By Bibi Khatoon
There will not be a further reduction of Value Added Tax (VAT) in the 2018 National Budget, Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia has noted.
In the 2017 National Budget, the Government reduced VAT from 16 to 14 percent but Statia during a panel discussion on Tax Reform on Thursday noted that “as far as I’m being told, there has been no consideration of reduction of VAT” in the 2018 Budget.
While the GRA Head agreed that taxes should be decreased and even went further to state that, “the higher the tax rate, the more you get corruption between the taxpaying public and customs and tax administrators.”
He expressed his preference for having a decrease in personal income tax based on the fact that the last reduction of VAT is not being filtered to customers.
“I prefer instead of there being a reduction in VAT, because that is not being filtered down to the ordinary man, the prices have not been reduced to show the reflection of the reduction in VAT from the 16 to the14 percent, I would have preferred that there would have been a decrease in personal taxation and let the disposable income increase to cover that,” he told stakeholders gathered at the Marriott Hotel during the business summit hosted by the Private Sector Commission. .
The revenue body had disclosed that instead of a reduction in prices as intended by the budget changes, businesses have apparently used the 2% reduction in VAT to increase their profit margins rather than passing on the intended benefit to the consumers.
One stakeholder raised the issue of inequality given that persons are required to pay the same tax and there is also a fixed threshold for persons with or without children. Government Parliamentarian, Michael Carrington recommended that “the more children you have, you should be paying less tax”—basically the return of the Allowance structure which was removed in the 1980s.
The GRA Head in response explained that the structure was removed because of widespread abuse.
He explained that “there was no way in which you could have found out whether the children that the guy has been claiming…or whether he was married or all these things. It is very very hard and the process of doing that entail the guy walking in with all of his certificates and all these other things. So you looked at it, and that is how you got to the threshold. You added up everything and say we’ll start the threshold here, and then you further said ok, the threshold is this amount but you now going to give a 1/3…and that 1/3 would have taken into consideration all the allowances.”
Given these challenges, Statia said a recommendation was made for the implementation of ‘Earn Income Relief’ which would eventually address the same issue.
“With the earn income relief, instead of you having the allowance, based on your income, you will now get a tax credit which would be refundable to you” he pointed out. Budget 2018 will be presented on November 27, 2017.
