Finance Minister seems to be distancing himself further from VAT reduction pledge
May, 31st 2016
It seems that the Minister of Finance is distancing himself further from the APNU + AFC Manifesto pledge to reduce the VAT rate. In your article `Rebate could help tax measures trickle down to consumers’ (SN, May 29, 2016), Minister Jordan said that in Guyana, the trickle down, as he described VAT rate reduction, has not worked in Guyana and that other measures ought to be considered. A measure he appears to advocate is that “pensioners and public servants” should pay the VAT and claim the refunds in their tax returns.
A fair question is whether the Minister has any clue about how VAT works. The first thing is that since the introduction of VAT, there has never been a reduction in the standard rate of 16% so what trickle down is he referring to? As for his suggestion that pensioners and public servants pay the VAT and claim a refund, he must be aware that more than 50% of the workforce in Guyana earn less than the tax threshold and therefore file no tax return while in the case of pensioners the percentage of pensioners who have other sources of income which are taxable, the percentage is over 95%.
Does he not know this, and even if he does, is he now saying that they must file nil income tax returns to get back at most a few thousand dollars paid in VAT? I am assuming that such persons spend about $20,000 per month in VATable so that if there is a reduction of say 2 – 3 %, the VAT saving will be about $400 to $600 per month or $4,800 to $7,200 per year. And bear in mind that the rebate may not apply to all VAT items so the amount of the rebate will be less, and possibly considerably so.
Our Minister wants the pensioners and public servants to collect all their bills on which VAT is paid, store them away for a year, add them up and then claim the amount of the VAT paid in their income tax return for a rebate which the GRA will pay only after several years. How many pensioners and public servants will be able to keep such records and prepare their returns? So the cost may very well outweigh any benefit.
And does the Minister know how much additional work and cost the GRA will incur to print and issue the tax returns, receive, process and store them along with scores of VAT bills and then cut refund cheques?
This proposal is so nonsensical that it is more logical to suggest that it is really an excuse not to reduce VAT in clear refusal to carry out a Manifesto 100-day commitment.