THE introduction of 16 per cent Value Added Tax (VAT) in 2007 by then President Bharrat Jagdeo was described as “legal larceny,” after it was revealed in the National Assembly on Thursday evening that 12 per cent was the amount intended to be introduced. 

This disclosure was made by Public Security Minister Khemraj Ramjattan, amid heckling from the Opposition People’s Progressive Party (PPP).

Examining the issue of tax reform during his presentation on Budget 2017, the minister said that tax avoidance and evasion have been around since authorities began levying taxes.

“It is not a Guyanese phenomenon and this requires rectification,” he said, adding that this justifies the Finance Minister’s attempt at restoration of fiscal autonomy and his call for corporations to pay their due.

The august House was then reminded of the PPP-sponsored VAT Bill, which was intended to attract a rate which was never stated. Additionally, it was intended for VAT to be applicable to all goods and services as was stated at that time by then Minister of Commerce, Trade and Industries Mansoor Nadir.

“VAT was supposed to be one rate for all good and services that it is applicable to. What happened then was that the bill never stated a rate. He [Jagdeo] never wanted to put a rate on that VAT bill,” Ramjattan said.

He reasoned that VAT, which at that time had replaced eight existing taxes, was intended to bring in $16B annually in revenue.

As such, Minister Ramjattan deduced that the rate was therefore fixed at 12 per cent. Subsequently, he said, Jagdeo indicated that the rate would be “revenue neutral.”

With impending General Elections in 2006, the minister said the PPP opted to hold off on the implementation of VAT. However, in 2007, having won the elections, the PPP implemented the tax, but, interestingly, at a rate of 16 per cent.

“The very next year he [Jagdeo] implemented VAT and put a rate of 16 per cent, which was four per cent more than what was expected to bring in the revenue,” he said, adding that this was legal larceny.

“There are people now who are saying that what we [Government] are doing is legal larceny. But that was legal larceny; putting a rate of 16 per cent, when it was supposed to be 12.”

And with the Government reducing VAT to 14 per cent in the 2017 budget, the minister said that what the executive is doing is showing the people that it has the strength and courage to start the process of reducing VAT to 12 per cent as it had promised during the 2015 elections campaign.

However, he explained that in Government’s efforts to reduce the amount citizens are paying on VAT, there will be a need for them to expand the base of zero-rated items to cushion the shortfall in revenue.

“In our attempt to reduce it [VAT] to 14 per cent next year and probably 12 per cent the following year, we have to widen the tax base of goods and services. We do not want to reduce VAT and stop our spending on infrastructure and services in the country,” he said to the House, causing an uproar.