The Bank of Guyana has reported a 10.2% reduction in revenue from VAT and excise taxes for the first quarter of 2022 when compared to the same period in 2021. This is connected to cuts in VAT which the People’s Progressive Party (PPP) promised would reduce the cost of living. However, food prices increased by 13.8% from April 2021 to April 2022, this is according to the Guyana Bureau of Statistics’ Consumer Perception Index (CPI) report.
“The PPP is now trying to deceive the Guyanese people with false promises that tax cuts would lower their cost of living. The upward stickiness of prices is a basic economic principle that one would expect any student of Economics to understand,” said Hon. Juretha Fernandes, MP, in her 2021 budget speech, as she accurately predicted the current reality.
The PPP government has, on several occasions, begged private businesses to transfer savings from tax cuts to consumers. This strange begging ignores the fundamental principle of economics that says economic actors are rational and act in their own self-interest. If a business can use tax cuts to increase its profit margins, then that is what it will do.
Workers are making up for the decreased VAT income while businesses pocket the savings. According to the Bank of Guyana, income tax revenue has increased by 55.5 percent between 2019 and 2022. This occurred during a time when there was a net loss of more than 5000 jobs. A recent International Republican Institute (IRI) study revealed that 22% of Guyanese now struggle to feed themselves and their families as a result of the PPP squeezing more taxes out of workers while businesses pocket the VAT savings.
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