The Guyana Government has reached out to its regional counterparts through its institutional support mechanisms to assist with its review of the Value Added Tax (VAT) imposed on numerous products locally at a rate of 16 per cent.
According to information recently divulged when Finance Minister Winston Jordon revealed the mid-year report on the nation’s accounts and spending, Government reached out to the Caribbean Regional Technical Assistance Centre (CARTAC) to review the efficiency of the application of VAT.
A mission from that regional body is due to arrive in Guyana in the third quarter of this year, according to the Ministry.
It was explained that since taking office in 2015, Government established a Tax Reform Committee (TRC) which examined the country’s taxation system and made recommendations for improving its efficiency and in order to inform policy decisions on the way forward with respect to the application of VAT.
A systemic review of VAT was considered necessary by that review panel.
According to the Finance Ministry, a reduction in the VAT without due analytical rigour will possibly cause a significant loss in revenue thereby handicapping the delivery of public services such as health, education, public assistance, and infrastructure.
Guyana currently has 177 items that have been zero rated and 11 that are exempt from VAT and it is anticipated that the review will include both the rate and the base on which VAT is applied to ensure stability of revenue collections, and lowered minimum threshold for VAT.
VAT rates across the Region range from 7.5 per cent in The Bahamas to 18 per cent in The Dominican Republic.
Guyana currently has 177 items that have been zero rated and 11 that are exempt from VAT and according to the Finance Ministry, it is anticipated that the review will include both the rate and the base on which VAT is applied to ensure stability of revenue collections, and lowered minimum threshold for VAT.
The Finance Minister in his report documents VAT collections for the first half of the year at $17.3 billion, which is 5.0 per cent more than the same period in 2015.
VAT on imports did decline by $1.4 billion while VAT on domestic supplies increased by $436.4 million.
It was pointed out that the declining VAT revenues on imports was due to a fall in imports by the wholesale and retail sector, while significant collections of VAT arrears, amounting to $125 million and $75 million from the manufacturing and services sectors, respectively, were responsible for the increases in VAT on domestic supplies.
The Finance Minister has also reported that Excise tax collections reached $15 billion during the first half of 2016, but this represents a decline of $311.5 million compared to the same period in 2015.
The Ministry explained that this has resulted from a decrease in collections on imports for petroleum products of $429 million, tobacco of $71.2 million and alcoholic beverages of $43.5 million which together more than offset increases in domestic collections of which collections on alcoholic beverages rose by $227.7 million.
The reduction in excise taxes collected was also said to be due in part to measures implemented, namely the removal of the tax charged on the importation of vehicles under four years old.