A Tax Review Committee has suggested to Finance Minister, Winston Jordan that if the 16 percent Value Added Tax (VAT) is to be reduced, the number of zero-rated or non-taxable items would have to reduced to compensate for a loss of revenue, Finance Minister Winston Jordan said Monday.
“The recommendation suggests that we should have less zero rated items so it’s natural for that to happen. If you want a reduction of the VAT in the kind that you are talking from 16 maybe to 12 or thereabout we have to have revenues to develop the country so you have to relook at the entire revenue potential that you’ll need,” he told a news briefing.
With most food items, electricity and water not attracting VAT, he cautioned Guyanese: “
Jordan said consultations on the Tax Review Committee Report would have to be held after the document is taken to Cabinet for discussion.
The APNU+AFC coalition had promised to reduce VAT in the run-up to the May 11, 2015 general and regional elections. However, Jordan cautioned that the reduction of that tax must be done in a way to ensure that there is sufficient funds to manage the economy. “It is not as straightforward as people would be making it out to be . It is not just about reducing the VAT from 16 percent and thinking everything is going to be OK. You have to maintain a revenue response,” he said.
Noting that Guyana has one of the largest leakages of VAT as it relates to zero-rated items, he said the time has come for the Guyana Revenue Authority (GRA) to enforce the law on VAT. “GRA’s lack of a presence out there has made people feel comfortable in cheating the VAT so VAT collections are increasing at a declining rate,” he said, adding that “GRA’s enforcement arm has not been working. They have no presence so people feel comfortable cheating the VAT.”
The GRA last year collected GYD$35.4 billion in VAT, represented a 5.2 percent decline. This year, the tax agency hopes to collect 9.9 percent more than last year’s amount.
Another reason for not lowering the VAT in this 2016 National Budget that was presented to the House on Friday, 29th January, 2016, he said was the fact that the Tax Review Committee’s Report had been submitted to him on January 18 and so there was insufficient time to take it to Cabinet for review.
The Finance Minister said he was aiming for an 80 percent tax collection, up from a current level of 65 percent.