Guyana News

Fire gave window of opportunity to looters

Georgetown — The fire that hit New Amsterdam’s commercial centre on March 7 presented a window of opportunity for looters. Sher’s Fashion was taken for an estimated $28M by bands of youth who capitalized on the disaster.

Showcases were smashed with stones and millions of dollars in brand-name clothing, footwear and imitation jewellery were carted off. One report indicate that the looted articles were being sold in the town. Yet no arrests were made and no stolen articles recovered.

The police apparently failed to cordon off the two entrances to Pitt Street to protect against looters.

Three show windows and two showcases were smashed and then a pick-axes were used to remove the grillwork and gain entry into the building.

After the raid that lasted about 30 minutes, almost all the stock and a substantial amount of cash which was in the office were looted.

Latchman Ramotar, owner of Shers Fashion, said he sold only brand-name clothing, footwear and imitation jewellery. He said that at the moment he cannot determine what he will do regarding his business because only a few days prior to the fire they had stocked the store. And now that everything was gone, he was frustrated and angry.

An employee of the store who saw the looting in progress said he called on a few policemen there to intervene but they replied that they had to get permission to ward off the looters

A distressed Ramotar lamented that there seems to be no protection.

Suicide-prone Berbicians to get counselling

Georgetown — Counseling services are soon to be provided to residents of Regions Five and Six to help reduce cases of suicide. The project is solely funded by the New Building Society (NBS) Limited.

A $40M building at Port Mourant would be opened shortly to provide the services according to a release from the Government Information Agency (GINA).

GINA’s release stated that this is a joint project between the Ministry of Health and the Ministry of Labor, Human Services and Social Security to address the high incidence of suicide in the Corentyne area.

It also stated that the two ministries have considered expanding the counseling services to include other areas such as HIV/AIDS, domestic violence and spousal abuse.

Central to the operation would be social workers, probation officers and specialists.

TPL closes city sawmill, blames competition

Georgetown — Toolsie Persaud Ltd (TPL), one of the giants in the lumber and hardware industry, will close its Lombard Street sawmill throwing many of its employees on the unemployment line. The company said that some of the employees would be absorbed into other areas of the company. But a majority of them would become redundant.

In a press release TPL stated that the decision to cease the sawmill operation in the city stems from several factors which includes competition from the chainsaw industry, new consumer preference for other types of building materials and high electricity costs.

The company said that notwithstanding the better finish of milled lumber, it is difficult to compete with chainsaw lumber production due to lower overheads in those types of operation. The chain saw operators generally do not comply with fiscal and other statutory requirements, said TCL.

TCL is now forced to consolidate its business operations, doing more processing closer to Anarika, the source of its log supplies. Here, the company has a modern sawmill and kiln-drying facilities which it will soon reactivate.

TCL is assuring customers that its Lombard Street office will continue to accept all orders for lumber. This office will still remain TCL’s local and export sales department.



Why Guyana’s underground economy flourished

Dwarka Lakhan

Part 1 discussed the size of the underground economy relative to the real economy. This part examines the reasons for the growth in the underground economy.

Final of 2 parts

Guyana’s underground economy has flourished over the past three decades for a number of reasons, including excessive government regulations during the Forbes Burnham years and lax regulations thereafter, poor governance, high levels of illegal activity, conscious efforts to evade taxes, and the institutionalization of corruption, among others. Its significant presence has undermined government revenue collection, increased the cost of providing public service and hindered the formulation and implementation of effective economic and social policies. On a more superficial level, it has led to a widening of the rich-poor gap.

Between 1970 and 1985, the underground economy gained impetus as Guyanese circumvented the late Forbes Burnham’s draconian import substitution policies which restricted the importation of essential food items. This led to a flood of officially "illegal" goods from unofficial sources to meet consumer demand, creating a new breed of "brave" entrepreneurs who were willing to take the risk of breaking the law to supply the underground market with banned goods. In many cases, law enforcement officials who were also affected by import restrictions turned a blind eye to the illegal trade in banned goods, and in some cases were willing participants in the underground economy. The short supply of certain permitted goods was exacerbated by the unavailability of official foreign currency to purchase these items, providing opportunity to underground traders to fill the gap between official supply and consumer demand.

High tariffs and licensing requirements, plus state control of the distribution chain added to the complexities of the official economy, making the underground economy an attractive source of business. The easing of import and foreign exchange restrictions under the leadership of the late Desmond Hoyte should have curtailed the growth of the underground economy but the entrepreneurs who participated in it saw an ideal opportunity to legalize their activities under new liberalized rules. For this reason, the size of the underground economy surpassed the real economy in 1989. It was not until official sources, mostly private enterprise, began to fulfill consumer demand for traditionally banned goods that the underground economy softened.

The conscious effort to evade taxes is probably the next major reason for a vibrant underground economy. In its working paper, WP/03/7, the IMF classifies tax evasion activities into two broad categories. The first includes entities that engage in value-added activities in producing goods and services, ranging "from the small entrepreneur – such as vendors, craftsmen, and tradesmen – and professionals – such as lawyers and doctors – to large family owned companies." Their participation in the underground economy says the IMF, "usually reflects a desire to evade high corporate and personal tax payments."

"The second group includes entities/persons who areinvolved in clandestine activities." These individuals/entities use cash as a preferred mode of conducting business. The IMF notes that "like the first group, participants in the second group engage in the underground economy in search of greater disposable incomes and are driven there mainly for institutional, legal and economic reasons." Some of the clandestine activities may include cross-border smuggling, drug dealing and manufacturing, gambling and racketeering, bribery and theft.

Although the size of the underground economy relative to the real economy has declined during the 1990s, the maximum amount of tax revenues estimated by the IMF to have been lost between 1990 and 2000 is a staggering G$80.6 billion. This is equivalent to 14 times more than the previous two decades combined. In fact, in 2000 alone more tax revenues were lost than in the 20-year period between 1970 and 1989. The Chart, Tax Evasion in the Underground Economy, quantifies the maximum amount of taxes that could have been collected between 1970 and 2000.

The amount of taxes evaded are equivalent to an average of 16% of GDP between 1970 and 2000, peaking at 43% in 1986 and falling to 12% in 2000. The Chart, Tax Evasion and Economic Growth, shows tax evasion as a percentage of GDP.

Lost tax revenues are largely due to poor governance and inefficient collection methods. In reality, it will not be possible to collect taxes on all underground activities but appropriate regulations and controls could lead to an improvement in tax revenues.

Corruption, which appears to be an accepted norm among Guyanese, has certainly contributed to tax evasion. Inefficient customs procedures, bribery, kickbacks from contractors, businesses and suppliers – whether in the form of cash, hard goods or free services – each contribute to the growth of the underground economy.

When taxes are not collected, the burden of financing development and public services is placed on actual revenues collected, creating an unfair advantage for those who benefit from the underground economy and limiting the scope of activities that could be undertaken by the government. As a result social and economic programs suffer, shortchanging the rest of the population that actually pay their fair share of taxes. For instance, the government’s efforts to reduce poverty are significantly hurt by tax evasion, contributing to a widening of the rich-poor gap. The country could also experience an improvement in its fiscal deficit, as well as reduced debt levels with better revenue collection.

The IMF recommends a comprehensive reform of the current tax system and its administration and an improved provision of government services, such as land titling, domestic security and judicial services, to help reduce the size of the underground economy. It is doubtful that the government has the wherewithal, commitment and resources to tackle this institutionalized problem.

Last financial sector holdout privatized

Georgetown — The state owned Guyana National Cooperative Bank (GNCB) has been taken over by the National Bank of Industry and Commerce (NBIC) on March 15, 2003. This acquisition by NBIC represents the last privatisation in Guyana’s financial sector following those of GBTI, NBIC itself, GCIS, GNCB Trust the merger of GAIBANK and GNCB and the winding up of the Guyana Cooperative Mortgage Finance Bank (GCMFB).

The completion of the deal with NBIC was announced in a statement from the Privatisation Unit (PU) and GNCB. Details indicate that NBIC paid GNCB G$2.72B for a guaranteed net asset position of G$2B. The net asset position would be confirmed by the audit firm Deloitte & Touche and the Office of the Auditor General.

A Memorandum of Agreement was earlier signed by GNCB with its employees providing for the terms of their severance which, according to the statement, would be calculated at the date of privatisation.

According to reports, about 100 of the retrenched GNCB staff have been rehired by NBIC while another 40 would be retained by GNCB to help in monitoring the collection of the bank’s outstanding loan portfolio. The privatisation agreements exclude the loan portfolio and some real estate "not related to the branch network," according to the statement.

The agreements were executed by Finance Minister Saisnarine Kowlessar who is also Chairman of the Privatisation Board, Managing Director of NBIC Michael Archibald, Executive Secretary and PU Head Winston Brassington and General Manager of the GNCB John Flanagan.

Brassington opined that the deal was a good one in the sense that GNCB would cease to be a loss-making entity and a drain on the treasury. This, he said, would result in considerable savings to government which would consequently have achieved a structural benchmark as part of its HIPC arrangements.

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