Tax change…GTT to reclaim US$6M loss from consumers

Dec 02, 2016 News

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By Abena Rockcliffe-Campbell
“Is ole house pon ole house.” That is an adage older folk would use in giving a synopsis of Budget 2017 as seen through the eyes of the Private Sector Commission (PSC).

At a press conference yesterday, the PSC spoke about the “few positives” and the “many negatives” in Budget 2017. One of the many negatives includes the new policy proposal with regards to exempt and zero rated items in the Value Added Tax (VAT) system.
During his Budget Speech, Finance Minister, Winston Jordan, proposed to expand the list of exempt items and eliminate all zero-rated items, with the exception of those pertaining to exports and manufacturing inputs.
Yesterday, PSC’s Ramesh Persaud said this will cause a strain on businesses and that strain may, in many cases, be passed on to consumers. Persaud highlighted that under the VAT Act, supplies are classified in three categories: standard supplies, zero rated supplies and exempt supplies.
Only standard supplies and zero rated supplies are considered to be taxable supplies. Where taxable supplies are made, input VAT can be reclaimed. In such a case VAT is not a tax on business. Under the new system where most zero rated items have become exempt, input VAT cannot be reclaimed. This will result in the increase in prices of many basic commodities.
Persaud said that the government should consider reversing this position as it would be a horrible impact on the poor. He said that this policy will contribute to inflation and will inhibit growth in the economy.
Persaud called for clarity needs to be provided on items removed from the zero rating list such as education and health services.

INCREASE IN DATA COST
Chief Executive Office of the Guyana Telephone and Telegraph (GT&T), Justin Nedd explained his company’s take on how the removal of zero rated tax would affect the business.
He told the media that while most governments are seeking ways to reduce taxes so as to attract more businesses, “this budget appears to be a little less business friendly.”
Nedd told the media that the increase in tax rates cannot be wholly absorbed by businesses so the burden will have to be shared by consumers.
Nedd said that the corporate tax rate for the telecommunications sector remains at 45 per cent while non-commercial businesses will only be paying 27 ½ percent. “We compete against players that pay non-commercial business rates. That means that we will pay almost 20 per cent more tax than some of our competitors.”
Nedd said that GTT was stunned at the government’s proposals regarding the VAT system that will have “harmful impacts” to the consumer.
He said that the measures reflect a 180 degree inconsistency with the government’s goals of bridging that divide and expanding and modernizing the ICT sector.
By GTT estimations, “If we put VAT on broadband, internet mobile data, as well as data sold to corporate entities we see an increase of about US6M per year for the services.” Nedd said that that is US$6M that will have to be passed to the consumers.
He added that this will stymie demand for services and create a negative cycle in how much GT&T is able to invest in growth. “The negative cycle will only reduce the company’s ability to grow.”
Nedd said that GTT is aware of the demand for increased internet speed and is looking to major expansion in terms of the internet speed through fibre optics. “But the business case for that has now significantly changed given the increase cost to the consumers.”
Nedd admitted that GTT can choose not to pass the charges on to consumers but said, “It is a business and we want to invest in more technology to give faster speed.”
He said that the investments are in the millions of US dollars. Nedd added that the taxes paid by GTT are the highest in the country. He pointed to fees that have to be paid to the Public Utilities Commission, the National Frequency Management Unit and corporate taxes. Nedd said that GTT gives back significantly to the people of Guyana in the taxes paid.
The CEO acknowledged the fact that the Appropriation Bill has not been passed and expressed his hope for amendments.
“The Budget is still in the draft. We are really looking forward for consultations for more clarity. We remain committed to Guyana as a company and are eager to work with the government to bridge the digital divide,” said Nedd.

NAMILCO
The National Milling Company of Guyana (NAMILCO) will also feel the proverbial squeeze. However, that company will not be passing the cost on to consumers.
Present yesterday at the presser was NAMILCO’s Financial Manager, Fitzroy McLeod. He said that because of the move from zero rated to exempt, the flour company will be losing over $200M in VAT refund.
He told the media, “We are not at liberty to simply pass off cost to consumers because we have to compete with other products.”
He said that what were once recoverable will now become final expenses “and we have to find a way to absorb that.”

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