VAT to remain on private school fees ; parents, schools must find creative ways around tax- Finance Minister

Last Updated on Thursday, 2 March 2017, 13:05 by Denis Chabrol

by Gary Eleazar

The Guyana Government has decided it will not be removing the application of the 14 per cent Value Added Tax (VAT) on private school fees, saying the anticipated revenue is critical to meet the funding for the $38B shortfall it has for its 2017 expenditure programme (2017 $250B Budget).
This was disclosed by Finance Minister, Winston Jordan, who on Thursday (March 2, 2017) met with members of the local press corps and said Private Schools that lament the burden the tax will place on its poorer students should consider absorbing the costs which could later be represented as a deductable for the Guyana Revenue Authority (GRA).
A defiant Jordan—in face of the growing calls and protest action for the removal of VAT on private school fees—used the occasion to remind that the majority of Private Schools operating in Guyana are in fact tax delinquents and measures will be made by the GRA to remedy the state of affairs.
The Finance Minister was quick to point out that the administration was in no way applying VAT to the private school fees as a result of their delinquency on other tax fronts but rather as a result of the expanded tax base as part of the reform in reducing the tax charged, down from 16 per cent to 14 per cent.
Venued at the Ministry of Finance’s Boardroom, Minister Jordan told members of the local media corps only 54 institutions, representing 57 per cent of the private schools that operate in Guyana are in fact registered with GRA.
The total VAT collected from Private Schools in 2016 amounted to $150M, according to the Finance Minister—monies collected from the 26 per cent of private schools registered to apply VAT.
Minister Jordan disclosed that the total tuition fees charged by the top eight private schools alone in the country amounted to some $2B.
Many of the private schools, according to Minister Jordan, charge fees in excess of that charged by the University of Guyana (UG) and range between $144,000 and $300,000 per school term.
Responding to concerns expressed by some schools that the poorer students attending private schools will be adversely affected, the Minister suggested going the route of the Guyana Telephone and Telegraph Company and the Cheddi Jagan International Airport Company (CJIA) which has since signaled an intention to absorb the application of the 14 per cent tax and not pass it on to consumers.
According to Jordan, parents and the schools can work together to find a creative way around having the increase costs becoming a burden.
He suggested that based on information supplied to him, the majority of students in private schools come from parents that can afford the service.
With regard the poorer students, the Minister suggested that the school and parents could work out some cost sharing mechanism which the institution could later represent to the GRA as an expense that would be deducted as against Vatable income.
“Go the route of absorbing the VAT… they will just write it down as a tax deductable…it will become an expense so it just reduce income that GRA can tax, it is a win-win for everybody.”
According to Minister Jordan, “I really do think that one solution is to go the route of GTT and CJIA, isolate those who can’t afford it and call a meeting (with parents and school) and discuss what percentage the school can bear and what parent can bear.”
On the matter of the delinquent private schools, Commissioner General of GRA, Godfrey Statia—who was also on hand to lend support to the Finance Minister—indicated that the tax collection agency has already begun writing to the tax defaulters.
It was pointed out that the recalcitrant schools will be given some time to get their affairs in order but none will be given a free pass.
According to Jordan, to remove the well thought out tax from private tuition would cost the government some $350M this year and this has to be looked in the context of the fact that the 2017 Budget is still not fully financed and that Government still need to borrow some $38B locally and internationally to fund its programme for the year.
“Either we upturn our economic program which will have effects or do what is required so we can all co-exist,” according to Minister Jordan.
The Finance Minister used the occasion to plead with citizens saying “Give this and other taxes a chance to crystallize and let us see how it ends up.”
He said what citizens should in fact be doing is holding the government accountable on its spending and pointed to benefits already being illustrated in the formed of cleaned drains and upgraded roads.
The Finance Minister was adamant that VAT is not being applied to education or education supplies but rather it was just the fees paid for private tuition.