Minister Jordan clarifies on the issue of VAT on private education

Feb 18, 2017 Letters

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Dear Editor,
I refer to the lengthy Editorial, “Minister Jordan’s response”, which appeared in Stabroek News, Friday, February 17, 2017. As an editorial, I recognise and accept a newspaper’s right to voice its opinion, which may not necessarily concur with the wider public.
When the SN reporter approached me in the margins of Parliament, I readily consented to an impromptu interview on my reaction to calls for the removal of VAT on private tuition. Indeed, I responded that VAT was first and foremost a fiscal tool and that it was not a cure for social ills. I went on to add that it was the income from VAT that will be used to cure social ills. But SN conveniently omitted this from its editorial because it would not resonate with what followed in the editorial. In that statement, I was stating a simple fact. It was not meant to display arrogance, hauteur and hubris nor a lack of empathy as SN was so quick to pronounce and declare.
The general populace is aware that public education is not at the stage that it should be. Our Government has recognised this, too. As a result, during last year, Cabinet had lengthy discussions on improving education at all levels. In fact, your newspapers carried several articles on this matter. There is also a Commission of Inquiry (COI) into the state of education in Guyana, which is on-going. We await the Commission’s findings that would help us chart a new direction.
There were many changes to the tax system that were announced in the 2017 Budget, including a reduction of the corporate and personal income tax rates, increase in the income tax threshold, and a reduction in the VAT rate. Taken together, all of the measures were designed to broaden the tax base; improve tax efficiency, collection and administration; and improve equity.
Based on our estimates of increased revenue collection, and our intention to borrow $38 billion to finance the excess expenditure over revenue in the 2017 Budget, we were able to increase the budgetary allocation for public education to $43.1 billion or 17.2 percent of the budget, the largest spending to be undertaken in any sector. This signals the high priority and urgency given by this Government to improving the quality and delivery of public education.
I refer the newspaper to pages 58-62 of the 2017 Budget Speech, where the many interventions that are contemplated are highlighted. Among them are: $1.9 billion for the school feeding programme, which has been expanded since this Government took office; $3.5 billion for the construction, rehabilitation and extension of schools and teachers’ quarters; $578 million to purchase textbooks; $424 million to provide free school uniforms to children in the public school system; $2.4 billion to improve learning outcomes at secondary schools; and $337 million for the Programme for Emergency Education Reform (PEER), specifically geared to tackle deficiencies in Mathematics and English.
In addition, 481 trained teachers were added to the pool of qualified teachers in the public school system last year and 600 more are expected to graduate this year. One will not fail to notice that while the Government continues to expend millions on training its teachers, the private school system benefits immensely by merely offering a better salary to them – something they can afford to do by, for example, charging fees ranging from $40,000 to $60,000 at the nursery level. Further, our Government intends to distribute 9,500 laptops to improve classroom productivity. And, next week, I will be in Washington to negotiate a new loan for secondary education from the World Bank. So much more needs to be done, but we have begun a concerted effort to improve the situation in the shortest possible time. After all, public schools remain, by far, the largest component of our education system.
I wish to make a few additional points. First, prior to the recent amendments, educational materials were zero-rated, meaning that private school providers had to claim refund 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.
Second, no VAT is charged on the tuition fees paid to any public educational institution. However, with the new amendments, VAT is to be charged on the tuition fees paid to any private educational institution. As of 2016, there were fifty-four (54) such institutions registered with the Guyana Revenue Authority, few of whom were tax compliant, including submission of yearly income and corporate tax returns.
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, 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? One such solution is the absorption of the 14% 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.
SN’s editorial is replete with statements such as “Minister Jordan does owe the public a more structured and properly articulated response …” and “… may trigger a more considered and cerebral response by Minister Jordan…” Numerous and lengthy submissions were made during the debate on the VAT in Parliament. These were aired live and covered by all the newspapers. An accurate record of the proceedings can be found in the Hansard of Parliament. In addition, I have made several public pronouncements before, during and after the debate on VAT. Other officials, including the Commissioner General of Guyana Revenue Authority, have been doing their part to educate the public on the changes and the need for them.
I have consistently indicated, virtually from Day One, that our Government intends to lower the VAT rate, in keeping with its manifesto promise, but to do so would have required a broadening of 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. We do not intend to stop there. As our economy improves, citizens can expect more benefits in the form of even lower taxes and better incomes.
Minister Winston Jordan

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