VAT increases will not deter investors – Business Minister

Following the Value Added Tax (VAT) measures announced by the Government in the 2017 Budget presentation, Business Minister Dominic Gaskin has opined that the measures would not deter investors.

The Minister communicated this stance during a telephone interview on Friday, as he addressed the question of whether the tax measures facilitated a suitable business environment and provided an inviting climate for local and foreign

investors.

“Certainly! VAT is implemented in a lot of countries. I don’t see investors shying away from investing in jurisdictions where the Value Added Tax is set. So, I don’t see the nexus between implementing VAT and attracting investors,” the Business Minister stated.

When asked about local investors, Gaskin pointed out that the same thing applied and that they also have the right climate to invest.

The parliamentary Opposition has been steadfast against the Budget, describing the tax measures as lacking innovation and as lazy attempts to raise money.

During a recent press conference, Opposition Leader Bharrat Jagdeo was very critical of the fact that the coalition Government raised VAT on a number of items. According to Jagdeo, the country could be managed effectively without the extensive hikes in VAT.

Effects on mining

Jagdeo also spoke of the plight of the local gold and diamond miners, who have since sought a meeting with President David Granger. According to the Opposition Leader, miners have legitimate concerns that the various measures announced in the Budget will kill the industry.

“The measures passed in the Budget can kill the industry. They introduced surreptitiously in the first budget in 2016 the VAT on heavy-duty equipment that was not there. So, that immediately sent up the cost on excavators, bulldozers, and other equipment used in the hinterland, by 16 per cent.”

“And then in the last budget they increased the tributors tax from 10 per cent to 20 per cent. So that’s a hundred per cent increase in the tributors tax. Then with the introduction of VAT on interior travel, I’m seeing they are going to exempt people who live in the interior.”

“But it is not provided for in the law. And this is an afterthought. They should remove it totally, from interior travel. The miners use that service. So that will drive up their cost. And then they have to file income tax at the end of the year – puts a whole new burden on people.”

According to Jagdeo, all of this has changed the fiscal environment, particularly for small miners, and this would cause irreparable harm to the sector.

According to the new regulations, as announced by Government, certain goods and services will now attract VAT. In addition to the tributors tax increase, there will be a two per cent tax on gross earnings.

These measures have been criticised by the Guyana Gold and Diamond Miners Association (GGDMA) since they were announced.

VAT of 14 per cent has been also applied to general electricity consumption in excess of $10,000 per month, and for water consumption exceeding $1500 per month.

It was also announced last year that the Guyana Revenue Authority (GRA) would receive authorisation to garnish funds from bank accounts held by taxpayers with outstanding tax arrears.

In addition to the miners’ representatives, the VAT measures have raised the ire of the business community. Back in December, Chairman of the Private Sector Commission (PSC) Economics Committee, Ramesh Persaud, had stated that the 2017 Budget took more than it gave.

The PSC had called on the Government to reconsider, noting that several items which were exempted from VAT have been removed from the list of zero-rated items.

The addition of VAT on local airfares has also not gone down well, notwithstanding the Government’s assurances that hinterland residents would not be charged. National Air Transportation Association (NATA) President Annette Arjoon-Martins recently spoke out against the development in sections of the media.

According to Arjoon-Martins, the increase would cause a decline in passengers. She said that in the absence of clear criteria from the GRA, domestic carriers would have to charge every passenger VAT.