Finance Minister Winston Jordan on Monday presented to the nation a 0B Budget for 2017 under the theme —“Building a Diversified, Green Economy: Delivering the Good Life to All Guyanese” — the Budget however, is to be financed through the imposition of a range of new taxes, penalties and fees increases in addition to competing with the local private sector for scarcely available resources.
During his more than three-hour long presentation to the National Assembly, the Finance Minister sought to regale the House of the many virtues of the early presentation of the 2017 Budget, which he said is not only a signal achievement, but it is also a testament to the stated resolve to return budgeting to its deserved place within the accountability and governance framework.
Fixed date
He announced too that in keeping with its objectives the coalition A Partnership for National Unity/Alliance for Change (APNU/AFC) Government is considering a fixed date for the delivery of future budgets.
On the matter financing its ambitious $250B Budget, the largest to date in Guyana’s history, the Finance Minister spoke on the issue of improved revenue collection through a suite of measures.
He said in 2017, Central Government revenue is expected to increase by 6.4 per cent to $186B.
Tax revenue, according to Jordan, is expected to increase by 8.9 per cent to $162.6B, reflecting a considerable increase in collections of Value Added Tax (VAT), due to the measures to be implemented, in 2017.
He said higher revenues are also supported by an increase of 15.1 per cent in excise tax collections, which are projected to reach $34.4 billion in 2017. Non-tax revenue is expected to decrease by 8.2 per cent to $23.4 billion.
VAT on electricity, water
On the matter of the range of tax reforms to be implemented the Finance Minister announced that Government has decided to reduce the VAT rate from 16 per cent to 14 per cent.
The excitement was extremely short-lived however since Jordan almost immediately announced that not only will VAT now be charged on electricity and water but the band of zero rated items has been disbanded.
According Jordan in his presentation, “I propose to introduce a VAT of 14 per cent on electricity consumption in excess of $10,000 per month.”
As it relates to water consumption, Jordan announced that the introduction of a VAT of 14 per cent on water consumption in excess of $1500 per month.
The Minister announced too that there will be an increase in the VAT threshold saying, “I propose to increase the VAT threshold from $10M to $15M.”
According to Jordan it was found that a significant number of persons were unable to maintain proper records to meet the minimum threshold requirement for VAT registration.
As such, this measure will allow the GRA to concentrate on the cohort that makes the bulk of VAT payments, since there will be a smaller tax base and consequently less VAT registrants to administer.
New Tax
With regards the zero rated provisions for VAT, Jordan declared: “I propose to expand the list of exempt items and eliminate all zero-rated items, with the exception of those pertaining to exports and manufacturing inputs.”
On the matter of new taxes, Jordan announced that Government will be introducing an environmental levy on the manufacturers and distributors of products that use non-returnable metal, plastic, and glass beverage containers.
The amount to be charged is $10 on each bottled product to be applied across the board (importers and manufacturers)—something the local private sector and manufacturers association had vehemently opposed over the years.
GRA powers
Speaking to his revamped taxation system, Jordan announced several new measures to be implemented by the Guyana Revenue Authority (GRA), including empowering that body to access any taxpayers’ bank account in order to ‘garnish’ monies it claims to be owed.
According to Minster Jordan: “The provisions of Section 102 of the Income Tax Act Chapter 81:01 will be revised to provide authority to the GRA to garnish funds from bank accounts held by taxpayers who have outstanding tax arrears…This provision would assist to improve compliance with demands issued by the GRA for outstanding payments.”
Empowering GRA further, Minister Jordan announced too that failure to ensure compliance with the tax authority provisions could see a person being prevented from leaving the country until outstanding arrears are settled.
GRA will no longer be required to secure a court order in order to enforce this provision, according to Minister Jordan.
Jordan announced too that GRA will be looking to put in place an “Excise Stamp Programme”, based on an Agreement with Canadian Bank Note (CBN).
An excise stamp is a type of revenue stamp affixed to excisable goods to indicate that the required excise (and other) taxes have been paid on the product.
“This will see the stamping of alcohol and tobacco products with high-security stamps, which can be read by barcode scanners.”
No extensions
He used the opportunity to announce too that the Commissioner General of GRA will no longer be allowed to provide extensions for the payment of VAT.
Explaining his rationale, Jordan told the House “VAT is funds held in trust, no such right should be given to taxpayers regarding payment…Therefore, this provision will be repealed.”
Another of the glaring announcements made by the Finance Minister is the fact that all Budget agencies, such as ministries, constitutional bodies and such like entities will now be subjected to paying VAT.
This effectively means that Government has set aside 14 per cent of the entire $250B budget to be remitted back to itself in the form of VAT payments—a scenario that never existed before.
He announced a range of increased penalties related to the late filing of Income Tax, Corporation tax and property tax returns, failure to keep proper books and records, failure to present books and records when requested – and the failure to inform the GRA about the commencement of business, among a host of other penalties.
Increased fees
He also announced increased fees for acquiring a passport, transferring of vehicles, departure tax and a range of other categories.
Measures were also announced imposing the restriction on used tyres.
According to Minster Jordan, the importation of used tyres for cars, vans, pickups, SUVs, and minibuses, will be restricted from entering Guyana, with effect from April 1, 2017.
Incentives have been put in place for the importation of hybrid and electric vehicles as well as for persons looking to import accessories related to the development of renewable energy such as wind and solar power.
With regards competing with the private sector in order to secure finances for its $250B Budget, the Minister said, “we must also mobilise domestic resources in support of our development goals.”
To this end, Jordan said Government is pursuing policies to encourage a deep and liquid domestic bond market, which will increase fiscal space and give government more flexibility to respond to external shocks, while reducing our reliance on external borrowing.
According to Jordan: “I am pleased to announce that Government will, in 2017, pursue the issuance of medium-term Government bonds specifically dedicated to the financing of the fiscal deficit.” (Gary Eleazar)
