New VAT regime was not recommended – Ram & McRae

The findings of a post-Budget analysis undertaken by eminent accounting firm Ram and McRae, are contrary to what was reported to the National Assembly that the revised Value Added Tax (VAT) regime was informed through studies conducted by the Caribbean Regional Technical Assistance Centre (CARTAC) in conjunction with a Tax Reform Commission (TRC), which was set up by Head of State David Granger.
In its analysis of the 2017 Estimates, Ram and McRae found that the reduction of VAT from 16 per cent to 14 per cent differs from those of CARTAC and the TRC in very significant ways. CARTAC recommended two rates – 16 per cent and 8 per cent. The TRC recommended 14 per cent and 7 per cent.
Meanwhile, as it relates to the application of VAT on electricity and water, the accounting firm found that at the proposed rate of VAT, “this is likely to cause a substantial increase in the VAT borne by affected taxpayers.”
On the matter of the elimination of all zero-rated items, except those pertaining to exports and manufacturing inputs, Ram and McRae found that the consequences of these proposals are severe: “We have taken an actual spending of a taxpayer and calculated the VAT under the current and proposed regimes… VAT increases by 155 per cent and total expenditure by 7.3 per cent.”
According to the analysis supplied by Ram and McRae: “All taxpayers will have different spending patterns, but we believe that they will face increases in their spending… It is not without significance that while the economy is projected to grow by 3.5 per cent, VAT collections are expected to rise by an average of 25 per cent on imports, as well as domestic supplies.”
On the matter of the amendment of the VAT Act to allow the Commissioner General to issue a direction to prevent a person owing tax under the Act from leaving Guyana, it was found that this measure is “completely unacceptable and the information referenced in the Speech is inaccurate and unreliable.”“Penal, excessive and disproportionate,” was the description ascribed to many of the provisions proposed by the Finance Minister, including the $200,000 fine and six-month imprisonment with regards businesses failing to keep records or the late filing of income tax returns.
Ram and McRae have expressed disappointment that the Minister once again has not provided the cost of each of the proposed measures.
It was found too that the commitment to a client friendly and business friendly tax environment may escape the taxpayers faced with charges for tax services and heavy penalties for administrative breaches. According to Ram and McRae: “If the tax authorities wish some equity, the law must provide for the payment of equivalent interest on amounts owed by the GRA as it does on amounts owed to the GRA… The Tax Measures proposed did not follow the recommendation of the Tax Reform Committee to abolish and slash concessions and exemptions on key political and other players.”