Guyanese could end up paying VAT on electricity, water

Tax reforms

…Jordan confirms recommendations made as trade-off for reduction

Guyanese longing for a reduction in the Value Added Tax (VAT) should brace themselves to start paying the toll on consumer products/services that previously attracted none, including the supply of electricity and water.

Finance Minister Winston Jordan

Accepting that the coalition indeed promised an expeditious reduction in the 16 per cent VAT rate, Finance Minister Winston Jordan explained that the matter is much more dynamic than it appears, since VAT is practically government’s main revenue earner.
The Minister, during a news conference on Wednesday, disclosed that the tax reform report proposed that in order for VAT to be reduced, certain measures have to be put into place to cushion the significant losses government will endure as a result. He said one of those recommendations was for the supply of electricity and water to attract VAT, along with other consumer items.
“In lowering VAT, one has to be prepared to the downside which is the removal of a range of exemptions under the VAT… as recommended in tax reform report, for items that do not attract VAT, to now attract VAT,” he stated.    However, he noted that Cabinet is yet to extensively discuss the report and deliberate on the various tax reform recommendations included. Nonetheless, Jordan indicated that VAT reduction will not be occurring anytime soon, given that the Guyana Revenue Authority (GRA) is still lagging behind as it relates to collecting taxes.          “This is no secret, lax enforcement by the GRA has aided in the falling off of VAT and before you can even dream of continuing giving exemptions on VAT and reducing rates and all of that, one has to be ensured that GRA has the capacity to enforce the law as it is presently in the books,” he explained.
In this regard, Jordan guaranteed that he will do everything in his power to ensure the GRA steps up its measures in revenue collection. “We are trying to bring the GRA around to the realisation that their first and foremost duty is to enforce the law and collect the government’s revenue,” he underscored.  Ahead of the presentation of the National Budget 2015, the Finance Minister told the coalition’s support base not to expect any reduction in VAT.  “You cannot wake up one night and determine that you are going to fiddle with a tax that you heavily depend on without having the benefit of a substantial study,” he had stated, despite having promised Guyanese that it would have been reduced within 100 days of his assumption to executive office.  At that time, he indicated that government would have to introduce new taxes in order to cushion any damage caused via a reduction in VAT.
Interestingly, Budget 2016 included a variety of measures which saw significant increases in several revenue earning avenues for government, like the increase in gun licences fees. It is already a prevalent perception that the new revenue-generating measures in Budget 2016 will only squeeze more money out of ordinary Guyanese; in some cases resulting in them plunging into further poverty