Reducing VAT rate will not ease cost of living

Jul 09, 2008 News

Minister of Finance, Dr Ashni Singh says that reducing the 16 per cent rate of the Value Added Tax will not in any way reduce the escalating cost of living.
Dr Singh made the announcement during a recent sitting of the National Assembly where opposition party members reiterated their calls for the reduction of the rate.
According to Dr Singh, the bulk of money for the average person is spent on electricity, rent, food and transportation.
The Finance Minister said that as it relates to transportation, the tax on gasoline has been significantly reduced and diesel has been zero rated.
He added that no VAT is paid on electricity, rent and basic food items. “How will reducing the VAT rate in anyway affect the prices of these commodities and services?”
The People’s National Congress Reform has long said that it supports VAT in principle but is against the 16 per cent rate.
“It is a more broadly based tax on the production of goods and services and thus, in principle, acceptable to the PNCR on the grounds of equity in tax burden among producers….However, from the time of the introduction of the VAT Bill in the National Assembly during the Eighth Parliament, the PNCR has consistently raised a number of concerns almost all of which remain unaddressed.”
The party organized a series of protest marches and picketing exercises against the rate of VAT among other issues.
Last year November when Dr Singh laid in the National Assembly the mid year financial report for the Guyana Revenue Authority (GRA) which revealed a windfall of some $12B, the PNCR had announced that its position was vindicated.
The rate has, however, not been reduced.
In December 2005 prior to its introduction on January 1, 2007 the Private Sector Commission pointed out that Guyana has the highest personal and corporate tax rates in the Caribbean, and opined that the introduction of VAT at a rate of 16 per cent would place an enormous tax burden on the Guyanese consumer and a terrible strain on the country’s manufacturing, business, tourism, and export sectors.

The Private Sector Commission stated that VAT must be introduced in conjunction with a reform of the existing tax system.
They further stated that the tax in its present form would result in a significant increase in the cost of living to the average consumer.
Red Thread, a civil society organisation that speaks for women around the country, had also expressed concerns with respect to the effects of VAT on Guyanese people in general, and more specifically on unwaged housewives, low-waged workers, unemployed women and men, and pensioners.
They had expressed concern about prices that have increased on items that previously had no consumption tax, or consumption tax lower than 16 per cent, but are now subject to VAT.
The Alliance for Change has also placed its voice on record regarding the adverse effects of VAT and has on several occasions called for the reduction of the tax.
Prior to its introduction, President Bharrat Jagdeo and the GRA had given assurances that VAT should not result in a higher cost of living.

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Reducing VAT rate will not ease cost of living

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