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VAT is not a social policy but an instrument of fiscal policy- Minister Jordan

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The content of the Opposition motion calling for the repeal of the order which removes several items from the Zero-Rated List and place them on the exempt list has had an exhaustive discussion in the House says Finance Minister Winston Jordan.

According to Minister Jordan, Value Added Tax (VAT) in 2008 stood at 34.4% of the current revenue in 2008 and by the year 2015, when the PPP/C demitted office, had regressed to 24.8%. Jordan told the House, while the economy was growing, the VAT collections were declining.

He attributed this to the policy measures employed by the former regime, which were weakening the VAT base. The Finance Minister admitted that the Coalition Government was doing the same in an effort to honour a promise made in its manifesto.

The Minister said following the May 2015 elections, the VAT base had further declined to 24% of total revenue collection.  He then questioned how Government can continue to do this with a major tax in the country. According to him, development itself would be slowed and could lead to more borrowing.

While Government had made a promise on the campaign trail to reduce the VAT rate, Minister Jordan said the tax could not be tampered with until it was understood at which point it was at.

Confronted with a set of payments known and unknown, the collapse of the sugar industry- which saw Government having to invest $12B, new threats by Venezuela and the collapse of the rice deal, Jordan noted all hindered the Coalition from addressing the VAT issue.

He said this position was understood by the Opposition, which commissioned a study by the Duke University, which Government inherited. The study was used as a jump off point.

One of the recommendations of the Tax Reform Committee, Minister Jordan highlighted was that VAT could be reduced to as low as 13% providing that the base was expanded.

Elaborating further, the Minister said all the items on the “poor people foods” list are exempt. He clarified that VAT is an instrument of fiscal policy and is not a social policy.

Jordan rejected the Motion brought by the Opposition and by a Government majority vote, the motion was lost.

 

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