…but baulks at VAT on water, electricity, environmental tax

THE Private Sector Commission has hailed some of the measures contained in the 2017 Budget presented on Monday, but expressed concerns about the imposition of Value Added Tax on water and electricity, as well as the $10 levy per unit on the importers and local manufacturers of products using non-returnable metal, plastic or glass container of any alcoholic or non-alcoholic beverage.

Executive Member of the PSC, Ramesh Dookhoo, has said the administration’s decision to increase the tax threshold and reduce Income Tax was an excellent move. In an interview with Guyana Chronicle on Tuesday, Dookhoo said Government’s reduction of the Value Added Tax (VAT) from 16 per cent to 14 per cent is “very cosmetic.” He is of the opinion that the decision to further place taxes on the consumption of electricity and water is a move in the wrong direction.

“We cannot see the reduction of VAT in isolation, we have to look at what else has happened — they have added VAT to water and electricity,” Dookhoo lamented. He noted that it would be one of the most “unpopular” decisions made by this administration.

The 14 per cent VAT, however, will only be applied to monthly water and electricity bills surpassing $1,500 and $10,000 respectively, and according to the Government, approximately 80 per cent of the registered consumers utilise less than $10,000 in electricity on a monthly basis.

Dookhoo is, however, unmoved on his position. “The people who pay VAT are the middle class, because almost every other essential item is zero-rated, and the same middle class the minister is taxing,” Dookhoo argued.

However, he said Finance Minister Winston Jordan has done an “excellent job” in increasing the tax threshold to $60,000 from $55,000 per month, while reducing the Income Tax rate of payment to 28 per cent from a high of 30 per cent for persons earning $180, 000 or less per month. For those persons earning more than $180,000 per month, the income tax payable would be reduced to 1/3 of their salaries.

“These people pay their taxes diligently and they deserve to have a break, and so I believe that the minister has done a great job in reducing taxes for the employed people,” the PSC executive member said.

He noted that these measures would not only benefit a select few, but working Guyanese all across Guyana. “He didn’t take it right to where we asked, but he did consider the recommendation, and I want to give the Minister 10 out of 10 for that movement. What he has done is reward the working people of the country.”

LACK OF ENFORCEMENT
Though Dookhoo is also pleased with the increase in the VAT threshold from $10M to 15M, he believes that enforcement measures should be put in place to ensure that small-, medium- and large-scale businesses are registered.

“We in the Private Sector have said that the fact we have voluntary registration and no active means of adding new registrants to the list tends to distort the marketplace, the economic marketplace,” he said.

Dookhoo explained that while fast food outlets and restaurants are required to pay taxes, many of them, though selling more than $10M per year, still do not pay VAT.

“I think that we have to become active in terms of having VAT registration done. Tax collectors do not consider distortion in the market place and competition in the market place…I would like to see more done in terms of enforcement,” the PSC executive stated.

Government had found that a significant number of persons were unable to maintain proper records to meet the minimum threshold requirement for VAT registration. As such, the measure will allow the Guyana Revenue Authority to concentrate on the cohort that makes the bulk of VAT payments, since there will be a smaller tax base and consequently less VAT registrants to administer.

GREEN AGENDA
The Private Sector representative also endorsed the measures put forward to support the Government’s green agenda and for protection of the environment. Minister Jordan, in making his announcements, said 2017 will see tax exemptions on the importation of items for wind and solar energy investments. In addition, there will be a one-off tax holiday of two years for corporation tax for companies involved exclusively in such importation. There will also be tax exemptions for investment in, and construction of, water treatment and water recycling facilities, in addition to a one-off tax holiday of two years for corporation tax for companies involved exclusively in such importation.

Similar concessions will be offered to persons and businesses in the field of waste disposal. Additionally, there will be exemptions of customs duties and taxes on greenhouses and component parts for use in the agricultural sector.

“I think that is excellent. That is the first real incentive that the private sector has to invest in the green economy, and that is commendable,” Dookhoo said, while alluding to the concessions that will be granted to persons and businesses in the business of generating green energy.

ENVIRONMENTAL TAX
However, he expressed some concerns regarding the environmental tax. The Finance Minister had announced the imposition of an environmental levy of $10 per unit on the importers and local manufacturers of products using non-returnable metal, plastic or glass container to package any alcoholic or non-alcoholic beverage. The new environmental levy with penalties will be implemented by amending the Customs Act, Chapter 82:01 to include a section to impose this levy, and will apply across the board, Minister Jordan has explained.

He had noted that this would put Guyana in compliance with the provisions of Article 90 of the Revised Treat of Chaguaramas. But Dookhoo said that this imposition is not fair to the manufacturers. “Manufacturers have to pay for an Environmental Licence, the cost for that licence is US$50,000 per year. We then have to be certified by the EPA, we then have to confirm to a number of measures that are enforceable by the Environmental Protection Agency before they grant that licence, we have to buy equipment, we have to service equipment, all contributing to the economy; and that number at the end of the year is a huge number,” Dookhoo argued.

He said that, compared to importers, the local manufacturers are at a disadvantage, and this should not be.