A TEAM of experts from the International Monetary Fund (IMF) will shortly be visiting Guyana to explore ways of reducing the Value Added Tax (VAT), which currently stands at 16 per cent.The assessment to be done by the IMF team is geared at finding options to the current per cent of VAT paid by citizens, so that those very options could be rationalised before the 2017 budget.

Minister Winston Jordan said the IMF’s Caribbean Regional Technical Assistance Centre (CARTAC) in Barbados will conduct the assessment of the current tax structure and make recommendations for the way forward on VAT.

“They are going to send a one- or two-person mission to do a complete assessment of our VAT: where it is today, including options for changes into the system… So it is on the cards,” the minister told reporters on Monday.

The CARTAC website describes the entity as one of eight IMF regional technical assistance centres (RTACs) located around the world: in the Pacific, the Caribbean, in Africa, the Middle East, and in Central America.
These centres assist countries to strengthen human and institutional capacities to design and implement sound macroeconomic policies that promote growth and reduce poverty.

But even as the team of experts will be here in Guyana to do the assessment, the minister said, reductions in VAT, as promised by the APNU-AFC coalition leading up to the May 2015 elections, will not be a reality this year.
Minister Jordan said there is great need for consultation on the issue, and he noted that ad hoc changes to the current tax structure could become problematic.

“I don’t see it happening before the next budget…. It will be extremely difficult to just bring in a VAT reduction in the middle or the half of the year, when our budget anyhow is not based on that,” he said. Consideration would have to be given to several issues, including the importance of electricity and water services to the tax regime. VAT is not charged on those two services.

That aside, the Minister of Finance posited that the tax base would have to be expanded, so that Government can then recover revenue lost from the reduction in VAT.

“The rate of VAT will be eventually reduced…we are looking at it in a careful manner, so we don’t have to go back,” he promised.

The minister also said he wants the issue of reduction of VAT attract the “widest consultation” possible. He lauded the Tax Reform Committee for doing “good work”, but reminded reporters that even if Government were to reduce VAT before the next national budget, that move would be the subject of parliamentary debates.

“Even if we agree to a measure now, we still have to get it to Parliament,” Minister Jordan explained.

Asked about other recommendations made by the Tax Reform Committee in its report submitted in January, the Finance Minister said some of those recommendations were inserted into the 2016 budget, while the other recommendations “are engaging the attention of Cabinet”.

He said after Cabinet concludes its deliberations on the content of the report of the Committee, “we will throw it out to the public”.