The personal deduction threshold is unchanged and will be running for three consecutive years. In US Dollar terms the threshold has declined from $128 at January 1, 1997 to about $101 currently.

With the increase in the cost of living due to the depreciation of the Guyana Dollar there was a widespread expectation that this threshold would be increased to cushion the effect of inflation and also as a concession to labour.

The increased rate does not mean less taxes but rather allows for the tax paying entity to write-off the asset under the straight line basis in two rather than five years leading to a more favourable cash flow in earlier years. The change is also beneficial when the time value of money is considered.

Prior to this announcement the same rate of depreciation (20%) applied to plant and machinery and electric office equipment. "Plant" for tax purposes includes any machinery, equipment or appliance whether affixed to land or not.

With the increased rate on electrical equipment there may be both a temptation and confusion in properly classifying items of plant and machinery and electrical equipment. In order to minimise this, fairly detailed regulations will be necessary.

The Minister referred to electrical equipment as including computer equipment. Again clarification will be required since a computer is an electronic device rather than an electrical equipment.

There have been widespread calls both by the TUC and the business sector for the abolition of property tax which constitutes a tax on capital. The announced measure is perhaps meant to be a response, albeit modest, to these calls.

The maximum savings resulting from the revision of the net assets threshold is $18,750 for individuals $7,500 for companies.

The increase in the level of net assets from $0.5 to $1.5M as a requirement to submit a property tax return is a welcome initiative. This will reduce the compliance cost on the taxpayer and the administrative burden on the Inland Revenue Department.

The Minister declared his Government’s commitment to distributing in excess of 10, 000 house lots in 1999.

Despite the obvious successes in land distributions the Government still seems unprepared to address squatting which unfortunately still continues and allegations of favouritism in the allocation of land.

In his 1998 Budget Speech the Minister announced his Government’s intention to pass a Mortgage Financing Act which would make provision for the incorporation of companies under similar terms and conditions as the New Building Society (NBS) and to amend the New Building Society Act to allow it to accept other forms of collateral.

Neither piece of legislation was passed in 1998 but the Minister has announced that the Mortgage Financing Bill and the New Building Society Amendment Bill are near completion.

The Minister also announced that the Government plans to table legislation on bankable property rights, implement a new land tenure policy, including greater conversion of leaseholds to freeholds, extend long term leases beyond 25 years and increase the sale of State lands.

The Minister announced a number of other measures including:

• Legislation to reduce stamp duty.
• Sectoral review of incentive regimes to determine attractiveness relative to other regional territories.
• Reduction in the maximum external tariff from 25 percent to 20 percent.
• Establishment of a Tourism Board with a subvention of $15 million during 1999.
• Public sector wage negotiations.

Under the Tax Act, Cap. 80:01 companies were required to pay a duty of one-half of one percent of their nominal capital on incorporation and on any increases thereof.

In addition the Companies Act 1991 requires fees of as much as 6 percent of a company’s nominal capital to be paid on incorporation.

Whilst the announcement by the Minister seeks to address the payment under the Tax Act we believe that there is a stronger case for a review of the fees payable under the Companies Act which contains a major loophole which is being understandably exploited by some companies since the existing rates are punitive.

We also firmly believe that the fees payable by external companies to register under the Companies Act 1991 are so excessive that they discourage foreigners seeking to do business in Guyana.

The Minister and indeed his Government have demonstrated considerable ambivalence on incentives. Tax holidays were eliminated in 1994 and re-introduced in 1997. Yet two months after their re-introduction and the publication of the Guyana Investment Guide the Minister publicly announced that a recent study showed Guyana having the most generous regime of incentives in the region. The Minister appears to overlook the number of disincentives to business in Guyana not excluding a weakening currency, slow decision-making and political uncertainty.

What we believe the Minister should in fact be doing is a major reform of the tax system designed to widen the tax base, discourage tax evasion, lower taxes and encourage investments in preferred sectors such as tourism and manufacturing.

This now brings the rate of the Common External Tariff to the floor level as agreed by Caricom countries.

One of the possible adverse effects of the lowering of the CET is to make imports more attractive.

The delay by this Government to establish of this Board has been a major cause of friction between the tourism sector and the Government. The decline in tourist arrivals since 1994 when there were 112, 822 visitors has been quite dramatic. A 6 percent decline in 1995 was followed by a 13 percent decline in 1996 and 18 percent in 1997 when 75, 732 persons visited.

In announcing the proposal for the Tourist Board the Minister has committed a subvention of 15 million dollars, which by no means can be considered an insignificant sum.

We believe the Minister should go further by extending tax holidays to new investments in the sector and bringing its income under the export allowances provisions of the Income Tax Act.

Guyana has an almost unique product in eco-tourism which is not only a source of substantial foreign exchange, employment generation but which by definition is largely self-sustaining.

The country must show greater commitment to this sector.

As it did in 1998 the Budget has deferred the vexing question of public sector salaries. The Minister merely indicated that wages for public servants are currently being negotiated and that he could therefore not announce an increase at this stage.

This is partly surprising for a number of reasons:

1. The Unions have already made a claim for 40 percent.
2. A protracted series of negotiations can only serve to exacerbate the cold relationship which exists between the Unions representing public workers and the Government.
3. The Government, following the public outrage at the wave of crime which hit the country, had made a public commitment to address police salaries in an effort to recruit and retain officers of calibre, ability and integrity.
4. There is an urgent and critical need to increase teachers’ salaries and stem the exodus to the Caribbean and latterly to Botswana. Whilst we seem obsessed with building schools we ignore the coincidental need to staff them with well paid, trained, motivated teachers.

The Budget has to be regarded as incomplete since the Minister has announced that he will be returning to Parliament for supplementary provision once the negotiations are completed.