VAT collection falls short by $1B

Feb 14, 2009 News

By Tusika Martin

Value Added Tax recorded a decrease of $1B in 2008. The budget had estimated the collection of $25.1 billion but only $23.99 billion was collected.
This year it is expected that $24.4 billion will be collected.
Finance Minister Dr. Ashni Singh told Kaieteur News on Thursday that the headlines in the press are ‘screaming from the top of the roof’ about the VAT collection.
During an interview with this newspaper, the Finance Minister said that VAT has not been ‘raking in’ as much as the media reports have sought to portray.
“The tendency has generally been to make a greater fuss about what VAT is collecting, but less attention had been paid on what has been given up on the VAT.” Dr. Singh said that this resulted in a number of items being zero rated, largely in response to the external price developments.
“We started the year with fuel and food prices rising very rapidly. They rose very rapidly on the global market throughout the first six months of the year.”
He said that a decision was taken to move swiftly and to zero rate an extensive list of items with the explicit intention of benefiting the consumers of Guyana.
“We obviously made an estimate of the revenue impact VAT would have. In this case, it is clear that perhaps the revenue impact would have been a little bit more than we had anticipated, but we have to bear in mind that we actually extended the list of zero rated items.”
Even after the budget was presented last year, Dr Singh added, more items were added to the zero rated list of items.
Excise Tax on petroleum products reflected revenue lost of $4.2B last year.
“We budgeted $8B but we actually collected $3.8B. If you look at how fuel prices moved on the world from last year January to about June or July…we would see fuel prices moving up to a US$147 a barrel.”
On the domestic market, while prices were virtually doubling on the international market, there was a marginal movement.
He said that a decision to remove and reduce the Excise Tax on petroleum products was done to cushion the impact of the world market price on domestic consumers.
“This was not done for only the individuals who buy gasoline for their motorcycles or cars, but for farmers and persons who run factories and industrial operations – who have to buy diesel for their machinery.”
It was recognised, he added, that diesel is a critical input to production, and that farmers need diesel to produce food.
“It was important for us to ensure that farmers did not have to bear the world market price developments.”
For much of last year, he noted, the Excise Tax on diesel was completely removed, thus resulting in the loss of $4.2 B in revenue.
While the Excise Tax on the importation of vehicles was above the budgeted levels, this could not have compensated for the ‘dramatic’ revenue lost, he added. Dr. Singh presented Guyana’s largest budget on Monday, amounting to $128.9B. The budget aims at having the economy of Guyana withstand the impact of the global financial crisis.
The Finance Minister said that Guyana should fare far better in 2009, but this is dependent on the success of the New Skeldon Sugar Factory.
According to Dr Singh, the budget was crafted with the objective of preserving macroeconomic stability, but he was also cognisant of the fact that the country was operating in a global economy that, “is currently experiencing its most challenging time in recent memory.”
As such, the minister pointed out, for this year, the sugar sector is once again likely to exert significant influence on overall performance of the GDP, given that it is projected to recover from a particularly low base.
This notion is embedded in the fact that the new plant is supposed to be up and running under Guyanese control by mid-year.
Sugar recorded a horrendous performance in 2008.

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