14% VAT on water, electricity a sad day for Guyana − Dookhoo

Former Private Sector Commission (PSC) Chairman Ramesh Dookhoo on Tuesday noted that he was saddened by the adjustments of the Value Added Tax (VAT) on electricity and water bills.

Dookhoo, in an invited comment, indicated that the implementation of 14 per cent VAT on water and electricity bills for consumers was not only a disappointment from the Government’s end, but it was not beneficial.

“It is really a sad day when we have to stoop to this level to do this… why does the Government have to do this to people when both of these agencies are budgeted?” he questioned in airing his dissatisfaction with this particular budget measure that was announced by Finance Minister Winston Jordan.

The former PSC Chairman also said that he foresaw an additional burden for the ordinary citizen, arguing that all the Government has done was shift taxation from one end of the table to the other.

Jordan, in his Budget 2017 presentation, has proposed the reduction of the VAT from 16 to 14 per cent and in the same breath proposed 14 per cent VAT be added to electricity bills exceeding $10,000 monthly and water bills exceeding $1500 monthly.

This announcement was received with angry shouts of reproof from the Opposition benches; however, Jordan posited that it was a promise to alter the arrangements for VAT made in his party’s Manifesto.

Dookhoo also lambasted the Government for the introduction of a $10 per bottle environmental tax on all beverage companies. He stated that this was particularly “unfair” for the manufacturing industry, since the manufacturers and the importers are different.

He explained that manufacturers were required to pay licencing fees amounting to $10 million every year, along with meeting the required levels of emissions and the purchase of recommended equipment. “So, basically what they are asking us to do is pay more… pay twice of which the importers will be paying, leaving us at a disadvantage,” he remarked.

Dookhoo said what the Government should have done was introduce incentive programmes for the manufacturing industry, based on the number of persons they employ. This measure, he pointed out, is being implemented in the Caribbean.

“Probably, they didn’t get a chance to study this before their budget presentation, but they need to do something better for the manufacturers,” he said.

He said too that the PSC was seeking a meeting with the Minister for the Government to reconsider the new environmental tax, given that local beverage manufacturers would have to incur many recurring expenses to retain the environmental licences.

No VAT refunds

He also stated that many companies, like the National Milling Company which produces zero rated items, would no longer be able to apply for VAT refunds. He stated that the Milling Company would not be able to apply for refunds of about $200 million per year under the new provision, resulting in bigger levies on that company which manufactures flour, rather than importing it.

Meanwhile, Dookhoo lauded the Government’s decision to issue medium-term bonds to finance Guyana’s fiscal deficit. He indicated that there was a lot of liquidity in the bank system, given that Guyana did not have a major capital market. However, he stated that he did agree with Opposition Leader Bharrat Jagdeo that it would affect interest rates.

He also commended the Finance Minister for the adjustment of the PAYE (Pay As You Earn) tax from 30 per cent to 28 per cent for individuals earning less than $2,160,000 per year or $180,000 per month. He further stated that the reduction in Corporation Tax would help encourage production.

Meanwhile, the Opposition Leader, at a press conference, immediately after the presentation of the 2017 National Budget, remarked that the Budget would kill the Private Sector and unleash untold hardships on the nation.

Jagdeo argued that the incorporation of taxes was the highest he has ever seen and has the ability to destroy any possibility of a recovery of the country’s economy.

“We heard for example the Minister fulfilling a promise to the electorate on reducing Value Added Tax (VAT) from 16 per cent to 14 per cent, but in the same breath, they have decided to extend VAT payments to water bills and electricity bills above a certain level,” Jagdeo added. He argued that there was a long list of exempt items that the former People’s Progressive Party/Civic (PPP/C) Government had put in place because they affected poor people and now these items have been removed.

“So, those items like baby milk and things people consume on a daily basis now become VAT-able. Now they have to pay 14 per cent VAT on it. When your electricity bill goes above $10,000, you now have to pay VAT on the full amount. How could this be helpful to anyone? There are so many issues, it is impossible to mention,” he said.