Unlikely VAT reduced anytime soon – Finance Minister

Feb 03, 2016 News

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–  dismisses Jagdeo’s criticisms of budget

By Leonard Gildarie
Reality on the ground is starting to hit home hard for the new administration.

Less than one year in office and two budgets later, one of the main campaign promises is unlikely to be realized anytime soon.
On Friday, Finance Minister Winston Jordan unveiled the 2016 National Budget, outlining a number of measures including tax reductions on imported vehicles and an impending ban on used tyres. However, missing was a promised reduction to the Value Added Tax (VAT). The 16 percent tariff has been seen by citizens as a stifling burden. But it has been raking in billions annually for consecutive Government.
Last year alone, VAT collections brought home $35.4B, representing a 5.2 percent decline over that of 2014.
Explaining the absence of the VAT reduction rate, Minister Jordan on Monday said that a government-appointed Tax Reform Committee only submitted its report on January 18, long after the Cabinet had studied a number of measures for the new budget.
There was no time to convene another Cabinet of Ministers meeting to approve it.
According to Jordan, reduction of VAT is not as easy as one may assume. He referred to the recent case in Trinidad and Tobago where the Government in its National budget reduced VAT, but was forced to introduce charges on a number of items that once were zero-rated.
“So I am just signaling to you. It is not as straightforward as you are saying…”
According to the Minister, it is the view by some analysts that the Guyana Revenue Authority (GRA) is leaking billions as it relates to zero-rated items.
“We have zero-rated so many items, that there are virtually no more items to be zero-rated when it comes to the consumer, poor person-type of items.”
To reduce VAT, Government will have to be careful how it treads, the Minister warned.
Government will have to study the country’s revenue potential and any reduction will have an impact. Already there is no VAT on water or electricity rates.
“One has to look at all that… put all of that into the picture when making a determination on the reduction of VAT.”
Jordan pointed out that when his Government took office last May, it was with the intentions to honour promises made on the campaign trail.
However, the administration immediately faced pressure with the Guyana Sugar Corporation (GuySuCo) facing a major cash shortage. Almost $12B had to be found.
“Let us just assume that GuySuCo was going merrily along the way, we would have had $12B available. Not that we would have paid 12 billion in salaries…just that resources would have been there.”
The administration also had to deal with the number of other big exports in trouble. These include a shortage of market for rice, and falling price for gold.
“We have to go find money to pay rice that was shipped to Venezuela – $3.5B.”
Jordan insisted that it is not a case of Government being bad-minded, but rather, one of the realities on the ground. However, Government still managed at the end of last year to make a one-off payment to public servants.
The administration has announced big plans to raise revenues – going after taxpayers who just were not paying.
It is estimated that only about 65 percent of the taxes due is actually being paid.
A large number of self-employed persons have not been filing returns and many who did, were under-reporting their true earnings.
As part of the measures, the administration is moving to adjust a tax law that will mandate taxpayers to be up-to-date with their returns before they could even uplift simple things like their driver’s and gun licences, among other things.
An initial assessment by the new GRA Board of Directors has found several areas believed to be prosperous economic centres, to be paying little taxes.
Jordan on Monday signaled a change in the way GRA operates, with focus to be paid on what were once considered rural areas.
“Things have changed and what was once considered rural can no longer be so.”
According to the Minister, GRA can no longer consider Georgetown as being the entire Guyana.
Meanwhile, the official made it clear that he will not be responding to Opposition leader and former president, Bharrat Jagdeo, who has described the budget as lacking imagination and anti-poor.
“I don’t respond to the Opposition Leader, because he (Jagdeo) is expected to say what he says. My statement is out there, my budget is out there. I don’t have to go defend it. The measures are clear. Mr Jagdeo is doing his job, I don’t have to respond to Mr Jagdeo… and that has been my position since I became a Minister.”

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