/West Demerara

107,785 4,634 4,719 43.0 43.8 0.8 1.8

No. 4 Demerara/Mahaica 311,563 5,068 5,721 16.3 18.4 2.1 12.9

No. 5 Mahaica/Berbice 49,820 2,559 2,850 51.4 57.2 5.8 11.4

No. 6 East Berbice/Corentyne 109,652 5,420 5,918 49.4 54.0 4.5 9.2

No. 7 Cuyuni/Mazaruni 18,375 2,087 2,288 113.6 124.5 10.9 9.6

No. 8 Potaro/Siparuni 11,077 1,383 1,575 124.8 142.1 17.3 13.9

No. 9 Upper Takutu/Upper Essequibo

24,238 1,679 1,925 69.3 79.4 10.1 14.6

No. 10 Upper Demerara/ Berbice

39,992 2,729 2,958 68.2 74.0 5.7 8.4

Total 746,955 30,788 33,797 41.2 45.2 4.0 9.8

Source: Budget Estimates, Volume 1, Table 8 and Census, Bureau of Statistics. Although Region No. 4 appears to receive the lowest direct allocation per person, agencies such as the Georgetown Public Hospital are located in this region and receive allocations outside of the regional administration. The funds expended on the principal law enforcement, maintenance and administrative bodies.



Ministries/Departments 2014 2015 2016

Revised 2017

Budget 2018

G$Mn G$Mn G$Mn G$Mn G$Mn Guyana Defense Force: Total Current Expenditure 7,392 9,017 10,011 11,167 11,513

Total Capital Expenditure 653 536 543 845 540

Guyana Police Force:

Total Current Expenditure 6,810 8,034 8,862 10,779 11,492

Total Capital Expenditure 689 325 786 815 688

Public Prosecutions:

Total Current Expenditure 88 115 152 154 160

Total Capital Expenditure 5 - - 14 14

Supreme Court:

Total Current Expenditure 1,081 1,313 1,712 1,545 1,564

Total Capital Expenditure 105 12 - 249 310

Source: Budget Estimates, Volume 1, Table 7. Ram & McRae’s Comments

1. Expenditure on the ballooning Ministry of the Presidency continues to climb with a 62.8% increase budgeted for 2018. Subsidies for Culture, Youth and Sport are now shown under the Ministry of the Presidency while the Integrity Commission has been moved from this Ministry to the Office of the Prime Minister.

2. The current Parliament has little to show for the $1.5 billion per year that it has cost taxpayers and its paltry legislative results are an absolute disgrace. It appears that there are two constraints to its effectiveness: its inability to have meaningful sessions because of its members’ penchant for overseas travel and the apparent lack of awareness of ministers of their responsibility for the issuance of the regulations that give meaning to legislation.

3. The Department of Public Information has been granted $250 million, up from $215 million in the prior year (to the then Government Information Agency).

4. Contributions to the Financial Intelligence Unit and the Guyana Securities Council have fallen by 8% and 11% respectively despite announcements in the budget speech for capacity building and institutional strengthening in these agencies and a plan to expand the functions of the Council

5. Expenditure on the Statistical Bureau will more than double from $434 million to $900 million while NICIL will receive $200 million, up from $130 million in 2017.

6. Ministry of Finance has included a subvention of $400 million in its latest estimates for 2017 to local authorities. We believe this is a provision for a bailout of the Georgetown Mayor and City Council but a supplementary appropriation has not yet been brought to the National Assembly.



7. A significant decrease in expenditure through the Ministry of Agriculture reflects Governments reduction of subsidies to the sugar industry – an amount of $6.3 billion has been allocated to Guysuco compared to $9 billion in 2017.

8. Linden residents will continue to receive a $2.2 billion contribution towards electricity charges.

9. A National Data Management Authority will receive $1.8 billion more than 2017 – no mention was made of this in the speech but it appears that this is a reclassification of amounts previously allocated under Public Telecommunications under the Ministry of Public Telecommunications. Half of this amount in both the current and prior years has been included as “Other goods and services”.

10. The State Assets Recovery Agency (SARA) has been granted an allocation of $260 million, up from $90 million in 2017. Separate provision for the Special Organised Crime Unit (SOCU) was not sure and this is expected to be included under the Guyana Police Force, expenditure for which showed significant increases in 2017 and 2018 budgets.

11. The total budget for the Police and Army is $24.2 billion, up from $23.6 billion in 2017. Between 2014 and 2018 projected total expenditure on the Army will have risen from $8.0 billion to $12.0 billion, almost as much as is spent on Agriculture and more than is allocated to any Region.



Budget 2018 Measures In this section we consider the measures announced by the Minister, analyse them, evaluate their impact and discuss the extent to which they provide useful economic benefits to stakeholders. Section 6 of the 2018 Budget Speech contains twenty five paragraphs of Budget measures, some of which are regulatory rather than fiscal. This follows the staggering number of fifty seven in 2017. Very few measures have their associated price tag and it is therefore not possible to assess their budgetary impact. The proposed changes are subject to statutory amendments and will take effect from January 1, 2018.

We now look at those measures and offer our comments.

Measures in Support of a Green Agenda

Measures R & M Comments

Exemptions of Excise Tax on vehicles principally designed to accommodate LPG gas, with an engine capacity not exceeding 2000 cc and not exceeding four years old from the date of manufacture to the date of importation;

Build it and they will come? While this is a non-contentious measure, it is one for the distant future. The acquisition cost of these vehicles is higher than other vehicles and there are no publicly accessible refuelling points in Guyana. Studies also indicate that 30% more fuel per mile is required by LPG vehicles.

These measures are unlikely to have any immediate impact on the Revenue or the public.

Amendments to Part III B (i) of the First Schedule to the Customs Act, Chapter 82:01 to exempt machinery and equipment from the payment of Customs duties to set up refilling stations for such vehicles, as determined by the Commissioner-General. The VAT will still be payable.

Measures to Increase Workers’ Income


Allowance of minimum Personal Allowance of $720,000 in full, regardless of whether a person works for the whole year or a part of the year.

The tax deducted by the employer and remitted to the Guyana Revenue Authority (GRA), will be refunded to those employees whose income did not reach $720,000.

This measure takes effect from Year of Income 2018, i.e. Year of Assessment 2019. It simplifies the compilation of income tax returns and is otherwise sensible.

It benefits those persons who work part of a year but will have some administration cost in processing refunds.

Implementation of tax-free vacation allowance in the private sector. This will be allowed up to a maximum of one month of the employee's base salary.

As stated by the minister, this is an anomaly between private and public sector employees.

While the measure removes the discrimination, it will require an amendment to the Income Tax Act.



Measures in Support of the Elderly and those in Difficult Circumstances


Increase in Old Age Pension to $19,500 from $19,000.

This additional benefit is negligible and barely in line with inflation. Increase in Public Assistance to $8,000 from $7,500.

Measures in Support of the Private Sector


Forestry The restriction of the importation of Pine Wood and Pine Wood Products. Increase of Common External Tariff (CET) on Pinewood and Pinewood Products from 5 percent to 40 percent. The exemption from VAT a supply of logs and rough lumber to the sawmilling industry. Commencement of a forest inventory. Government to partner with the private sector in a Public Private Partnership to establish a Dimension Stockyard.

The new tariff is proposed to be in effect from January 1, 2018 to December 31, 2019. These measures are designed to and should assist the forestry sector which has been underperforming.

Gold mining Reduction in the Tributor's Tax from 20 percent to 10 percent.

This withholding tax is creditable against final tax liability. This proposal is a reversal of the measure introduced last year and heavily opposed by the mining community.

Replacement of the current “2% of the gross proceeds” regime with a sliding scale percentage that is based on the price of gold:

Price of Gold (per ounce)

Percentage Income Tax Payable

Under US$1,100 2% of Income Tax (final Tax)

US$1,100 and under US$1,300

2.5% of Gross Proceeds (Final Tax)

US$1,300 and under US$1,600

3% of Gross Proceeds (Final Tax)

While the Minister’s undertaking that there would be no new taxes, this is a significant increase from 2% to 3.5%. However, the price of gold is well below the price at which the 3.5% marginal rate is payable, and the measure will therefore have no immediate impact.



Over US$1,600 3.5% of Gross Proceeds (Final Tax)

Housing

Exempt from VAT complete housing units costing up to $6.5 million, that are built by, or on behalf of, the Central Housing and Planning Authority (CH&PA) or any other approved entity.

The measure does nothing to reduce the cost of owning a home, after the VAT changes of 2017.

Our information is that CHPA does not charge VAT and the basis for the statement by the Minister is unclear.

Transportation

Reduction in the rates of Excise Tax on the importation of overland transportation used for tourism purposes in Regions Nos. 1, 7, 8 and 9.

This concession will be applicable to vehicles between 2,000 cc and 4,000 cc that are used exclusively in the tourism sector for the transport of persons by incorporated entities that have been operating in those regions for at least five years.

For vehicles 2,000 cc to under 3,000 cc and which are less than 4 years, the Excise Tax would be slashed from 110 percent to zero; for vehicles over 3,000 cc to 4,000 cc and which are less than 4 years, the Excise Tax would be reduced from 140 percent to zero;

The measure is inconsistent with the policy to promote tourism which must include attracting new investment to the tourism industry.

This is an anomalous measure as it means that vehicles under 1500 cc will pay more in duties and taxes than the higher engine capacity vehicles.

It also seems inconsistent with the environmental goals of the country.

Free vehicle licences to motor buses and motor vehicles that operate in Regions Nos. 1, 7, 8 and 9;

The fee for such a licence is up to $14,000 so the impact is unlikely to be significant enough to affect the supply of transportation in those regions.

Removal of VAT on vehicles that are less than 4 years, which are used to transport more than 21 persons;

This measure is designed to encourage newer, energy efficient vehicles.

Removal of Excise Tax flat rate of US$6,900 which will be replaced with VAT of 14 percent, on vehicles 4 years and older that carry between 22 and 29 passengers.

The intent of this measure is unclear since it seems to support the importation of older vehicles which would most likely have greater emissions.

Small Business

The Ministry of Business, through GO-INVEST, and the Ministry of Finance, through GRA, will embark on an intensive education program aimed at sensitising small businesses to the availability and accessing concessions available under the various Tax Acts, the Small Business Act and those offered through Investment Development Agreements (IDAs).

Without a reduction in the red tape involved with accessing these concessions, these programs will have minimal impact.



The sum of $100 million has been allocated to replenish the Small Business Development Fund.

Educational Services Measures R & M Comments Removal of VAT on the provision of all educational services.

The initial decision was justifiably unpopular and its reversal is eminently sensible.

Day Care Centres Employers who provide day care services to their employees, and businesses that provide and construct handicap facilities will be allowed to deduct as an expense the capital costs and expenses related to such provisions.

This is an enlightened measure but may be very little used in practice.

The preceding measures take effect from 1 January 2018.

Measures to Improve Tax Administration

Measures R & M Comments An amnesty to all delinquent taxpayers - corporate and individual - who are outstanding in the filing of true and correct tax returns and payment of their true and correct taxes. The amnesty will be in effect from January 1, 2018 through September 30, 2018. Taxpayers who file and pay all principal taxes on or before June 30, 2018 will have all interest and penalties waived, while those who file and pay all principal taxes between July 01, 2018 and 30 September 2018 will have 50 percent of interest and penalties waived.

Tax amnesties are not without their critics with the strongest argument being that they reward tax cheats while others debate whether they contribute to greater tax compliance. The tax amnesty is perhaps the most significant measure announced by the Minister and of course requires statutory amendment. The Minister’s announcement was in respect of “taxes” and would therefore seem to apply to all forms of taxes, including income, corporation, property and capital gains tax. The projected increases in the separate tax revenues do not seem to presume any spike in collections from this initiative. The projected increases translate to a 7.3% against an increase of 9.8% in 2017, where no amnesty was available. This is not the first occasion of a tax amnesty and was among the recommendations of the Tax Reform Committee. An amnesty for taxpayers in arrears for the period 1984 to 1990 was granted in 1991. Corporate tax collections are projected to increase by $2.7 billion or 6.5% compared to the $6.9 billion or 20.4% increase expected for 2017. The reduced Corporation tax rate, dual rates for companies involved in both commercial and non-commercial



Measures R & M Comments activities and removal of the minimum tax are all expected to impact 2018 revenues.

Reduction of the deposit required to lodge an appeal in any tax matter from 2/3 in the case of an appeal to the Board of Review and the full amount in the case of an appeal to a judge in Chambers. Where the amount in dispute is less than $20 million, a deposit will be required but if greater, the Revenue would accept a bond or other form of guarantee.

This is a significant improvement over a long contentious law but it remains discriminatory against the small and medium sized businesses who will have to make a deposit of cash.

In certain instances, as predetermined by the Commissioner-General, draft management accounts may be accepted for filing purposes, and audited accounts filed on or before December 31st of the year in which the return falls due.

The Accounting profession and their clients will welcome this measure, particularly since the introduction of a penalty for non-filing of returns in the 2017 budget. It is however inconsistent with the requirements of the Companies Act and may not be welcome by commercial lenders. The measure is likely to impose on the Commissioner-General’s time and it will require clearly defined regulations made into Regulations. As a principle, discretion in tax matters should be avoided.

In cases where businesses have a difficult in obtaining a licence a Provisional Licence may be issued for a period not exceeding two years, for premises conducting some of the following businesses: Grocery Shops, Variety Stores and Snackettes. The Provisional Licence cannot be used to acquire any additional licence such as a Liquor Licence. In addition, upon expiration of the Provisional Licence, no extension will be granted.

Should improve compliance with licensing requirements and generate some additional revenue for the government.

Following the amendments in Budget 2017 to the VAT Act and Schedules, there are additional amendments necessary to correct errors and omissions as well as bring greater clarity to certain definitions and areas of the law.

The assurance that any such cleaning up exercise will not “negatively affect” any taxpayer while not legally enforceable, is welcome. Transition rules were lacking in the 2017 amendments.

Overall comments The measures are not contentious although they do not offer much by way of monetary benefits. The modest increase in the old age pensions will no doubt attract criticisms. The timing of the amnesty may be significant since this approach usually precedes or coincides with strong enforcement. The Minister has had the benefit of three separate tax studies and had earlier announced a four year programme of tax reform. The Speech did not signal whether or not there were likely to be any further measure of a fundamental nature and appears to have shifted focus to the administration of taxes. Taxation is



a useful and necessary tool for the reduction in income and wealth inequality and it is regrettable that the Administration does not appear to share that philosophy. As set out in the Table above, the Budget does not appear to anticipate any unusual spike in tax collections arising from the Amnesty. Ram & McRae has always argued that the relationship between the tax administrator and the taxpayer is an unequal one in favour of the administrator. For this reason, and well before the announcement, we had decided that among the topics we would cover in this Budget Focus, would be a Taxpayer Charter. See Commentary and Analysis.



Commentary and Analysis Each year, the Partners of Ram & McRae identify and draw attention of policy makers to critical issues and challenges facing the country, whether arising out of the Budget presentation or otherwise. We recognise that our selection will not receive universal acceptance and particularly since they are limited to economic and financial issues seen from the perspective of a professional firm operating in the capital city. Last year’s Focus addressed the continuing saga of Contract Employees, a mechanism used by successive Administrations to employ whoever they wish outside of the public service rules; the image of the Granger Administration in terms of accountability and transparency; the state of the Laws of Guyana, including the bungled Consolidated Laws inherited by the Attorney General from his predecessor; the State Assets Recovery Agency Act (SARA), now passed into law, providing for civil recovery of State assets improperly acquired; the Paris Climate Change Accord to deal with the existential threat of global warming; and amendments to the Value-Added Tax, transferring large numbers of zero-rated items to the exempt and taxable categories, including VAT on education. The positive in the decision to rescind VAT on education contrasts sharply with the complete absence of action on the laws. As we have noted on several occasions, there are major errors of omission and commission in those laws while we still operate the emerging petroleum sector on laws that belong to a different era. On the SARA, the Government rejected every plea and recommendation for amendments or for the Bill to be taken to Select Committee. No wonder then that the Act is the subject to a major legal challenge in the Constitutional Division of the Guyana High Court. In this Section we address the following:

1. Dealing with Income Inequality; 2. The New Demerara River Bridge; 3. Management and Investment of Oil Revenues; 4. Local Content; and 5. Taxpayer Charter Needed.



Dealing with Income Inequality The Organisation of Economic Cooperation and Development (OECD) has stated that global income inequality stands at very high levels, whereby the richest eight percent of the world’s population earn half of the world’s total income, while the remaining 92 percent of people are left with the other half. In countries across the world as diverse as Hong Kong and Australia the alarm bells are ringing and politicians are using income inequality as the platform from which to launch political campaigns. Even then newly elected President of Guyana appeared to recognise that there is a serious problem, pronouncing thusly on September 3rd, 2015: “There can be no social cohesion in an economy characterised by huge gaps and wide income disparity between a few very rich people and a large mass of destitute, homeless and very poor people. Extreme poverty can be reduced and eventually eliminated.” Wonderfully phrased, but other than the several studies now being conducted, how engaged has he been in ensuring that specific strategies are implemented and what tangible progress can his government point to since accession to office that takes them out of poverty and capable to earn an independent living? Of course, there is ample anecdotal historical evidence that income inequality is a fact of life in Guyana and articulation and execution of policy solutions is the government’s responsibility. The President must be only too aware of that class of society described as the working poor.

Understanding that income inequality can come about as a result of both external and individual-specific causes is necessary if appropriate solutions are to be developed. Individuals may possess certain advantages which may influence their earning potential since they are able to differentiate themselves from others. Some of these attributes may be associated with intelligence, certain skillsets, personality, and even physical strength, and differences in these individual characteristics may result in some persons being able to command a higher price for their talents than others. In many countries race and gender also play a significant role in income inequality as a result of discriminatory policies that create barriers to entry into the workforce or into specific jobs and professions for certain categories of persons. While race and gender are important and cannot be totally ignored, they may not be as significant a part of the equation in Guyana as other things that impact income inequality. As for external factors, one of the most important determinants of mobility and future income of individuals is undoubtedly education. Government can influence this, whether positively or negatively, by educational policies that either create avenues for greater access to education or do not. If these policies are not appropriate, those who could obtain education and acquire skills will command higher salaries while others without similar access will have to settle for poorer paying jobs. Educational policy needs to be formulated so that the skills needed are the ones that attract the greater portion of resources. An extreme example of defective policy is Argentina where as a result of government initiatives the number of graduated psychiatrists is the largest in the world with an estimated of 42,000 practitioners: 110 professionals per 100,000 inhabitants, over four times the average of most developed western economies. In the case of Guyana, we just had another large group of graduates from the University of Guyana but how does this help reduce the income gap if a significant number of them cannot find jobs in their fields of study, or indeed, cannot find jobs at all. Serious work needs to be done by the government to assess where the skills deficit is in Guyana and to direct resources towards those areas.



Another culprit identified is globalisation and the interconnected economy that results in fluctuations in economic cycles and global recessions such as the one experienced starting 2008 that created conditions that increased inequality. Joseph Stiglitz, the Nobel laureate presented a study showing that policies to stop the effects of the recession, such as the enormous rescue packages offered by the United States government to a number of financial institutions and industries (such as the automotive sector), may cause even more income inequality if financed by public deficit which will later oblige the government to increase tax rates and negatively impact wages generally. The developed countries have proved that they can utilise taxation and monetary policy to offset the income disparities created by globalisation and countries such as Guyana should find it equally possible to use these same tools. This Administration must eschew traditional economic growth policies borrowed from the IMF in favour of strategies designed to raise the income level of the poorest households faster than the average through employment policies that focus on creating better jobs with adequate income, stability and security for workers. Throughout the world small and medium sized businesses traditionally are drivers of most of the job growth in the economy and any employment policy in Guyana with its high levels of unemployment, must be designed with this in mind. Matters such as access to capital, technology and markets are some of the obstacles to growth faced by this sector. Through regulation and other facilitative actions government can reduce or eliminate the impact of these impediments, and make sure that the environment is created where financing can be obtained with relative ease is essential. The proposed establishment of a $100 million revolving fund to finance businesses is an essential first step. However, to ensure maximum and optimum utilisation of the funds, the intended restriction of access to the funds to those businesses whose goods and services are sustainable and environmentally friendly should be reconsidered at this stage of our development. The government Guyana is still the largest consumer of goods and services and it can help grow the small business sector by mandating quotas for the award of a percentage of government procurement to smaller businesses. Obtaining the commitment of the oil companies to local content should also be revisited. The government can also help by having institutions that make it easy to obtain information on improving production methods, diversification of products and accessibility to new markets, while also providing technical support services and vocational training. Fiscal policy is another tool in the government’s policy toolkit that can have a significant impact on income inequality in a relatively short period if the right mix is achieved. Countries like Brazil and Mexico have embarked on programmes that, through direct transfers, have managed to produce clearly measurable results. Analysis of our own tax system indicates that the tax burden rests heavily on wage earners with business and the wealthy contributing a much smaller share to tax revenues than can be morally justified. Capital gains which are most likely accruing to the wealthier higher earners are taxed at a significantly lower rate than wages, and dividends and estates, again largely accruing to the wealthy, are not taxed at all. All the foregoing policy prescriptions will not be effective if the government does not develop the institutional capacity to ensure that the interventions and services get to their intended targets. It must be recognised that simultaneously building institutional capacity that is efficient and responsive to the needs of the poor and disadvantaged is also fundamental to the success of any programme.



The New Demerara River Bridge

The existing floating Demerara Bridge built forty years ago has outlived its technical and economic life. It is therefore to the credit of Guyanese engineering and probably more to the point, ingenuity that it continues to operate. The decision to build a replacement before catastrophe strikes is therefore welcome. The proposed replacement is likely to constitute the single largest investment by the APNU+AFC Government. A decision on this Bridge will test the soundness of the Government’s judgment, challenge the country’s procurement system, test its understanding and competence of evaluating, financing and undertaking of major projects and reveal its commitment to consultation, transparency and accountability. The signs are not encouraging.

Budget 2017 had no provision for the proposed Bridge while Budget 2018 and Volume 3 – Project Description has a provision of $5 million. Surprisingly for the largest infrastructural investment of this Administration, the Minister devoted little of his 84-page Speech to the Bridge and it does seem that necessary as it is, there is no sense at this stage of where the money will come from.

It appears that the Government has accepted the recommendations of a Study, carried out by a Dutch firm, but released to the public without the all-important Appendices to support the findings, conclusions and recommendations. Requests by Ram & McRae to obtain a copy of these have been ignored while the invitation for bids require that certain documents must be “specifically requested by sending a formal written request”.

The Government, or more directly, the Ministry of Public Infrastructure, has also made a complete mockery of the tendering process and the selection of the consultant remains mired in mystery and speculation. The contents of the Study hardly reflect or do justice to a project of this size, breadth and complexity and its failure to include the Terms of Reference of the Study does not help. It recommends a fixed low bridge between Houston on the East Bank of the Demerara River and Versailles on the West Bank, with three lanes and no provision for pedestrians or cyclists, compared with two for the existent Bridge, at an estimated capital cost of US$170 M. This figure very well be greater, depending on the geotechnical studies and findings. Despite its cost, it appears that the planning horizon for this Bridge is a mere ten years as the Study contemplates another Bridge by 2030!

The Study contains some serious contradictions. It notes the Government’s desire for possible private involvement to reduce the claim on Government funding and liabilities, and that a “keen appetite has been found in the national and regional financial markets to fund the Project.” Yet, the Study immediately pronounces that the financial projections show that the business case of the Project is financially not viable…” It seems that whether the Government realised the contradiction or not, it would proceed with the project on the basis of a flawed Study.

The Study identifies a range of toll increases ranging from 100% to 300% for road tolls, and 750% for vessels. According to the Study, if existing tolls are increased by 100%, the anticipated Government contribution over the first 12 years is projected at US$140 M. It advises therefore that toll tariff rates be increased to 250 % of the present 2017 road toll rates, reducing the Government’s contribution to US$40 million. However the project is structured, and even without any price escalation, the capital cost of this Demerara Bridge will be more than 400% of the Berbice Bridge.



So far the Government has not engaged the public on any matter regarding the Bridge, let alone the prohibitive increases it may impose when confronted with budgetary challenges. It seems reasonable to conclude however, even at this late stage, that the Ministry of Public Infrastructure is unable to make up its mind on the details of the project it is proposing. Its invitation to bidders volunteers that the Government will “encourage BOOT (Built, Own, Operate and transfer) or DBFM (Design, Built, Finance and Maintain) or similar proposals as this may provide a more attractive proposition for the Employer.” With respect Minister, you and the Cabinet need to decide on the location, type, operations and management, and the financing of the project. The absurdity of the Government’s approach to the project is further demonstrated by its stated intention to pre-qualify three firms while anticipating two different project structures!

The issue of a Pre-Qualification documents for construction of a new Demerara Bridge, suggests a public project, within a Build Own, Operate and Transfer (BOOT)/Design, Build, Finance and Maintain (DBFM) structure. It must be obvious that a structure for a public project simpliciter, is vastly different from a BOOT project. This dual structure is again reflected in the pre-qualification document, dealing with the type of contract—one purely a Design Build (FIDIC Yellow Book), and one a BOOT/DBFM model (FIDIC Gold Book), each implying vastly different considerations.

The Procurement Commission should be calling in the officials of the Ministries of Public Infrastructure and Finance and the Demerara Harbour Bridge to guard the country against their folly.

Inevitably the Demerara Bridge brings forth a comparison with the US$40 M Berbice Bridge undertaken as a BOOT project, with ownership passing to the Government after twenty-one years. Unlike this current circus, no one could criticise the expansive and comprehensive technical studies including a Feasibility Study, a traffic study, a full Environment Impact Assessment (EIA) and geotechnical studies, all undertaken prior to the commencement of construction work on the Berbice River Bridge.

Apparently experience and technical competence do not count for much in the choice of a successful bidder. The Evaluation Weighting provides 40% of the evaluation points to “Costs, Funding, and Local involvement.” Only 25% is attributed to “Relevant Experience,” of which the sub-weighting of relevant bridges is only 10 %.

In the case of the Berbice Bridge, a separate Act was enacted, allowing for a Concession Agreement to a private company. A financing model was prepared based on no drawdown or guarantees from the Central Government. Of course, that does not mean that the Berbice Bridge was not without controversy, including its location, investment mix and governance, all of which formed the basis of a Motion by the APNU and the AFC, then separate and in the parliamentary Opposition, calling for a lowering of fares on the Berbice River. Mr. Moses Nagamootoo, now Prime Minister, in opposition had called for those tolls to be reduced to $1,000, a cut of more than 60%. As Prime Minister and Leader of the House, confronted with the reality of governing, he was happy voting for a more modest ten per cent cut!

The gap between opposition taunts and idle talk and the serious business of running a country exposes a grave lack of competence and experience with construction type projects, and a dangerous absence of capacity to engage in, plan and undertake BOOT projects. With a budget of US$170 M, the proposed Bridge will be the largest public sector led project undertaken thus far by this Administration. Even if



there is no price escalation, the national debt will increase, crowding out other national investment priorities.

The Government has failed in significant ways in arriving at the most cost-effective solution, when taking into account economic, financial, environmental, technical, traffic, social and other considerations. It must consider the ramifications of constructing another Bridge less than ten years after construction, and after such a substantial outlay of funds. Also, there must be a definite determination of the type of bridge that would be most suitable all things considered – high, fixed with openings or even floating bridges, and their respective costs, advantages and disadvantages.

In conclusion, the planning and public engagement on this US$170 M project are seriously inadequate. The entire process by which the Bridge study was commissioned fails the transparency and accountability test and we must ensure that the next phase, which will involve more substantial sums of money, is not equally shrouded in mystery. With key mistakes appearing so early in the process, one must wonder whether those entrusted with responsibility for this project possess the qualification, experience and competence to take it forward.



Management and Investment of Oil Revenues It is now just over the halfway stage of the life of the current Parliament. In about the same time into the future, Guyana will join the club of petro states, catapulting to No. 9 on the list of oil producing countries, using the metric of per capita barrel of oil per day. Ram & McRae projects that in the first full year of production, the share of government revenue from petroleum will exceed twenty-five per cent. This is huge but not unusual among oil producing countries. Budgeted Current Revenue for 2017 – illustrative impact of Petroleum

Of course, Guyana has long been a producer of non-renewable resources earning not insubstantial revenues and foreign exchange in the process. For decades, the revenues from those sectors were substantially collected not by the central government but by statutory bodies such as the Geology and Mines Commission (GGMC), the Guyana Gold Board and the Guyana Forestry Commission, each acting both as regulator and collector of taxes and fees. These moneys therefore found themselves in the Consolidated Fund by this indirect and inefficient route. In the two and one half years since the announcement of the largest oil find in 2015, there has been no concluded parliamentary intervention in the sector, as a result of which the governing regulatory and fiscal framework for the petroleum sector is governed by two petroleum Acts, one passed in 1939 and the other in 1986, industry specific regulations passed in 1986, and the Income Tax Act. Meanwhile a Petroleum Commission Bill was tabled in the National Assembly and referred to a Parliamentary Select Committee. The Minister indicated that this is a priority for 2018 but there are likely to be substantial changes to the Bill if it is to serve the function of overseeing the oil sector within a framework of transparency and accountability.

Internal Revenue27%

Customs & Trade6%

Value Added and Excise Taxes

31%

Other9%

Petroleum27%

Total Current Revenue – G$255,007Mn

Internal Revenue

Customs & Trade

Value Added andExcise TaxesOther

Petroleum



The financial provisions of that Bill are not only opaque but are silent on the matter of profit oil which will be the largest single source of revenue from upstream petroleum operations. Paragraph (4) (b) of Clause 4 of the Bill setting out the responsibility of the proposed Commission speaks only of “the collection and recovery of all rents, fees, royalties, penalties, levies, tolls and other charges”. This does not appear to include the share of profit oil which Guyana will receive. Under the terms of the existing Petroleum Agreements, oil companies will pay no Corporation Tax but they will receive a credit for deemed Corporation Tax paid. Presumably the Guyana Revenue Authority will make a book entry for, and treat the tax as paid over to the Consolidated Fund. In the absence of an amendment to Article 216 of the Constitution, the proceeds of profit oil less the deemed Corporation Tax, will also be credited to the Consolidated Fund. As the law currently stands, the entire proceeds from the oil companies will be available to the Legislature and the Executive to appropriate for spending. That is clearly unacceptable and unfair to future generations when the wells are exhausted and there are no oil revenues. Recently, Guyana has become a magnet for consultants and investment specialists offering gratuitous advice to Guyana on everything from oil refineries to establishment of a Sovereign Wealth Fund. By now, every Guyanese is aware that the primary functions of such a fund are the stabilisation of the country's economy through diversification, and the setting aside of revenues for future generations. Such goals are not only noble: they often make economic and practical sense. For Ram & McRae therefore it is not a question of whether or not Guyana should have a SWF, it is clear that it should. That is the easy part. The hard part is to recognise that a Sovereign Wealth Fund, however described, is part of the wider issue of revenue management, including resource governance. The Resource Governance Index for 2017 (Governance Index) covering eighty-one countries across the world, distinguishes the successful extractive industries countries of which Norway, Canada, Chile and Botswana are held up as models, – from those that have been plagued with the “resource curse” or the Dutch Disease, of which neighbouring Venezuela, Nigeria, Myanmar and Uzbekistan are unfortunate poster children. The distinction between these two group of countries lies in the establishment and adherence to sound laws, policies and practices conducive to value realisation, revenue management, and an enabling environment. The first component - value realisation - covers the governance of allocating extraction rights, exploration, production, environmental protection, revenue collection and state-owned enterprises. The second - revenue management - covers national budgeting, subnational resource revenue sharing, and sovereign wealth funds. The index’s third component assesses each country’s enabling environment, or governance framework, made up of Open data, Political stability and absence of violence, Control of corruption, rule of law, regulatory quality, government effectiveness and voice and accountability. Guyana is not among the eighty-one countries covered in the Index. So while it would be meaninglessly idle to speculate where the country would have ranked in the Index, it would still be useful for our policy makers to take note of its findings and assessments and to consider the examples to follow and the lessons to be avoided. After all, only four of the countries, or one out of every twenty, is considered “good”, i.e. has established laws and practices that are likely to result in extractive resource wealth benefiting citizens. Another twelve countries were found to be satisfactory, i.e. have some strong governance procedures and practices, but some areas need improvement. In those



countries, it is reasonably likely that extractive resource wealth benefits the citizens of these countries, but that there may also be costs to society. The majority of the countries – around sixty - are rated as “weak”, or “poor”, with a mix of strong and problematic areas of governance, or practically few respectively, procedures and practices to govern resources. Finally, there are ten countries which are rated as failing. In these countries, there is an absence of any governance framework to ensure resource extraction benefits society. In these countries, it is highly likely that benefits flow only to some companies and the country’s elite. But the Index is not without some significance to Guyana. Ram & McRae has compared the rankings in the Governance Index with those in another major Index in which Guyana does not fare too well – the Transparency International Corruption Perception Index. A comparison shows that those countries which fare poorly on the Corruption Index also fare poorly on the Governance Index. Norway, Chile, United Kingdom, Canada and Australia and the USA rate highly in both Indexes but without exception, every country found at the bottom of the ladder in the Corruption Index is among the worst in the Governance Index as well. Guyana is among the countries with a poor showing in the Corruption Index which may portend a poor showing in the Governance Index as well, whenever it is included among the petroleum and extractive industries Governance Index. While the Government successfully applies for membership of the Extractive Industries Transparency Initiative (EITI), it is adamant about not disclosing its petroleum agreements, offering facile excuses which not only make the country seem backward but can make corruption so much easier. Writing in Oil, Gas and Mining, a World Bank 2017 Publication, Peter D. Cameron and Michael C. Stanley noted that while good practice in resource management is increasingly recognised, the experience in most resource-rich states “has not been especially encouraging” and that there are continuing problems in the implementation of sound resource revenue management. The writers identified three resource constraints faced by developing countries with recently discovered large scale natural resources and four main challenges. With minimal exception, all seven constraints and challenges apply directly to Guyana, and are therefore worth repeating. Constraints:

1. A scarcity of capital, with an interest rate higher than the global rate, and limited access to international capital markets, possibly as a result of the country’s credit rating.

2. An undersupply of public infrastructure.

3. An investment climate that lacks incentives to private investment.

Challenges:

1. Volatility and uncertainty of revenue receipts: Prices for commodities have defied the most informed price forecasting and have been stunningly unimpressive since the oil war of the seventies. Given the fungibility of money, significant oil revenues will affect both the revenue and capital budgets and could easily stop otherwise desirable projects midstream.

2. Absorptive capacity: Where revenues are spent at once, the price of plant machinery and equipment that enable production, such as transportation, will be driven up. Future non-



resource sectors may appear unattractive by comparison and cause sectors even with good prospects to be neglected, reducing learning and future growth.

3. Exhaustion: The products, being non-renewable, raise a conflict between short-term revenue maximisation and inter-generational interests. Both the PPP/C and the APNU+AFC have chosen to give licences over most of the off-shore areas currently under the country’s international jurisdiction. If all of these are explored and exploited simultaneously exhaustion will take place sooner rather than later making the decision between consumption and savings all the more critical.

4. Undetermined ownership: If the provisions of the Constitution regarding the power of the Regions to raise money (Article 76) and the allocation and garnering of resources by local democratic organs (Article 77A) were taken seriously by the Government, the question of ownership of natural resources and the disconnect between simultaneous resource wealth and individual poverty within regions would have posed real challenges. It does not appear that the Government or the Opposition understand the significance and implications of these constitutional provisions.

Halfway into its term, this Administration has not demonstrated that it sufficiently understands the law and issues regarding the petroleum sector and that it is capable of managing the petroleum resources. Most of the resources have been allocated or reallocated under archaic legislation by Ministers whose competence in the sector is unconvincing.

The Minister of Finance announced in his Speech the establishment of a Sovereign Wealth Fund, starting in 2018. Of course oil revenues do not arise until mid to late 2020 so there will be no petroleum money to put into the Fund. Maybe as a test run, the Minister of Finance and the Minister for the petroleum sector might wish to consider starting with a gold, diamond and bauxite fund and by the time oil revenues come in the country will have worked out the kinks.



Local Content

Any discussion on local content in the petroleum sector must begin with the law. And the position of the law is clear. An application for a prospecting licence must contain a statement giving particulars of the applicant’s proposals with respect to the employment and training of citizens of Guyana. The requirement with respect to a production licence is even more expansive. It must contain a statement giving particulars of the applicant’s proposals with respect to the employment and training of citizens of Guyana and in relation to goods and services to be obtained in Guyana.

In very strong and unambiguous language, the Petroleum Exploration and Production Act prohibits the Minister from granting a production licence unless both the proposals for the employment and training of citizens of Guyana, and for the procurement of goods and services obtainable within Guyana are satisfactory. We may not have realised it in 1986 or described those provisions as Local Content Requirements, (LCR) but LCR is embedded in our legislation and it is not within the powers of any minister or Cabinet to suspend or modify the law.

It is therefore strange that Mr. Raphael Trotman, a lawyer and Minister of Natural Resources who understands the importance of certainty of law, would state in ‘A Policy Framework – Working Draft for Discussion and Input’, that a “Local Content Policy (LCP) will be developed over time and in tandem with the growth of the industry”, whatever that means. Much of our deepwater blocks have already been given out so time is not on our side. He and the Administration must be aware that offshore oil does not produce a whole lot of onshore jobs and that every effort needs to be made to ensure that the benefits of petroleum to Guyanese are maximised.

Minister Trotman had promised that the Draft, first published in April of this year would be finalised by August which is now long past. According to him, the sector is naturally taking shape, that Government will not intervene but let competitiveness rule, that the policy is not expected to include any sanctions for non-compliance, and that legislation will not be promulgated. Clearly, Mr. Trotman is the wrong man for the job.

Ironically, the driver of this country’s local content policy is not himself a Guyanese but a Trinidadian who seems to be recommending for Guyana local content requirements that fall way short of those of his home country. Consequently, government’s approach has received criticism from several sources with the Georgetown Chamber of Commerce saying the policy does little for job creation. Various commentators including former officials of the Government of Trinidad and Tobago have urged that Guyana enact legislation to drive local content and ensure that it does not make the same mistakes as the twin island republic.

The Guyanese policy paper recognises that oil offers an opportunity for “enhanced engagement and participation of Guyanese nationals and businesses”, but reduces the strength of its case by noting that the sector requires specialised skills and provides only a small amount of direct and indirect jobs. Instead, the document shifts the focus to “growth and diversification in the economy and the supporting skills, services, technology and infrastructure base” as opposed to “the direct impact on employment and businesses.”

Contrast this with the intent set out in the 2004 framework of Trinidad and Tobago which stated that that country “will maximise the level of participation of its national people, enterprises, technology



and capital through the development and increasing use of locally owned businesses, local financing and human capabilities in the conduct of all activities connected with the energy sector, along its entire value chain, at home and abroad.”

Local Content Requirements do have their detractors who argue that these are inefficient and carry up cost since the best goods and services may not be available in the home country. That argument will forever be made until the bullet is bitten. There is too the argument of the internationalist who posits that such requirements violate WTO Rules, an argument that is equally easily debunked. Despite the questionable nature of LCRs under WTO rules, both developed and developing countries have turned to local content requirements. Both the World Bank and the OECD unabashedly promote local content requirements with a recent OECD publication, Local Content Policies in Minerals –Exporting Countries pointing out that the “Use of local content, procurement, and capacity building measures in the mining sector is widespread, including in the OECD countries (emphasis added). In fact, some countries like Brazil and Nigeria embody their local content requirements into domestic law, sometimes defining local by reference to regions and communities.

If used sensibly, local content requirements may have a greater fiscal and economic impact than the royalty and taxes which may be collected. And when it comes to the development of the skills and the competence of the locals, such requirements have no equal.

Ram & McRae is not advocating for quotas but for immediate measures to ensure that our people, goods and services are as good and competitive as other nationalities. Meanwhile Minister Trotman has a duty to ensure that the petroleum laws are enforced and no comprises or uninformed arrangements are permitted.

The Budget Speech had much to say about Sovereign Wealth Fund, the implementation of which is still a couple of years off while being completely silent on Local Content which is of far greater urgency. That both the Finance Minister and Mr. Trotman are members of the Cabinet Sub-Committee on the Petroleum sector adds to our concern.



Taxpayer Charter Needed Introduction

Taxation without representation was one of the causes of the American Revolution and has ever since been an emotive appeal for those who consider themselves aggrieved by injustice. In a more peaceful environment the call is for a social compact – one of mutually enforceable interlocking rights and responsibilities, often between the State and the citizen. Where a breach occurs sanctions step in – penalties, including jail time for the tax cheat and for the Government, sanction through the ballot box. But the Government itself does not administer the tax laws or collects the taxes – it uses the tax authority as its alter ego or its agent. In the course of one’s life, one interacts with the tax authority more than any other arm of the Government. That Ram & McRae believes strongly that there needs to be a binding compact between the tax authority and the taxpayer is neither revolutionary nor new.

We sensed from the Minister’s Budget Speech a recognition of the need for a less combative, less adversarial relationship between the government and the governed. We believe that the mood is right for the establishment of a strong, enforceable charter between the taxpayer and the Guyana Revenue Authority. While we recognise that the incidence of tax evasion is extremely high, the traditional attitude of the tax administrator towards taxpayers who are often meeting or trying to meet their obligations leaves a lot to be desired.

Most taxpayers who have had dealings with the GRA usually come away from those encounters feeling, justifiably or not, that they did not get a fair shake. These viewpoints generally arise from the belief that no matter what evidence is produced or what is said, the attitude of the GRA is one of distrust and display of power. As a long established firm of accountants, Ram & McRae has an entirely different relationship and experience with the tax authorities but whether justified or not, this is and remains the perception of the average person who has had to deal with a tax issue.

Feeling of Helplessness

This sentiment is in no way unique to the Guyanese taxpayer and it is safe to say that taxpayers the world over are equally unhappy with the way they are treated by their own tax authorities. In the United States of America, the feeling of helplessness is as bad if not worse because budget cuts have resulted in less attention to customer service and more emphasis by the Internal Revenue Service (IRS) on enforcement. Speaking with a live person at the IRS in the USA is almost impossible unless one is prepared to wait sometimes as long as two hours, after and if you have been able to decode the various prompt options offered by the sophisticated telephone system. Then even after all that time and frustration it is not unusual to hear: “Due to excessive call volume, we are unable to answer your call. Please try your call again later,” followed by the click of the system disconnecting the call.

There is however an alternative which is available and which has its beginnings in the Office of the Taxpayer Ombudsman which was created in 1979 by the IRS “to serve as primary advocate within the IRS for taxpayers”.

Significant Change The position of Ombudsman was codified in the Taxpayer Bill of Rights in 1988 but it was felt that this was not enough and The Joint Committee on Taxation, a Congressional body, decided that a



significant change was necessary. The Committee set forth the following reasons for change: “To date, the Taxpayer Ombudsman has been a career civil servant selected by and serving at the pleasure of the IRS Commissioner. Some may perceive that the Taxpayer Ombudsman is not an independent advocate for taxpayers. In addition, in order to ensure that the Congress is systematically made aware of recurring and unresolved problems and difficulties taxpayers encounter in dealing with the IRS, the Taxpayer Ombudsman should have the authority and responsibility to make independent reports to the Congress in order to advise the tax-writing committees of those areas.” Voice of the Taxpayer Congress then replaced the Office of the Taxpayer Ombudsman with the Office of the Taxpayer Advocate in 1996 and the Taxpayer Bill of Rights 2 described its functions as:

To assist taxpayers in resolving problems with the IRS; To identify areas in which taxpayers have problems in dealings with the IRS; To the extent possible, propose changes in administrative practices of the IRS to mitigate

those identified problems; and To identify potential legislative changes that may help mitigate such problems.

In 1997, the National Commission on Restructuring the Internal Revenue Service identified the Taxpayer Advocate as the “voice of the taxpayer” and stated that the Taxpayer Advocate should be viewed as independent within the IRS. It also noted the Taxpayer Advocate’s important and essential role in the protection of taxpayer rights and in the promotion of taxpayer confidence in the integrity and the accountability of the IRS.

Since assuming her position in 2001, National Taxpayer Advocate Nina E. Olson has emphasised the protection of taxpayer rights in tax administration. In her 2007 Annual Report to Congress and in later reports, she proposed a new Taxpayer Bill of Rights. On June 10, 2014, the IRS formally adopted the National Taxpayer Advocate’s proposal, to renew the focus on protecting the rights of taxpayers in all of their dealings with the IRS. This document groups the dozens of existing rights in the Internal Revenue Code into ten fundamental rights, and makes these rights clear, understandable, and accessible for taxpayers and IRS employees alike:

1. The Right to Be Informed

2. The Right to Quality Service

3. The Right to Pay No More than the Correct Amount of Tax

4. The Right to Challenge the IRS’s Position and Be Heard and

5. The Right to Appeal a Decision in an Independent Forum

6. The Right to Finality.

7. The Right to Privacy

8. The Right to Confidentiality



9. The Right to Retain Representation

10. The Right to a Fair and Just Tax System

Because the relationship is of mutual rights and responsibilities, the Advocate also proposed that it should not be a one-sided transaction but that taxpayers should also accept the following as their responsibilities:

Obligation to be honest; Obligation to be cooperative; Obligation to provide accurate information and documents on time; Obligation to keep records; and Obligation to pay taxes on time.

Customer Service

The Taxpayer Advocate in the USA has proven to be very accessible and moves relatively quickly to bring a resolution to complaints received about the IRS. The one drawback is that most taxpayers are not aware of that resource. Adopting something similar in Guyana would be an extremely radical but what may seem a rational and yet progressive initiative could go a far way to improving the perception of the GRA. Most of the ten rights identified above are already enshrined somewhere in our legislation but whether sufficient attention is paid to upholding them is debatable.

Focus believes that there are many well-intentioned, hardworking persons in the GRA who try their best to meet the needs of taxpayers but that they face many constraints in executing their daily tasks. The GRA is the main revenue generator for the government so it will always be under pressure to meet the financial targets imposed by the Government. Its leadership is therefore perpetually treading a fine line between the enforcement and collection and its recognition that it is a public body, that its acts are subject to judicial review, and that it has an obligation to be fair and just to its major stakeholder – the taxpayer. Are taxpayers really even perceived as stakeholders rather than adversaries out to outwit the tax administrator and to cheat the system?

It would not be inaccurate to conclude also that the prevalence of tax evasion inevitably informs an attitude of suspicion on the part of the tax administrator. The consequence is however that their actions disproportionately impact those taxpayers who are trying to be compliant since many lawbreakers in fact have little or no interaction with the GRA.

Inequality and statutory abuse of Taxpayer Rights

The relationship is one of unequal power with the obligations on one side (the taxpayer) and power on the other (the tax authority). It is all well and good to say that the “do nothing, fear nothing”. But the taxpayer has neither the power nor the means to take on the tax authority. Fortunately, there is the Judicial Review Act but only the few and the privileged have the means and the will to take on the authority. There is a fear of causing a backlash and dealing with the consequence of challenging the authority and possibly being l targeted. The authority can take its own time to raise an assessment and additional assessment, placing on the taxpayer the burden of proof. The tax authority can take its sweet time to respond to correspondence and pleas from the taxpayer but the latter is almost always constrained by a fourteen or twenty-one days deadline.



If you owe the tax authority, there is a legal penalty and there is statutory interest. If the tax authority owes you, it will first check into your past to dredge up any reason or cause why you should not be paid. And if after an audit and whatever other obstacles are available to the authority, it finds that it does owe you, you are then placed in the queue subject to availability of funds. And if the taxpayer is finally paid, often years and years after, the interest s/he receives, if any, is disproportionate to what is payable on amounts owed to the authority.

Ram & McRae welcomes the Minister’s announcement modifying the deposit requirement to exercise the right to appeal against any unreasonable act by the tax authorities. It reverses a draconian rule upheld by the Guyana courts in less enlightened times. Kudos to Minister Jordan and Commissioner General Statia. But it will not be enough if there is real injustice.

Conclusion

There is no doubt that the relationship between the tax authorities and the taxpayer is improving, albeit slowly. The GRA needs to ensure that it is not seen as a coercive arm of the state but in an independent partnership or compact with the taxpayer. It needs to disengage – at least publicly – from its perceived close relationship with the political directorate. Any communication between it and the politicians should be done through the Chairman of the Governing Board. Its leadership needs to concentrate on and not compromise its role, responsibilities and relationships. Ram & McRae had argued during the previous Administration against the GRA being part of the anti-money laundering authority. That sends a bad signal. Worse is the possibility that it will share its powers and functions with the State Assets Recovery Agency.

Let us have that Taxpayers’ Charter or Bill of Rights. It is long overdue. A clear outline of rights would also be highly beneficial to the GRA and taxpayers as a means of outlining clearly the expectations for the functioning of the entity. It is time for a peaceful revolution.



Conclusion Once again, Finance Minister Winston Jordan has delivered an early Budget which should be passed before the beginning of the new year. Credit is also due to the Minister for living up to his public commitment prior to the budget that there would be no new taxes. After the criticisms he received last year, he probably thought that discretion is the better part of valour. Given the year of assessment basis for taxation, the impact of the tax reductions could only be seen in taxes that are paid on a current year basis, such as income tax collected on the PAYE basis and Value-Added Tax (VAT). In the case of the former, tax collections actually increased while in the case of VAT, there was a significant reduction. The Minister may wish to obtain from the GRA their perception of the reasons. Budget 2018 continues the pattern of annual increases in spending and while it reports increased revenues, the deficit is now over fifty billion dollars to be financed by debt. Debt service as a percentage of revenue has increased. The forestry and the domestic gold mining operators will probably be satisfied but the poor, women, youths and the unemployed will see little immediate relief in the Budget for them. While Ram & McRae is convinced that tax reform is needed to make the system fairer, we continue to be concerned about the level of government spending driven by the massive expansion of the public service without any regard for whether or not taxpayers receive value for money. Contrary to what the Fiscal Management and Accountability Act provides, the bloated number of ministers, most of whom have little competence or experience in management have power over billions of dollars. A key competence of a good manager is the ability to make timely decisions. As we saw in the case of the second prison riot leading to the destruction of Guyana’s largest prison, no one is fired by this Administration regardless of how poor they are. What is most troubling is that the Government does not seem to have any underlying national values or philosophy or to understand the nature of the State or its Constitution. Regions should be given more power and resources under clear rules and a new Regions Management Act. We are disappointed too in the lack of performance by the National Assembly. Its first duty is make laws for the peace, order and good government of the country. Its failure is spectacular although it does require the Attorney General and other members of the Assembly, including from the Opposition to initiate legislation. The year 2018 will see local government elections which may reflect citizens’ assessment of the Administration. Regardless, it is hoped that the animosity between the Government and the Opposition will thaw and they will realise why they are put there by citizens in the first place. They must be vigilant in making sure that the billions available to the Government is not easily be frittered away by incompetence. This budget is likely to be much less contentious than the 2017 budget which included a number of controversial taxes. Ram & McRae, Chartered Accountants, Waterloo Street, Georgetown. 29 November 2017

Focus Guyana’s National Budget 2018 Appendix A1


Acts Passed in 2016/2017

Act No. & Title Description Date Passed Date of Assent Bill 24 of 2016 Appropriation Act 2016

Authorises the issue from the Consolidated Fund the sum of $230,349,079,000 as the Budget for the year. Of this sum $173,590,727,000 was for Current Expenditure and $56,758,352,000 was for Capital Expenditure.

December 21, 2016 January 3, 2017 24 of 2016.

1 of 2017 Motor Vehicles and Road Traffic (Amendment) Act 2017.

Amends section 9 (1) (b) and the First Schedule of the principal Act dispensing with the requirement for Compliance Certificate for Motor Vehicles; imposes a flat fee on transfer of registration of motor vehicles and cars; increased charge for driving permits and letter of authenticity. See Focus 2017.

January 5, 2017. January 16, 2017. 25 of 2016.

2 of 2017 Customs (Amendment) Act 2017.

Amends the Customs Act imposing an Environmental Levy of $10 on non-renewable beverage containers. See Focus 2017.


3 of 2017 Value Added Tax (Amendment) Act 2017.

Amends several sections of the Value-added Tax Act to give effect to Budget 2017 Measures, including extending the limitation period for bringing action by the Revenue Authority.


4 of 2017 Capital Gains Tax (Amendment) Act 2017.

Amends section 2 of the Capital Gains Tax Act, to bring the valuation date - January 1, 2011 - in line with the Property Tax Act.


5 of 2017 Corporation Tax (Amendment) Act 2017.

Amends sections 2, 10 and 10A of the principal Act, reducing the Corporation Tax Rate to 27.5% for non-commercial companies; introducing a dual rate of corporation tax; and vesting in the Commissioner General a discretion whether to impose the 2% MCT in any specific case.




Act No. & Title Description Date Passed Date of Assent Bill 6 of 2017 Income Tax (In Aid Of Industry) (Amendment) Act 2017.

Amends the principal Act to facilitate tax holiday of up to two years for the provision of wind and solar energy, water treatment facility and waste disposal facility.


7 of 2017 Intoxicating Liquid Licensing (Amendment) Act 2017.

Amends the principal Act to increase thirty-three fines payable under the Act.


8 of 2017 Miscellaneous Licences (Amendment) Act 2017.

Amends the principal Act to increase twenty fines payable under the Act.


9 of 2017 Tax (Amendment) Act 2017.

Amends section 56 of the principal Act to allow the appointment of collection agents for the collection of travel tax. The amendment also requires every carrier operating an aircraft in Guyana to give a bond to secure payment.


10 of 2017 Travel Voucher Tax (Amendment) Act 2017.

Amends the principal Act, inter alia, to exempt certain classes of persons and appoint collection agents.


11 of 2017 Financial Administration and Audit (Amendment) Act 2017.

Amends section 6B of the principal Act to provide for a charge of simple interest rate of 18% on late payment of taxes.


12 of 2017 Income Tax (Amendment) Act 2017.

Amends the principal Act, inter alia to increase the tax threshold to $720,000 or ⅓ of chargeable income, whichever is higher, per annum, introduce an additional band of personal tax rates (28% and 40%) and increase the rate of tributors' tax from 10% to 20%. See page 39 of Focus 2017 for more details and comments.




Act No. & Title Description Date Passed Date of Assent Bill 13 of 2017 Prime Minister Hamilton Green Pension Act 2017.

Provides for the payment of a pension to former Prime Minister Hamilton Green based on the salary paid to the serving Prime Minister and the benefits enjoyed by a former President under the Former Presidents (Benefits and Other Facilities) Act 2015.

March 9, 2017. March 17, 2017. 23 of 2016.

14 of 2017 State Assets Recovery Act 2017.

Establishes the State Assets Recovery Agency (SARA) whose primary function is the recovery, through civil action, of State and other property obtained through the unlawful conduct of a public official or other person.

April 13, 2017. May 4, 2017. 2 of 2017.

15 of 2017 Deeds and Commercial Registries Authority (Amendment) Act 2017.

Amends the principal Act to allow the Ministers to act as the Governing Board where no Board has is appointed.

June 15, 2017. June 28, 2017. 3 of 2017.

16 of 2017 Supplementary Appropriation (1 for 2017) Act 2017

Provides further sums for the year ended 31st December 2017 of $143,593,924 under the current budget and $6,252,324,936 under the capital budget, a total of $6,395,918,860.

July 7, 2017. July 14, 2017. 6 of 2017.

17 of 2017 Tobacco Control Act 2017

Provides for the adoption and implementation of tobacco control policies in accordance with the WHO Framework Convention on Tobacco Control.

July 27, 2017. August 22, 2017. 5 of 2017.

18 of 2017 Motor Vehicle Insurance (Third Party Risks) (Amendment) Act 2017

Amends the principal Act to provide for the issuance of third party insurance coverage for motor vehicles coming into Guyana from foreign countries.

July 27, 2017. August 22, 2017. 7 of 2017.

19 of 2017 Supplementary Appropriation (2 for 2017) Act 2017

Provides further sums for the year ended 31 December 2017 of $161,623,627 under the current budget and $2,353,055,703 under the capital budget, a total of $2,514,679,330.

August 3, 2017. August 9, 2017. 11 of 2017.



Act No. & Title Description Date Passed Date of Assent Bill 20 of 2017 Broadcasting (Amendment) Act 2017

Amends the principal Act inter alia to introduce three classes of broadcasting services.

August 4, 2017. September 7, 2017. 10 of 2017.

21 of 2017 Anti-Money Laundering And Countering the Financing of Terrorism (Amendment) Act 2017

Amends the principal Act to make money laundering a hybrid offence.

August 4, 2017. August 22, 2017. 8 of 2017.

No provision on how the Environmental Levy is to be utilised. It is unclear why this Administration persists with the label “Levy” when the funds so received are not earmarked for any specific purpose. This is in fact a tax.

Act 5 is likely to bring some additional administrative work as well as dispute over the allocation of costs and expenses by companies which carry out commercial as well as non-commercial activities.

A two year tax holiday is unusually short for a tax holiday. In fact, the same Act allows for tax holidays in certain cases of 5 years, ten years and in exceptional sectors more than ten years.

Only three substantive Acts passed during the year of which one – the State Asset Recovery Act – was tabled in 2016.

Of the twenty-one Acts passed in 2017, only eight were actually tabled in 2017!



Regulations Issued in 2016/2017

Regulation No. & Title Principal Legislation Description Date 7 of 2016 Travel Tax Regulations 2016

Tax Act, Cap. 80:01 Increase in travel tax to $3,500. December 19, 2016

8 of 2016 Value-Added Tax (Amendment) Regulations 2016

Value-Added Tax Act, Cap. 81:05

Reduce the rate from 16% to 14%; increase the threshold from $10Mn to $15Mn; apply a limit on the value of electricity and water which is zero-rated.

December 19, 2016

9 of 2016 Customs (Amendment) Regulations 2016

Customs Act, Cap. 82:01

Revise the fees payable. December 19, 2016

10 of 2016 Excise Tax (Amendment of Schedules) Regulations 2016

Excise Tax Act, Cap. 82:03

Provide for relief for hybrid and electric vehicles, garbage trucks, and bio-fuel.

December 19, 2016

1 of 2017 The Customs (Amendment) Regulations 2017.

Customs Act, Cap. 82:01.

Established a system of Excise Stamps for alcoholic and tobacco products.

August 16, 2017.



Orders Made in 2016/2017

Order No. & Title Principal Legislation Nature of Order Date of Order 17 of 2016 Customs (Amendment of Schedules) Order 2016

Customs Act, Cap. 82:01 Restricts the imports of used tyres, reduces rate of Customs Duties on new tyres to 15%, and exempt from Custom Duties items for use in water treatment and water recycling facilities, machinery and equipment to set up charging stations for electric vehicles, greenhouses and components for use in the agriculture sector, and items for construction of waste disposal and recycling facilities.

December 19, 2016.

18 of 2016 Value-Added Tax (Amendment of Schedules) Order 2016

Value-Added Tax Act, Cap. 82:05

Amends Schedules I and II of the principal Act to give effect to new lists of zero-rated and exempt items respectively.

December 19, 2016.

19 of 2016 National Registration (Residents) Order 2016

National Registration Act, Cap. 19:08

Provides for the continuous registration of persons during the period 16th January 2017 to 4th March 2017.

December 19, 2016.

1 of 2017 National Registration (Residents) Order 2017

National Registration Act, Cap. 19:08

Provides for the continuous registration of persons during the period 13th February 2017 to 18th March 2017.

February 9, 2017.

2 of 2017 National Registration (Residents) (Revision of Registers) Order 2017.

National Registration Act, Cap. 19:08.

Provides for the Registration Officer of every Registration District to prepare a register of voters for that Registration District by the qualifying date June 30, 2017.

February 28, 2017.

3 of 2017 GNCB Property Holdings (Transfer of Property) Order 2016 (sic).

Public Corporations Act Cap. 19.05

Sale of property situated at Bush Lot, WCB on behalf of GNCB Property Holdings Inc. to B. L. Mangra

December 1, 2016

4 of 2017 Prospecting Permit Medium Scale (PPMS), exemption Order 2017

Mining Act Cap 65.01

Exempts several named persons from the application procedures for such licences under the Mining Act.

March 16, 2017



Order No. & Title Principal Legislation Nature of Order Date of Order 5 of 2017 Georgetown Metered Parking By-Laws (Suspension) Order 2017.

Municipal and District Council Act, Cap. 28:01.

Suspends the Georgetown Metered Parking By-Laws 201 for a period of three (3) months commencing 21st March, 2017. (Note 1).

March 21, 2017.

6 of 2017 South Rupununi District Council Order 2017.

Amerindian Act, Cap. 29:01 Provides for the establishment of the South Rupununi District Council.

March 20, 2017.

7 of 2017 Property Holdings Inc. (Transfer of Property) (No. 1) Order 2017

Public Corporations Act, Cap. 19:05.

PRI transfers property in Section A, Golden Grove to NICIL.

April 12, 2017.

8 of 2017 Income Tax (United States of America Foreign Account Tax Compliance Exchange of Information) Order 2017.

Income Tax Act, Cap. 81:01. Establishes an Agreement between Guyana and the United States of America for the exchange of information relating to income tax.

May 29, 2017.

9 of 2017 Wildlife Conservation and Management Act (Commencement) Order 2017.

Wildlife Conservation and Management Act No. 22 of 2016.

Appoints June 1, 2017 as the day on which the Wildlife Conservation and Management Act 2016 came into operation. (Note 2).

June 1, 2017.

10 of 2017 Integrity Commission (Amendment of Code of Conduct) Order 2017.

Integrity Commission Act, Cap. 26:01.

Substitutes Schedule II of the Principal Act with a new Schedule II titled "Code of Conduct".

June 12, 2017.

11 of 2017 National Industrial and Commercial Investments Ltd., (Linmine No. *) (Transfer of Property) Order 2017.


Sold property at Plantation Noitgedacht by NICIL to the Lennox Cort and Maureen Cort.

July 7, 2017.

12 of 2017 National Industrial and Commercial Investments Limited, (Transfer of Property) (No.2) Order 2017.


NICIL transfers Downer 53.655 acres at Plantation Coldingen to the Government

July 17, 2017.

13 of 2017 National Industrial and Commercial Investments Limited, (Transfer of Property) (No.1) Order 2017.


NICIL transfers plots 1-84 of Block DD at Plantation Eccles to Minister of Business.

July 17, 2017.



Order No. & Title Principal Legislation Nature of Order Date of Order 14 of 2017 National Industrial and Commercial Investments Ltd., (Linmine No. *) (Transfer of Property) Order 2017.

Public Corporations Act, No. 21 Cap 19.05

NICIL sold property to Patricia Allen at Plantation Noitgedacht.

July 17, 2017.


Public Corporations Act, Cap. 19.05

Transfers property at Plantation Noitgedacht by NICIL to Cheryl Providence as purchaser.

July 17, 2017.



Transfers property at Plantation Noitgedacht by NICIL to Allan Bakker as purchaser.

July 17, 2017.

17 of 2017 Allied Professions Act Cap 35:01

Allied Professions Act Cap. 35.01

Establishes and appoints Councilors to the Allied Health Professions Council, for the period August 01, 2017 to July 31, 2019. Fixes the rate of fees and allowances to the Chairperson and Deputy Chairperson of $7,500 per month and to members $5,000 per month.

July 13, 2017.

18 of 2017 Acquisition of Land for Public Purposes (Water Treatment Plant) Order 2017

Acquisition of Lands for Public Purposes Act Cap. 62:05

To acquire land for water treatment plant at Sheet Anchor, Berbice

August 16, 2017

19 of 2017 Target Financial Sanctions (Specified Persons) Order 2017

Anti-Money Laundering and Countering the Financing of Terrorism Act Cap. 10:11

Declaring Abdel Nur and Abdul Kadir as specified persons.

August 29, 2017

20 of 2017 Prospecting Permit Medium Scale (PPMS) Exemption Order 2017.

Mining Act Cap. 65.01

Exempts specified individuals from the application procedures mentioned in the Mining Act 1989. It also exempts the Commission from Regulation 27B (2) of the Regulations made under the said Mining Act.

August 16, 2017.

21 of 2017 Gafoors Townhouses Order 2017

Condominium (Regulation and Miscellaneous Provisions) Act 1989

Declares that the "Gafoors Townhouses" Scheme has met the requirements of a Condominium Scheme.

September 26, 2017.



Order No. & Title Principal Legislation Nature of Order Date of Order 22 of 2017 Acquisition of Lands for Public Purposes (New Demerara River Crossing and Connecting Roads) Order 2017.

Acquisition of Lands For Public Purposes Act, Cap. 62:05.

Authorises the Commissioner of Lands to acquire lands for the new Demerara Harbour Bridge.

September 22, 2017.

23 of 2017 Local Government Commission Act 2013 (Commencement) Order 2017.

Local Government Commission Act 2013. No. 18 of 2013.

Appoints October 23, 2017 as the day the Local Government Commission Act 2013 comes into operation.

October 23, 2017.

* Number not specified.

Note 1: The period of suspension of the Georgetown Metered Parking By-Laws ended on June 21 and has not been extended. Technically, the Order is now in force.

Note 2: The Wildlife Conservation and Management Act contains eighty-five sections and seven Schedules and requires comprehensive, new Regulations for its proper application and enforcement, in addition to those Regulations “saved” from the Wildlife Management and Conservation Regulations 2013. While the Act came into operation on June 1, 2017, the Commission to administer the Act has not been appointed and the Act remains unenforceable and unenforced.



Appendix B: Selected Socio - Economic Indicators

2017 2016 2015 2014 20131 National Accounts Aggregates (2006 Base)

1.1 Growth Rate of Real GDP 2.90 3.40 3.20 3.80 5.20 1.2 GDP at current basic prices (US$M) 3,140.20 3,045.80 2,775.90 2,685.20 2,611.30 1.3 GNP at current basic prices (US$M) 3,160.80 3,050.40 2,751.20 2,711.90 2,582.70 1.4 Per Capita GDP (US$) 4,223.50 4,096.60 3,741.20 3,606.40 3,248.20 1.5 Per Capita GNP (US$) 4,251.20 4,102.80 3,707.90 3,642.10 3,212.70 1.6 Gross National Disposable Income (US$M) 3,440.00 3,370.80 2,940.10 3,169.50 3,170.40 1.7 Private Consumption as % of Gross Domestic Expenditure 56.80 57.00 65.90 64.40 72.80 1.8 Public Consumption as % of Gross Domestic Expenditure 16.70 15.70 14.30 13.20 12.40

2 External Trade and Finance (US$M)

2.1 Bal of Payments Current Account Balance (235.00) 13.00 (149.80) (385.20) (456.00) 2.2 Imports of Goods and Non- Factor Services (G&NFS) (2,100.00) (1,909.10) (1,900.30) (2,217.50) (2,377.60) 2.3 Exports of Goods and Non- Factor Services (G&NFS) 1,606.30 1,606.40 1,306.20 1,348.40 1,539.90 2.4 Resource balance (493.70) 302.80 (548.90) 869.50 (837.70) 2.5 Imports of G&NFS/GDP(%) at 2006 Base 66.90 62.70 68.80 82.60 91.10 2.7 Exports of G&NFS/ GDP (%) at 2006 Base 51.20 52.70 47.30 50.20 59.00 2.8 Net International Reserves of Bank of Guyana 616.80 596.70 594.70 652.20 751.20 2.9 External Public Debt Outstanding 1,234.50 1,162.50 1,143.01 1,216.40 1,246.50

3 Prices, Wages and Output

3.1 Rate of Inflation (% change in CPI)1 2.00 1.30 (1.80) 1.20 0.90 3.2 Public Sector Monthly Minimum Wage in G$ (e.o.p) 60,000.00 55,000.00 50,000.00 42,703.00 39,540.00 3.3 % Growth Rate 9.10 10.00 17.10 8.00 5.00 3.4 Electricity Generation (in MWh) 805.90 790.30 750.70 716.70 711.00

4 Population & Vital Statistics

4.1 Mid- Year Population ('000) 741.40 743.50 742.00 744.60 746.90 4.2 Population Growth Rate (e.o.p) (2.80) (2.00) (3.50) (3.10) (2.70) 4.3 Net Migration ('000) (18.50) (18.50) (4.50) (13.50) (13.50) 4.4 Visitor Arrivals ('000) 249.20 235.30 206.80 205.80 200.10 4.5 Crude Birth Rate (per 1,000 persons) 13.10 19.90 17.60 19.80 18.50 4.6 Crude Death Rate (per 1,000 persons) 4.90 6.90 6.80 7.30 6.60 4.7 Crude Marriage Rate (per 1,000 persons) 4.00 6.00 6.50 NA NA4.8 Infant Mortality Rate (per 1,000 live births) 21.00 21.50 21.80 23.30 12.90 4.9 Under 5 Mortality Rate (per 1,000 live births) 23.10 21.20 22.50 23.90 15.80

5 Health and Education

5.1 Public Expenditure on:5.1.1 Education as % of National Budget 17.20 17.50 11.80 14.80 13.60 5.1.2 Health as % of National Budget 12.50 11.90 9.50 9.90 8.50 5.2 Number of Physicians Per Ten Thousand Population 18.70 17.50 14.10 13.30 9.50 5.3 Number of Nurses per Ten Thousand Population 37.80 36.20 31.40 30.50 15.30 5.4 Number of Hospitals Beds per Ten Thousand Population 25.40 25.40 25.40 25.40 25.40 5.5 Low birth-weight babies (<2,500g.) as a % of live births 8.90 7.40 11.90 11.70 8.90 5.6 Severely Malnourished 0.20 1.60 0.30 0.30 0.20 5.7 Moderately Malnourished 1.00 1.50 2.10 1.90 2.00 5.8 Overweight (%) 0.50 1.20 8.70 7.80 7.60

ITEM



Source: Bureau of Statistics, Ministry of Finance, Ministry of Public Security, Ministry of Public Health, Guyana Tourism Authority and BOG Statistics as at September 2017

2017 2016 2015 2014 20136 Immunisation Coverage

6.1 1 year olds Immunised against DPT/(Pentavalent) (%) 72.00 97.00 96.00 98.00 98.00 6.2 1 year olds Immunised against MMR, Yellow Fever (%) 69.00 100.00 90.60 100.00 97.50 6.3 1 year olds Immunised against Polio (%) 72.00 94.00 96.00 97.00 97.50 6.4 1 year olds Immunised against TB, BCG (%) 65.00 95.00 90.00 99.00 97.80

7 Crime

7.1 Reported Serious Crimes2 3,030.00 2,894.00 3,925.00 3,688.00 4,204.00 7.2 of which: Murder 116.00 142.00 149.00 149.00 155.00

8 Exchange Rates

8.1 G$ to US$ 206.50 206.50 206.50 206.50 206.25

9 Interest Rates

9.1 Commercial Banks' Lending Rate3 10.55 10.71 10.63 10.86 11.169.2 Small Savings Deposit 1.11 1.26 1.26 1.23 1.339.3 Three Months Time Deposits 1.01 1.17 1.13 1.10 1.099.4 Treasury Bill Rate (91 days) 1.54 1.85 1.92 1.67 1.45

10 Debt 342,335.70 330,092.32 317,722.57 329,620.47 355,890.63

10.1 External Public Debt (G$M)4 253,995.00 239,352.09 236,031.57 251,182.47 257,090.63 10.2 Public Domestic Debt (G$M) 88,340.70 90,740.23 81,691.00 78,438.00 98,800.00

2: The category 'Reported Serious Crimes' now includes the reclassification of certain offences.

3: The average prime lending rate actually used by commercial banks applicable to loans and advances.

4: Amount denoted in US$ - converted using exchange rate in 8.1

5: Item numbers 8 to 10 are stated as at September 30, 2017.

ITEM

1: Rate of inflation in 2010 is presented under the New Series with base year December 2009, while for 2005 to 2009 data ispresented under the Old Series with Base Year December 1994.

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