Finance Minister explains VAT on private education fees

Feb 18, 2017 News

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While on the campaign trail the coalition of A Partnership for National Unity + Alliance for Change (APNU+AFC), made several promises to the nation if elected to office. Among the promises made was a reduction of Value Added Tax (VAT).

Following the May 11, 2015 National and Regional Elections, APNU+AFC was elected to take over the reins of the nation. However, applying its VAT reduction promise has not been as simple as bellowing a slogan on the campaign trail.
In fact, Finance Minister, Mr. Winston Jordan, in a missive sent to this publication yesterday explained that Government recognized that in order to lower VAT there was a need to broaden the tax base to include items of goods and services not covered previously.
“It took this Government two studies and 18 months after coming into office to keep its promise,” Minister Jordan related.
Among the items that now attract VAT are the tuition fees paid to private education institutions. This development has been cause for concern to many private education stakeholders. Several persons have been calling on Government to reverse this decision altogether.
This issue was one that was brought to the attention of Minister of State, Mr. Joseph Harmon, when he conducted this week’s post-Cabinet press briefing at the Ministry of the Presidency yesterday.
Harmon was told that the 14 percent VAT that private education tuition fees now attracts has in fact caused a number of students to part ways with some institutions, thereby amplifying the call by stakeholders for Government to remove the tax.
When questioned about Government’s view about the call to remove the newly implemented tax, Minister Harmon said “it is engaging our attention.” He however asserted that “I don’t know what the figures are about dropouts, but Minister Jordan did allude to the fact that a number of these schools are private charter schools [that] do not pay taxes.”
“I think the Ministry is going to come out with some information which basically will lay the case on the table,” said Harmon, as he noted that VAT is not applied to any public education fees, but only that which is collected by private education institutions.
According to Harmon, he has seen some letters from private institutions relating concerns about the implemented tax. “I have received copies of those letters which we are addressing, and to the persons I have already acknowledged receipt of their letters.”
“But certainly, anytime there is a tax there is always a little push back on it,” said Harmon, as he pointed out that often the implementation of some measures such as new taxes cause people to suddenly highlight issues.
“I believe it is in the implementation of these measures that people might try to put pressure on you to say that so many persons drop out and so on,” Harmon considered.
In his letter yesterday, Minister Jordan explained that the imposition of the VAT on tuition fees falls on the payer (parent) rather than the payee (educational institution).
“The argument has been made, at least by Dr. Brian O’Toole [Director of School of the Nations], that some parents would not be able to afford it. Perhaps, this argument has some merit. But, is the solution the complete removal of the VAT or to find creative ways to overcome it?” questioned Jordan.
He continued, “One such solution is the absorption of the 14 percent VAT by GT&T. Note carefully, in this case, that though it appears altruistic, the absorption merely represents a reduction in the payment of corporate taxes due by the telephone company. A similar arrangement has been implemented by the CJIA, which has decided to absorb the VAT to be applied when parking at the airport. In like manner, the private educational institutions may wish to consider similar approaches,” the Finance Minister asserted.
Prior to the recent amendments, Minister Jordan noted that educational materials were zero-rated, meaning that private school providers had to claim refunds of VAT imposed on a wide range of school supplies. Now, all of these items have been moved to the Exempt Schedule, which means that no VAT is charged and none has to be refunded.
“Please note that the entire list of educational materials in the previous schedule has been retained in the new schedule. This is important, because there has been idle talk of geometry sets, dividers and textbooks, among others, now attracting VAT. This is totally false, as can be easily referenced from the Exempt List that was published on a number of occasions in all of the dailies,” Minister Jordan noted.
As of 2016, there were 54 private education institutions registered with the Guyana Revenue Authority, and according to Minister Jordan, few of these “were tax compliant, including submission of yearly income and corporate tax returns.”

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