PSC confirms Govt’s plan to implement VAT on exports

…says move ill-advised, counterproductive

Just a few days after Finance Minister Winston Jordan denied that Government was seriously considering having zero rating of exports for Value Added Tax (VAT) purposes removed, the Private Sector Commission (PSC) has come out confirming that such a move was intended and has expressed its deep dissatisfaction.
The PSC said it considered the decision by the Government and the Guyana Revenue Authority (GRA) ill-advised and counterproductive to the interests of businesses and to the economy of the country.
“We wish to place on the public record our dissatisfaction over the decision by the Government to disallow exporters the right to reclaim the VAT paid on inputs used to produce goods and services to be exported from Guyana. Such refund claims were allowed since 2007 when the VAT was introduced,” the entity said on Monday.
While the Government, through Minister Jordan, has advised that the export of rice is an exempt item, that exempted goods and services are not considered taxable goods and services, and that the provisions of the VAT Act which provide for the zero-rating of exports do not apply, the PSC had a different opinion.
“We respectfully point out that it appears the Minister is misled on the chronology of amendments he has made to the VAT Tax Act since 2017 and on the specific provisions of the Act. Nevertheless, the Minister must be held responsible for the amendments which he piloted in the National Assembly,” the PSC said.
Jordan’s response was in relation to concerns raised by the President of the Guyana Rice Exporters and Millers Association, that the action by the Government was negatively affecting the competitiveness of the rice exporters. His justification was that he consulted with the Commissioner General of the GRA.
The Private Sector body strongly believes that the GRA is fusing two amendments, neither of which supports the interpretation and advice offered by the GRA to the Minister.
The PSC said the GRA is causing the Minister to reverse an undertaking given to the National Assembly in January 2018 that “none of these proposed amendments will negatively affect any individual or business”.
The first amendment, which became effective on February 1, 2017, resulted in a significant shift of items from the zero-rated list to the exempt list, the PSC stated. But, exports remained on the list of zero-rated items. The second amendment, which became effective on January 24, 2018, resulted in a deletion of guidance from the VAT Act on how to treat with an item appearing on both lists.
It was observed by the PSC that no changes were made to the zero-rated list in respect of exports, but the Minister and the GRA were advising that exports of goods and services listed in the exempt schedule were not zero-rated even if they were listed in the zero-rated schedule.
“The consequence of denying VAT refunds is that the exporter must either absorb the VAT, which can make their operations lossmaking, or seek to recover these losses by increasing prices for their exports of the goods and services, making them uncompetitive,” the PSC noted.
Speaking on behalf of other organisations such as the Guyana Manufacturers and Services Association, the Georgetown Chamber of Commerce and Industry and the Guyana Rice Exporters and Millers Association, the PSC said while the margin in trade for their goods and services internationally was often small, it allowed local exporters the opportunity to offer competitive prices on the domestic market. “We, therefore, consider that should the Government proceed with this policy, the country, the economy, the exporters and consumers will suffer,” the statement from the PSC added.
The PSC maintained that Government should encourage the export of products to earn foreign exchange and to avert the Dutch Disease and the creation of a “one-horse economy” referring to the impending oil sector.
The new measure has the potential to negatively affect the following products: raw brown, white and parboiled rice; paddy; raw brown sugar; vegetable, corn or coconut cooking oil; fresh fruits and vegetables; plywood, logs and construction lumber; raw gold or diamonds; sanitary napkins; and bleach, among others.
Opposition Leader Bharrat Jagdeo has described the initiative as a misguided approach aimed only towards collecting more taxes. He said it could destroy the entire local export sector reducing its competitiveness; factories would have to close and more people could lose their jobs.