There is export VAT being charged despite what Govt. says

May 16, 2018 Letters

Dear Editor,
Despite valiant attempts by the Commissioner General of GRA and the Minister of Finance to deny that there is no VAT on exports it is conclusive that Guyana will no longer be able to be competitive on the international rice market. How can they claim that there is ‘no VAT on export’ when input VAT on exports is not reclaimable?
On April 23 it was reported that ‘the Ministry of Finance has assured that Government is not moving to implement Value Added Tax (VAT) on manufactured exports.’ It further stated that, ‘The ministry categorically denies this allegation and makes pellucid that the export of taxable items remains zero-rated’.
On April 25, 2018 the GRA Commissioner General also refuted claims that VAT is charged on exports and called on local companies to prove that they are adversely affected by the amendments made to the VAT Act.
It must be recalled that the first amendment effective February 1, 2017 saw many items moving from the zero-rated list to the exempt list but the second amendment which became effective on January 24, 2018 created massive confusion on how to deal with items which now appear on both lists. This means that while exports remained on the zero-rated list some items appeared on the exempt list. The last amendment provided no guidance on the matter which appreciates its complexity.
However, the Private Sector Commission’s main contention is ‘the decision by the Government to disallow exporters the right to reclaim the VAT paid on inputs used to produce goods and services to be exported from Guyana. Such refunds were allowed since 2007 when VAT was introduced’. The replies by Minister Jordan and the GRA confirmed this position.
On 9th April, 2018, the Guyana Rice Exporters and Millers Association had written to The Finance Minister, Mr Jordan seeking clarification on the issue of the exportation of rice which has moved from zero-rated to exempt supplies under Schedule II which makes input VAT being non-refundable.
This was confirmed by the Finance Minister in his letter to GREMA dated 11th April, 2018. It stated that, ‘rice is an exempt supply and therefore not eligible for VAT refunds’. It further stated that ‘exempt goods are classified as exempt whether supplied in Guyana or Exported’.
Therefore, the GREMA claims are justified since if input VAT on the manufacturing of rice exported cannot be reclaimed then the export has become vatable. There is empirical evidence to show that each miller pays millions of dollars of VAT on electricity, water, wharfage, security charges, cargo handling services, admin fees, bill of lading fee and terminal handling fees.
One rice miller is reported to pay in excess of $50 million in VAT, so what will be the result of this? Of course the VAT charged will be added to the production costs making the exported rice more expensive.
Nowhere in that letter did Minister Jordan advise that GREMA supply GRA with empirical date to support their claims of significant losses on costs due to changes from zero-rated to exempt for remedial actions to be taken as reported in the media.
This Government is sending the wrong signal to investors. They are being told: ‘WE DON’T WANT YOUR BUSINESS TAKE IT ELSEWHERE. WE ARE HAPPY COLLECTING TAXES FROM IMPORTS’. Already many local investors are contemplating taking their manufacturing to other countries where there is no VAT on electricity on water and electricity and where the electricity and labor costs are significantly lower.
This is in addition to long periods of tax holidays. Our finished products have lost their competitiveness whether locally or internationally.
In March 2017, Minister Jordan admitted that the economy is declining and called for increased local manufacturing to help boost the economy but it is now clear that VAT on manufactured goods is an erroneous move which cannot be justified.
Mike Persaud, Snr.

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