Home News Govt records $2.4B more VAT revenues
…a result of tax on educational, telecommunication, medical services
In its 2017 Budget, Government had announced that Value Added Tax (VAT) would be reduced from 16 per cent to 14 per cent, in order to ease the burden on taxpayers and the ordinary man.
However, by expanding the tax base to include items such as educational materials and supplies; telecommunication services, such as the Internet; and medical supplies, the administration has in fact secured a financial windfall from VAT.
This information is contained in the Mid-Year Financial Report for 2017, which was presented to legislators on Friday last as the House met for its final sitting before going into its annual recess.
Presented by Finance Minister Winston Jordan, the Report documents that Government — as a result of expanding the tax regime over the past two years — had garnered a whopping $97.2 billion in revenue for the first half of this year.
Collections from the application of the controversial 14 per cent VAT regime on an expanded base saw Government raking in $2.4 billion more that it had collected for the first half of the previous year.
The total VAT collected during the first half of 2017 is $19.3 billion.
The information contained in the 2017 Report details, “VAT from imports of goods grew by $1.2 billion, partly as a result of policy changes in Budget 2017.” This, too, was stated: “The value added tax on domestic goods also increased by $838.5 million, primarily due to higher payments from the telecommunication and wholesale and retail trade sectors.”
Taxes make up 88.3 per cent of Government’s total annual revenue collection, and Finance Minister Jordan has reported that internal revenue collection increased by $5 billion to reach $41.6 billion during the first half of 2017.
Collection for the same period in 2016 stood at $36.5 billion.
The Finance Minister attributes this increase primarily to a $2.3 billion growth in corporation tax payments made by several companies in the manufacturing and services sectors, as well as in the natural resource sector.
Withholding tax payments also grew by $865.5 million, mainly due to payments by two companies providing support services to the oil-and-gas sector and interest earned on savings accounts at commercial banks.
Personal income tax payments made during the period also increased to $10.8653 billion, some $265.3 million more than what was collected during the same period in 2016.
Money collected from petroleum products increased by $3.2 billion to $10.9 billion, offsetting the reduction given in excise tax on motor vehicles during the period under review. Excise taxes paid on motor vehicles during the first half of 2017 stood at $2.9 billion, a decline of $1.5 billion in what had been collected in the period January to June 2016, when excise tax payments stood at $4.4B. This decline is credited to a slow-down on the importation of vehicles into the country during the first half of 2017. Revenue collected from excise taxes on domestic alcoholic beverages did, however, increase to $2.1 billion, some $238 million more than what was collected in 2016, according to the Finance Minister’s Report.
Jordan credited this increase to two reasons: the Budget 2017 measure that amended excise taxes payable on alcohol consumption, and higher sales of beverages on the local market.
Importation of consumption goods reached US$231 million in the first half of 2017, and this growth was buoyed by an expansion in the importation of other non-durables. Importation of foodstuff (for final consumption) skyrocketed by 72.7 per cent, while importation of clothing grew by 9.9 per cent and footwear by 37.8 per cent, contributing to the increased taxes collected.
In contrast, importation of motor cars, beverages, tobacco, semi-durable and durable goods fell. The importation of intermediate goods, such as fuel and lubricants, chemicals, parts and accessories, did expand to lend to the increase in earnings experienced by Government.
Minister Jordan’s Report detailed that importation of such intermediate goods increased in the first half of 2017 to US$408.5 million, compared to US$350.3 million in the first half of 2016.
Conversely, importation of capital goods such as transport, machinery, and building materials fell by 25.3 per cent, 20.1 per cent, and 31.4 per cent respectively. Collectively, this represents an 11.3 per cent decline in revenue garnered from those sources, and represents a collection of only US$18.2 million in the first half of 2017.
As it relates to Government’s non-tax earnings for the first half of 2017, Minister Jordan reported that this, too, rose to reach $11.3 billion, topping the figure for the same period last year by $567.4 million.
According to the Finance Minister, this increased collection is credited to “higher transfers from statutory agencies during the review period.”
Fees, fines and charges also reported a 4.2 per cent increase at end June 2017 to reach $684 million; while rents and royalties declined by 32.3 per cent, reflecting lower gold declaration from both Troy Resources and Guyana Goldfields.
Despite the increased domestic earnings which have resulted from the revised tax regime introduced by the APNU+AFC Coalition Administration over three consecutive budgets, international reserves held by the Bank of Guyana declined in the first half of 2017 to US$578.4 million, a decline of US$18.3 million from the US$596.7 million that had been collected during the same period in 2016, and a representation of 3.4 months of import coverage.