Private Sector wants 25-year exemption on Capital Gains Tax reinstated
As the PPP/C Government prepares for the 2021 national budget, the Private Sector wants to see the restoration of the exemption of Capital Gains Tax from the sale of properties that were in possession of the seller for 25 years or more.
Capital Gains Tax is the tax paid by individuals who have disposed of assets and made a gain, if it exceeded the cost of acquisition of the asset, if the value at the time it was acquired exceeded the value at the time of ownership, or if the value of the asset has exceeded its market value as at January 1, 2011.
Previously, transactions which were carried out over 25 years after the date the asset was acquired had an exemption from the payment of this tax if there was a profit on the sale. But the APNU/AFC coalition Administration removed this exemption back in 2019.
Now, Chairman of the Private Sector Commission (PSC), Nicholas Boyer is hoping that the PPP/C, which will be presenting its first full-year budget this year since taking office in August 2020, will reinstate this exemption.
According to Boyer, the removal of this exemption has not only affected the construction and real estate industries but also the desire to invest in real estate and to hold real estate on a long-term basis.
“In other words, when you have a hype right now you definitely get investments in real estate but when you get to a point where Guyana is massively built out, taxes like that will really hurt the investments and trading business within the real estate industry. So that tax needs to revert back to what it was,” he posited.
The PSC Chairman posited that countries around the world have the Capital Gains Tax along with such an exemption in order to encourage investments into real estate.
“Guyana decided to remove that exemption and I don’t think that should be because it will stymie investments into the real estate sector. It’s also incentivising people to not report the correct sales figures and to try to find illegal ways around the taxes, and that’s not something we want. We want to encourage people to do the right thing. We want to encourage people to be law-abiding citizens and to do the legal and correct thing when investing, selling or transacting real estate,” Boyer contended.
In the 2019 budget presentation, former Finance Minister Winston Jordan announced a series of measures on the Capital Gains Tax including the removal of the 25-year limitation.
But during the 2019 budget debates, then Opposition Leader Bharrat Jagdeo, who now serves as Vice President in the PPP/C Administration, had zeroed in on the amendments to the Capital Gains Tax Act.
“A lot of my colleagues got excited about the Capital Gains Tax; if you reinvest your capital gains within six months at another property, you don’t have to pay; but they did not realise the Minister took away the ownership exemption they had — that if you own something for 25 years, you are not capital gains exempt.”
“All the older folks who own their buildings across Guyana would not have had to pay capital gains if they sold their property. They now have to pay capital gains,” Jagdeo had pointed out.
Nevertheless, the coalition Government in January 2020 went ahead and passed the Capital Gains Tax Amendment Bill.
However, this bill was passed in the absence of the parliamentary Opposition and days after the passage of the No-Confidence Motion against the APNU/AFC regime.