….PSC says greater clarity needed on measures in budget

THE Private Sector Commission (PSC) while congratulating the government for the early presentation of the 2017 national budget, has dubbed the $250B budget as “complicated.”
Chairman of the PSC, Edward Boyer, told reporters at a press conference on Thursday that budgets are designed to raise revenue and ensure that the populace and citizens are better off, but next year’s budget is far from simple. “We looked at this budget and …it is very difficult to analyse, it is not a simplified budget…it is not clear and precise ; we keep going back and wondering what is meant, and some of the areas are not clear,” he said, while stressing that the ordinary man cannot comprehend the budgetary measures.

“The introduction of tax and penalties in the budget left a bitter taste in the private sector,” Boyer said referencing “stiff penalties” and the “garnishing of persons and companies’ funds,” leaving ordinary citizens at the mercy of the Guyana Revenue Authority (GRA).
The PSC Chair said in assessing the 2017 budget, he had expected that the APNU+AFC coalition government would have arrested the downward trend of the economy. “I didn’t see that in the budget. We would have liked to see something done as it relates to sugar, some diversification in the economy, more investors’ confidence,” said Boyer, who was supported by Ramesh Persaud, Chairperson of the PSC’s Finance and Economic sub-committee.

Persaud said the PSC for the most part is seeking clarity on many of the budgetary measures and noted that the lack of clarity could be a result of the budget being prepared with a “level of haste.” He however made it clear that all is not negative in the budget. Notwithstanding the positive aspects, Persaud said, “In summary I would like to say the budget give and it take it away a lot. It took away more than it actually gave.”

The PSC’s Economic and Finance sub-Committee chairman said some of the proposed initiatives lend to hardship on citizens. In his presentation on Monday, Finance Minister Winston Jordan announced that there would be an increase in the current threshold of $660,000 per annum to $720,000 per annum or one-third of the employee’s salary.
He also proposed to introduce what he called “an element of progressiveness” in the tax system that would see a new rate of 40 per cent being applied to the incomes of individuals earning in excess of $2,160,000 per annum. Based on this proposed implementation, the PSC has called on Minister Jordan to explain the application of the measure. “Is it a tier system? It is progressive as explained? What are the implications for allowances and benefits in kind, produced to most of the executives across the country?” asked Persaud.

That aside, he praised the raising of the threshold though not high enough, noting that it is a step in the right direction. The PSC he said, was “heavily involved” in the Value Added Tax (VAT) process when it began a few years ago and is advising against the proposed changes by the Minister of Finance. He outlined the categories of VAT; Taxable and Non-taxable and sought to explain that non-taxable VAT refers to all goods and services that have been exempted from the tax system, while taxable supplies are zero rated and standard rated.
Standard rated currently stands at 16 per cent, but the minister has proposed a 2 per cent reduction. “Input VAT cannot be reclaimed from exempted supplies. If you were a provider of a totally zero rated product (education or health care) all of your input VAT you would have been able to reclaim from the government. If you were a mixed supplier, therefore you were supplying some items that were zero rated, standard rated, or exempt- those items would have been prorated — input VAT would not be able to be reclaimed.”

Using the National Milling Company (NAMILCO) as an example, he noted that all products used by that company are zero rated and as such, that company would not be able to claim almost $200M in VAT refund. “The other concerns we have in regard to the exempt list is that we have seen the disappearance from the list of things like education services, health care services that no longer exist as exempt or zero rated- mobile data were all zero rated. Right now it is not zero rated, not in exempt- therefore you have to pay VAT when you are on FB now,” said Persaud, who called on the government to reverse its policy on moving items away from the zero rated lists to exempt as it will contribute to inflation.

“…inflation means people would have to pay higher prices and it inhibits growth in the economy —it is amazing that the government’s policy is the promotion of ICT and technology and so forth and internet services will now take on VAT,” Persaud added. Briefly addressing the government’s proposition to have consumers pay the Guyana Power and Light Incorporated (GPL) a VAT of 14 per cent on electricity consumption in excess of $10,000 per month, the Sub-Committee’s chair said that the new system would be a “big blow to small businesses.”

Meanwhile, turning his attention to tax administration mechanisms, Persaud said it is unfathomable why as an administration it is believed that punitive measures would enhance the tax net and bring more people into conformity with the system. “I don’t see it being practical, sensible or wise for us to increase these,” he said, while noting that there is currently a penalty to maintain records and that penalty doesn’t only relate to corporations, but [to] every business owner. Failure to maintain records could see persons paying a fine of $200,000 or spending six months in prison.

Is this practical? I don’t understand it – we agree every business must maintain records but what about the micro businesses, small businesses? Vendors in the market? Are we going to force all of them to hire accountants?”
On the issue of the GRA being able to garnish funds from the accounts of delinquent persons, the PSC believes that the move contradicts with the principles of natural justice and ought to be corrected. Section 102 of the Income Tax Act Chapter 81:01 will be revised to provide authority to the GRA to garnish funds from bank accounts held by taxpayers who have outstanding tax arrears.

However, the PSC is of the opinion that such an amendment will empower the GRA to “do the work of the judiciary.”
“Right now the GRA has the right to garnish funds from your account, but through a court proceeding but the minister is proposing to remove the court from the aspect- This is dangerous if a court order is not being used. The minister needs to clarify why the GRA is dodging the court… if the court is slow don’t get a short- cut mechanism.”
Meanwhile, Persaud said the move by the government to impose a charge on Tax Payers Identification Number (TIN) certificate is ludicrous. “Why would you want to put a barrier to entry if somebody wants a tin? – You should freely give it to them so they could register on your net of doing things. Why pay $1000 for it? We could understand if you lose it and want to get back a copy,” he stated.

All in all, the PSC maintains that the 2017 budget has confirmed their expectation that the country’s economy was “sluggish,” while noting that the budget “did very little to help us.”
“A lot more could have been done and we do look forward to further consultations and clarification,” said Persaud, who reminded that all relevant data was not available to the PSC at the time of the press conference. Also present at the press conference were Secretary of the PSC Ramesh Dookhoo, GTT’s CEO Justin Nedd, Desmond Sears, Chairman of the Guyana National Shipping Corporation, Fitzroy Mc Leod Finance Manager NAMILCO, GCCI Chairman, Vishnu Doerga and President of the Corriverton Chamber of Commerce, Hemchand Jaichand.