No VAT on air travel for hinterland residents

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…gov’t warns against price gouging

Hinterland residents are exempted from paying VAT on air travel, a top airline official has clarified amid concerns over the 14% tax that will be charged on air ticket locally from today.

This new tax measure has however caused operators to express concern over this implementation, saying that it will likely result in increased cost of traveling within the country by air.” The matter has also caused concern about the effects it will have on sectors that depend on domestic aviation. However, Air Services Limited (ASL) Executive and President of the National Air Transportation Association (NATA) Annette Arjoon-Martins told the Guyana Chronicle that, “the 14 percent VAT implementation while it will indeed have an impact on the sectors that depend on local aviation Hinterland residents were not subjected to the tax.”

She said however that the problem stems from identifying who are residents of the interior. Operators say they will not be able to identify Hinterland residents and thus exempt them from the tax. In another scenario, if a passenger is deemed unacceptable for the exemption, it is feared that that airline would have to bear the cost.

Wings Aviation Executive Roxanne Reece also expressed concern over the VAT implementation but noted that it is a cost that has to be charged to the passenger. “We will have to charge the VAT,” Reece noted. She recognised that the cost of traveling to the interior will increase, but given the requirement of the Guyana Revenue Authority (GRA), Reece said the company must abide.

Like Arjoon, she too touched on the businesses that would be affected with the new VAT implementation. Reece pointed out that certain aviation items that were previously zero rated are no longer so, and while taxes paid could have been reimbursed, she said the VAT too will now be charged to passengers. The tourism and mining sectors heavily depend on the aviation sector since many hinterland locations are difficult to be reached by land. When asked, some operators were unsure what would become of tickets purchased before the implementation of the VAT. If not paid by the passenger, it is likely that touring agencies or airlines would themselves have to pay the 14 percent.

As it relates to identifying hinterland residents, Arjoon-Martin said that NATA is very interested in positive engagements with the GRA and intends to write the agency about resident cards or documentation identifying those residing in the interior. Arjoon-Martin said that NATA is also expected to meet with Minister of Public Infrastructure, David Patterson in a matter of days and the VAT matter will be up for discussion.

Outside of the aviation arena, miners and tour operators have already expressed concerns over having to increasing their service costs. Colin Sparman of the Guyana Gold and Diamond Miners Association (GGDMA) told the Guyana Chronicle that interior operators such as shop owners will have to increase the cost of their items to accommodate the VAT.
Already he noted, items transported to the interior via plane are charged per pound, the VAT, he said will be an additional cost to be carried over to the consumer. The Aircraft Owners Association has also acknowledged the effects that the VAT could have on the aviation sector and those that depend on their services. Some operators say they are keeping an eye on the situation to ascertain what changes could be made to make the system more workable.

Meanwhile, Minister in the Ministry of Finance, Jaipaul Sharma, during a debate on a motion regarding the VAT on Monday cautioned that measures would have to be taken to ensure that businesses do not take advantage of consumers through price gouging.  “GRA may have to monitor and may have to sanction persons” who inflate prices for the protection of consumers, Minister Sharma said. “The poor people should not be fearful,” Sharma assured.

Finance Minister, Winston Jordan also explained that the new measures are aimed at making the VAT relevant. The Minister noted that the previous VAT regime netted excessive revenues in its initial implementation, reaching 30.4 per cent in 2008. The VAT regressed to 24.8 per cent thereafter. Jordan noted that while the new VAT measures were part of fulfilling a manifesto promises, the new measures also sought to strengthen the VAT system. The decline in the collection included policy measures which weakened the VAT regime, Minister Jordan said this had implications not only for tax payers but for the government.