Private sector bodies object to Government’s new VAT policy

…Finance Ministry denies making changes

A number of private sector organizations have come out swinging against measures from the state’s tax regime — measures that have started biting into the livelihoods of exporters. However, this development comes even as Government is distancing itself from such changes.

In a letter seen by this publication, the private sector bodies cited the recent troubles of the Guyana Rice Exporters Association (GREMA), which had complained that changes were made to the policy that allowed them to recoup costs.
Where they had previously been allowed to reclaim costs associated with Value Added Tax (VAT) inputs in goods they produced for export, they contended that Finance Minister Winston Jordan had, in a correspondence, backed GRA’s discontinuance of this policy.
“Such refund claims were allowed since 2007, when VAT was first introduced,” the letter dated April 19, 2018 stated. “We consider the decision by the Government and the GRA a reversal of a commitment you gave the country less than four months ago: that none of these proposed amendments will negatively affect any individual or business. We also consider your new position ill-advised and counterproductive to the interests of the businesses we represent and to the economy of our country.”
“Responding to concerns raised by the President of GREMA that the action by the Government is negatively affecting the competitiveness of the rice exporters, you advised that the export of rice is an exempt item, and that the provisions of the Value Added Tax Act which provide for zero rating of exports do not apply. In justifying the position, you volunteered that you had consulted with the Commissioner- General of GRA.”
The letter went on to point out that it appeared the minister was “badly misled”. The bodies in the letter reminded the Finance Minister that it is he, and not the GRA, that bears responsibility for setting policy. It urged the minister to remind GRA of its duty to just administer the tax laws.

Wasn’t me
But the Finance Ministry, in a statement on Friday (April 20), strongly denied that any changes have been made, or will be made, that will impact exporters in a negative way. The ministry’s denial came on the heels of Opposition Leader Bharrat Jagdeo alerting the public to this impending change.
In fact, the ministry accused this publication of not telling the truth in the story published on Friday (April 20) while failing to make known the minister’s correspondence to GREMA.
“The Ministry categorically denies this allegation, and makes pellucid that the export of taxable items remains zero rated. Since the implementation of VAT in 2007, it has not been charged on exports, and that has not changed. Furthermore, there have been no discussions or contemplation to charge VAT on exports.”
“Please be assured,” it had continued, “that such a proposal with far reaching consequences would not be introduced without proper consultation and analysis of the impact on the manufacturing sector and the export and local economy. It should be noted, in accordance with section 17 and 18 of the VAT Act, where the local supply of goods is taxable, they are zero rated for export. In these cases, input VAT can be recovered. However, if the local supply of goods is exempt, then the export of these items is considered an exempt supply.”
At a press conference on Thursday, Jagdeo had revealed that local Guyanese exporters are next in line to be taxed by the current Government as serious consideration is being given to have the zero rating of exports for Value Added Tax (VAT) purposes removed.
Jagdeo had said that this new development was brought to his attention recently.
According to Jagdeo, exporters were shocked to learn of the coalition Government’s plans to implement this new taxation initiative. He said it is a misguided approach to collecting more taxes. He had said this decision could destroy the entire local export sector, where goods are going to become internationally uncompetitive, factories will have to close, and more people could lose their jobs.
“Almost every country in the world where VAT is in place, they have a zero rating of the exports. So, it allows the producers to claim back their input VAT on their imports, so they can be internationally competitive. In our case, this will change,” Jagdeo told the media conference.
The PPP General Secretary said this matter has been engaging the attention of the Guyana Manufacturing and Services Association (GMSA), where there are “serious worries in those quarters.”
Jagdeo said he hopes the organisation will take some urgent action to represent people in this regard, and to call on the minister to reverse this decision forthwith.
He said, “It will harm our economy and damage all our exports the way it is now being treated.”
GMSA President Shyam Nokta previously blasted the Government’s tax measures and lack of an economic plan, saying Government’s policies were harming, rather than helping, the manufacturing sector.
There is no positive indication that Guyana has so far managed to manoeuvre its way out of the economic slow lane in which it has been stuck for the past three years due to the minimal GDP growth.
Finance Minister Winston Jordan made this admission during a press conference last week. Revealing that the 2017 end-of-year economic report has been completed, he linked the dismal figures to sectors, including sugar.
Initially, Government had projected that Guyana’s economy would have grown by a 3.8 per cent growth rate for 2017. This projection was reduced to 3.1 per cent, and then again to 2.9 per cent.