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Contrary to Singh, Nandlall and Luncheon’s statements Chief Justice’s decision was not final in the Budget cuts case

The Attorney General, the Minister of Finance and the Head of the Presidential Secretariat have been busy distorting the decision in the Budget cuts case to mislead the public. They appear to use their flawed interpretation as the basis for continuing payments to party comrades like Mr Reepu Daman Persaud, Ms Gail Teixeira and Mr Kwame McCoy, in violation of a vote by the National Assembly.

On the day Mr Ian Chang, Chief Justice (ag) delivered, to use his own words, “his views,” the Attorney General Mr Anil Nandlall went from the court, via the Office of the President, to NCN to shout victory.

And in the 2012 mid-year report Finance Minister Dr Ashni Singh presented recently, he said that “The [National] Assembly was later deemed by the Courts of Guyana to have acted outside its constitutional remit in inflicting those cuts to the budget.”
Not to be left out, Dr Luncheon was quoted in the press on September 7, 2012 as saying that “the $1 that was approved by the opposition for the various agencies was totally inconsistent with the constitutional provision as ruled by the Chief Justice.”

Let us turn to the Chief Justice’s decision. He rejected the application of the Attorney General and denied the Minister of Finance the “liberty” to make advances/ withdrawals from the Consolidated Fund to restore the $21 billion 2012 budget cuts, except for the sum of $99,000,000 for the ERC. The reason for restoring the amount for the ERC, according to the Chief Justice, is that it is a constitutional body subject to a direct charge on the Consolidated Fund. Accordingly, its budget allocation was not subject to a vote of the National Assembly.

And let us be reminded that the Chief Justice concluded his decision with the words that the matter brought by Mr Nandlall is in its “preliminary stage” and that “the views expressed at this juncture are not final.” The misinterpretation suggests that the three do not have any regard for the truth, respect for the court, or deference for the National Assembly, the only body with the power over the spending of public funds. We may be tempted to discount Mr Nandlall and Dr Luncheon as ineffective political spinners. Not so Dr Singh. He controls the public purse of Guyana and the records show that he has not been unwilling to play around with the Contingencies Fund and the dormant bank accounts to the tune of billions of dollars.

So when Dr Luncheon announces in last month that “no one lost their jobs” and that “Contingency funds were approved and funds made available belatedly but still available to meet the wages and salaries of the contract workers [at OP].” it is time to get worried. Because, if that is so, the Minister of Finance is in violation of not one but two Acts – his own amended 2012 Budget Act and the Fiscal Management and Account-ability Act, under the pretext of a misrepresentation of the court’s decision.

The question now is whether, after a prolonged break, the political opposition can muster the capacity and the courage to confront with all the powers at their disposal, the continuing lawless manner in which the country’s public funds have been mismanaged and misspent by Dr Singh, assured of a pliant and ineffective Audit Office.

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Mid-Year 2012 Report shows mixed performance

Introduction
In the introduction to last week’s Business Page I pointed out that it was refreshing that the mid-year report was not only prepared within the statutory deadline but that the report was actually made public even before it was laid in the National Assembly which is presided over by the Speaker. That was certainly one step forward. Just one week later the Auditor General presented to the Speaker of the National Assembly the audit report for 2011within the statutory deadline. This was the first time that this was done under Mr Deodat Sharma as the Head of the Audit Office. And guess what the Speaker does? He not only drew comparison with what last took place twenty-one years ago, but then goes on to confuse his specially assembled audience over the timing of the submission of reports since that date. And to add vinegar, he announced that the report will be locked away until the National Assembly resumes from its prolonged recess. That certainly is not a forward step.

Last week as we reviewed the sectoral performance of the economy we saw the up-and-down performance of its major sectors even as it recorded overall growth. We also looked at the values of imports and imports and the change in the consumer price index which is popularly referred to as the inflation rate. Today we turn attention to other segments of the report and begin with revenues.

Revenues
Central government revenue for the first half of 2012 amounted to $64.9 billion. While representing only 44% of the budgeted revenue for the year, the collections represented a 5.5 % increase over first half 2011, primarily as a result of improved performance across several tax revenue categories. Tax revenue collections for the period amounted to $58.6 billion representing 90.4% of total current revenue collections or 2.9% over 2011.

Internal revenue collections for the half-year amounted to $25.9 billion compared to $26.5 billion in 2011, a decline of 2.3%, as a result of contractions of $582.2 million and $146.6 million in private and public sector corporation taxes respectively. The Minister attributed this decline to lower company tax rates, a bit of a stretch since tax rates were reduced not in 2012 but in 2011, and tax payments to June 30, 2011 would have taken the reduced rates into account last year.

A more realistic explanation lay in withholding tax collections which decreased by $624.8 million compared to first half 2011 due to arrears in dividend payments made in 2011 by a local company to its overseas parent company.

Customs and trade tax collections totalled $5.7 billion for the first half, representing a 19.6% or $930.9 million increase over 2011 half-year collections. The minister attributed this to a $900.6 million increase from import duties due to higher level of imports of most categories of goods particularly intermediate goods. Excise tax collections for the period amounted to $11 billion, a slight fall from 2011. Excise tax collections from motor vehicles amounted to $5.2 billion, an increase of $1.5 billion reflecting higher levels of vehicle imports.

Collections of value added tax (VAT) for the half-year amounted to $16.1 billion, an increase of $1.4 billion. VAT on imports of goods and services accounting for $611.7 million of the increase while VAT on domestic supplies increased by $831.1 million. Value-added tax for the full year was budgeted at $33.968 billion.

Tax evasion
Taxes collected from the self-employed amounted to a mere $1.8 billion to the revenues, compared to $1.5 billion for same period in 2011. As a percentage of tax revenues the self-employed – who dominate the professions, agriculture, fishing, car dealers, goldsmiths, artisans, contractors and most of the main shopping areas in all three counties – contribute less than 2.6% of the tax revenues of the country.

We have heard nothing recently of the so-called tax review committee announced by President Ramotar almost ten months ago, a delay that perpetuates a lop-sided, regressive tax-system in which the self-employed continue to treat taxation as a voluntary matter rather than be treated as the criminals that they are.

No Minister of Finance since 1992 has treated tax evasion seriously but all, including Dr Ashni Singh and his appointed Board of the Guyana Revenue Authority, continue to ignore the glaring statistics that show how serious and damaging the situation has become. Imports by the self-employed continue to rise by double digits, with bank deposits and import taxes not far behind. Yet the taxes the self employed merchants including our newest friends and the rest of the self-employed sector pay, move up only imperceptibly.

With all the inherent problems the GRA faces, it is quite remarkable that the taxes collected by it continue to rise. Whatever we may think of the nature of the tax system and the systemic corruption in some segments of the GRA, those of us who have to deal with the Authority on a day-to-day basis cannot help but admire – and feel a bit sorry for – the many hardworking staff who have to deal with a taxation public made up of so many groups of prominent tax evaders and money launderers.

Missing GRIF and other monies
In paragraph 3.34 of the mid-year report the Minister states that “based on developments in the first half of the year, total current revenue collections (net of GRIF inflows) are now estimated at $128.7 billion for the full year.” A review of Appendix E1 shows that while the sum of $18.4 billion was budgeted to be received, that amount has now been revised downwards to $1.975 billion. Since the Norwegian funds accounted for 15% of budgeted revenue for this year and since many of the LCDS projects were framed around the Norway funds, it was reasonable to expect that the Minister would say something of substance about the status of those funds.

Absent from revenue projections too are monies from the Lottery and the proceeds from the disposal of state assets by NICIL for sundry purposes.

Current expenditure
On the expenditure side total non-interest current expenditure to June 2012 amounted to $43.8 billion, an increase of 14.3% over the same period in 2011. This sum represents 41% of the budgeted expenditure for 2012.

The several types of expenditure where there were increases in 2012 over 2011 included statutory pensions and gratuities which had a 38% increase (no explanation offered); total other charges which increased by 11%; and subsidies and contributions to local organisations – mainly Guyana Power and Light Inc – which increased from $5.8 billion in half-year 2011 to $10.3 billion (77.6%) in the corresponding period in 2012. Old Age Pensions and Social Assistance payments in 2012 amounted to $2.4 billion compared with $1.98 billion in the corresponding half year in 2011.

While the late presentation and passing of the 2012 budget may have been responsible for a number of categories of expenditure to be lower than those for 2011, their greater significance lay in the percentages which the half-year 2012 expenditure bear to the full-year budget. Not unusually, the entire amount of $$3.7 billion for revision of wages and salaries remains unspent.

If we look further at the item Other Charges, which includes several categories of expenditure, we note that only $26.3 billion was spent up to June 30, representing 37% of what is projected for the full year. Principal among the items which had disproportionate spending in the first half of 2012 are expenditure on Materials and Supplies which represents 34% of full year projections; Rental and Maintenance of buildings18.7%; Maintenance of Infrastructure 14.5%; Transport, Travel and postage 34.3%; Utility charges 32.8%; Other Goods and Services 33.9%; Other Operational Expenses 30.1%; Education Subvention and Training 38.8%; Rates and Taxes and Subventions to Local Authorities 3.9%; and Pensions 42.5%.

The situation is no different with the capital expenditure side of the accounts.

Sectoral Capital Expenditure
What we may see and need to fear is that there will be a mad rush to spend in the second half of the year with continued negative consequences for quality and value for money as well as controls over public expenditure.

Source: Mid-Year Report 2012

Deficit and debt
The overall deficit before grants is projected at $43.5 billion, almost certainly the largest budget deficit in the country’s history, measured by absolute amount as well as a percentage of revenue. Even after projected grants of $16.8 billion, the country will need financing of $26.6 billion which will have to come from borrowings. By June 2012, the external debt had increased to US$1.3 billion, 7.6% more than the amounts owing at December 31, 2011. During the first half of 2012, external debt service totalled US$20.4 million, an increase of 10.8% compared to the same period in 2011.By December 31, 2012 the combined external and domestic debt stock will exceed the psychological US$2 billion threshold.

Conclusion
It is evident that the economy’s growth rate in 2012 was lower than in 2011. But perhaps because the Minister had projected for lower real growth in full year 2012, he concluded his report with some reassurance, if not confidence, that the performance of the first half of the year “augurs well for the remainder of the year.”

But acknowledging the events in Linden, his final words were directed not at his colleagues in his government or his ministry to implore them to exercise greater and better management, but at all national stakeholders to “ensure the preservation of the environment that is so critical for a continuation of this favourable performance, not just for the remainder of the year but into the medium term.”

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Mr Ramnarine was exercising a right and duty under Article 32 of the Constitution

There has been a call from high-up for the disciplining of senior police officer David Ramnarine for exposing certain practices in the Guyana Police Force, and for claiming that his constitutional rights trump the Force Orders. The practice he identified was in connection with the payment of $90 million from Contingencies Fund to feed the Police over the November 28 elections period. On the question of the constitution, Mr. Ramnarine was in fact not only exercising a right but rather carrying out a duty which Article 32 of the Constitution imposes on every citizen. And as just about everyone by now knows, the Constitution is the supreme law of Guyana and not even the Parliament can make a law that is in conflict with it.

I cannot see then how some Force Order purporting to restrict a right could abridge a duty imposed by the Constitution. I would therefore like to receive from the Minister of Home Affairs an informed opinion on which instrument – the Constitution or the Force Orders, or which interest – secrecy of the Police Welfare Fund or the protection of public property – his Government considers paramount.

For, as Article 32 states: “It is the joint duty of the State, the society and every citizen (emphasis mine) to combat and prevent crime and other violations of the law and to take care of and protect public property.”

The country is fortunate and grateful that circumstances forced the lone Mr. Ramnarine to exercise his constitutional duty under Article 32. It is frightening to reflect on the several others in the Police Force, some more and others less senior to him, the GDF, the ministries and departments, and the hundreds of thousands of Guyanese who daily fail in their Article 32 duty.

Whether by accident or intent, Article 32 is a Whistleblowers protection in the public service. I would like to see some enabling legislation aimed at giving effect to Article 32, and to wrong-doings in the private sector as well.

I draw attention also to a further development from the same issue. In the process of his revelation, Mr. Ramnarine implicitly exposed a weakness in the State audits to which I have been drawing public attention: that a bare statement in the Audit Report that drawings from the Contingencies Fund did not meet the criteria set out under the Fiscal Management and Accountability Act was not enough. The Audit Office needs to go further and by a scientific sample, audit Contingencies Fund transactions for accuracy, authority, authenticity and completeness from what auditors call cradle to grave: in this case from the issue of the drawing right by the Minister of Finance to his timely request to the National Assembly for replenishment. The Minister of Finance has only up to the next sitting of the Assembly to seek approval.

I have noticed that the Auditor General (ag.), against a background of public concerns, has announced a special investigation into the $90 million fiasco. I should remind him that Dr. Ashni Singh’s Supplementary Appropriation for expenditure during the parliamentary break involved $5.7 Billion, of which $2.4 Billion was judgmental. I doubt that the public and the parliamentary opposition will be satisfied with another limited scope, incomplete and therefore inadequate exercise.

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Citizens have a constitutional right in relation to budget consultations

The exchanges between Dr. Ashni Singh, Minister of Finance and Mr. Carl Greenidge, former Finance Minister about whether or not there will be a meeting of the parliamentary parties on the 2012 Budget should not have been necessary given the country’s constitutional framework.

Prior to 2003, Article 11 (now Article 13), Chapter II PRINIPLES AND BASES OF THE POLITICAL, ECONOMIC AND SOCIAL SYSTEM provided that “The principal objective of the political system of the State is to extend socialist democracy by providing increasing opportunities for the participation of citizens in the management and decision-making processes of the State.” To the representatives of the PNC Government who questioned the justiciability of the specific Article, then Chancellor Keith Massiah responded in the 1987 decision in the case Attorney General v Mohammed Ally that “I see no reason to think that the articles in Chapter II of the Constitution have no juridical relevance and are merely idealistic references with cosmetic value only. So to think would be to seek to debase the Constitution.”

In a subsequent amendment, the strength and justiciability of Article 13 were put beyond doubt when by Act 10 of 2003 the right to be consulted was made into a fundamental right under Article 149C in the following terms: “No person shall be hindered in the enjoyment of participating through co-operatives, trade unions, civic or socio-economic organisations of a national character in the management and decision making processes of the State.”

However, since his appointment in 2006, Dr. Singh has shown a disdain and intolerance for the annual budget consultations – arguably the single most important decision made by the State in any year – and discontinued them for his first Budget in 2007.

Ironically, while Dr. Singh might have argued against any meeting with the parliamentary opposition on the grounds that they were not contemplated within “trade unions, civic or socio-economic organisations”, and that they have all the opportunities to participate in the debate in the National Assembly, he has agreed to meet with them even as he has blocked out entities as women’s groups, the professional accounting body, the trade unions, the private sector organisations, etc.

President Ramotar has to be careful that his preference for a more open presidency and non-violation of the Constitution applies not only to himself, but to his Ministers as well. It is not whether or not Dr. Singh cares for consultations or whether he thinks they are useful.

It is that citizens have a constitutional right to participate in such a process.

And as a Minister of the Government Dr. Singh has a corresponding duty to engage persons, and not only the parliamentary opposition, in such consultations.

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Ramkarran has disregarded essential facts in his comments on the 1961 and 2003 finance Acts

In his column in last Sunday’s Weekend Mirror defending the government’s $5.7 billion Supplementary Appropriation Bill No. 1 of 2012, Mr Ralph Ramkarran SC may have been guilty of some of the very charges – political opportunism, a disregard for essential facts and, over one significant issue, the taint of racially inspired motives – which he makes against Mr Carl Greenidge, the APNU shadow Finance Minister.

Even politicians, who often find truth and history inconvenient, do their best to avoid some of the errors made by Mr Ramkarran in his column. It is more than semantics that Mr Ramkarran describes the Bill as Estimates rather than what it was – an appropriation for 2011 transactions for which parliamentary approval is being sought in 2012. Mr Ramkarran’s statement that the Fiscal Management and Accountability Act 2003 Act, which he mis-identified, had “only one material amendment” to a 1961 Act is way off mark. In fact, the 2003 Act repealed twenty-eight of the forty sections of the 1961 Act, including two of its three substantive parts. The remaining substantive part and one general part were removed one year later.

I find those lapses most amazing since Mr Ramkarran, as Speaker of the National Assembly, was in the chair when the 2003 Act was debated and passed on December 16, 2003, assented to the same day, and gazetted one day later. I can overlook, as an inconsequential error, Mr Ramkarran’s miscalculation about the duration of the combined operation of section 24 of the FAA Act (it really is section 25) and section 41 of the FMA Act – it is fifty and not forty years as he states. What I am hesitant in allowing to pass is his suggestion of similarity between “the methodology and format … of approaching the National Assembly to approve the expenditure of funds by way of supplementary estimates” under the 1961 and 2003 Acts. The contrast between the two Acts is fundamental, touching on provisions of the Constitution of Guyana and involving the difference between substantial sums – half-a-million dollars under the old Act and billions of dollars currently.

I will take a short walk down memory lane with Mr Ramkarran and point to the fact that Guyana was a colony when the Financial Administration and Audit Act was passed in 1961. Five years later in 1966 we had our Independence Constitution, and fourteen years thereafter, the present day 1980 Constitution. In 2003 came what on paper was the path-breaking Fiscal Management and Accountability Act designed to give effect to the provisions of the constitution requiring strict financial discipline over the moneys received by the government and the procedures for approving and accounting for expenditure.

Mr Ramkarran is therefore being more than a little disingenuous in speaking of “only one material amendment”; that ‘section 41 added “unavoidable” as a qualification to “unforeseen and urgent.” The real and substantial differences between the two Acts lie not only in whether or not the Minister of Finance has discretion but in several major areas:

1. The amount in the Contingencies Fund is now 2% of the previous year‘s budget which in 2011 would have translated to approximately $2.5 billion compared with $500,000 prior to the passing of the 2003 Act.

2. The Minister is required to report to the National Assembly all withdrawals from the Consolidated Fund, providing specific information on the payments made.

3. Specific allocation of responsibilities, the creation of offences and imposition of penalties, including on the Minister;

4. the concept of conditional appropriations;

5. mid-year reporting;

6. government guarantee levy, etc.

Mr Ramkarran seems to find it inconvenient to acknowledge the vastly different sums involved in “Contingencies” spending between 1961 and now, or that the concept of transparency and accountability is a defining feature of modern public sector management. As a defender of a Bill and financial papers not brought to the National Assembly in accordance with the Act, Mr Ramkarran and the Finance Minister Dr Singh should be happy that the parliamentary opposition allowed almost all of Financial Paper # 7 to pass, not mock them with references to the “Indian” hospital.

Let me put this scenario to Mr Ramkarran as the CEO of the country’s oldest law practice. His chief finance officer comes to him saying that he has spent, without any evidence whatsoever, not only the $150 million the management had approved for “preparatory studies and designs on a specialty hospital,” but also another $29.1 million on “mobilization payment” for which he now seeks approval. I cannot see Mr Ramkarran approving the additional payment – as he is now asking not only the opposition, but the entire National Assembly – without some serious and penetrating questions and demands for documentary evidence. I know Mr Ramkarran quite well and I am certain that, couched in some good Guyanese language, he would demand, under threat of sacking, a copy of the study to examine its recommendations before any further expenditure is incurred. It troubles me therefore that in what amounts to a similar response by the Opposition, Mr Ramkarran can see some racially inspired undertones.

If Mr Ramkarran had understood the significance of the legislative changes in the 2003 Act, he would not have filled the remainder of the column with a learned but irrelevant discussion on the exercise of ministerial judgment. The space would have been better utilised reminding Dr Singh that as Speaker he had cause to caution the Minister with the message that arrogance and disrespect ought to have no place in Guyanese society, let alone the National Assembly.