–Cabinet likely to discuss report on public consultation

CABINET is likely to discuss today a report flowing from the public consultation on the tax on private education tuition fees based on assurances given by top officials of the administration last week Friday.

Several private schools and some students have been clamouring for government to reverse the 14% Value Added Tax (VAT) on private tuition fees and Dr Brian O’Toole, head of Nations University had told a consultation last Friday that the solution to the issue is “not to punish who pay tax,” but to go after those who are not compliant. He said that 12% of students pursuing the American Business Executive (ABE) programme at Nations have already dropped out of the programme in light of the increased fees, which were made following implementation of the VAT measure. Stacy French of Mae’s School called on the government to explain what factors were considered in a $2B figure, which the authorities noted private schools have attained from tuition.

At the consultation government had committed to review the tax on private tuition fees and a decision on the measure is likely to be made when Cabinet meets on today. This was announced on Friday when Prime Minister, Moses Nagamootoo, and other government officials, including Minister of Education, Dr Rupert Roopnaraine and Minister of Public Telecommunications, Cathy Hughes, met with officials of private schools at the National Culture Centre. Several private school students and their parents also attended the forum. Prime Minister Nagamootoo told the gathering that “it will be reviewed, as well as other taxes,” adding that “but whether it will be reviewed for 2017, I cannot say that definitively, but for 2018 it is a possibility.” His comments did not go down well with some in the audience, who were obviously hoping for a more definitive position on the withdrawal of the tax.

Meanwhile, writing in his column, ‘My Turn’ in the Sunday Chronicle this week, Nagamootoo reminded that in Guyana, both private and public tuition constitute the formal education system and complement, rather than rival, each other. The PM said it is clear that VAT on private tuition fees is unpopular. “It has caused, not only unease in the society, as Education Minister Dr Rupert Roopnaraine stated, but it has also burdened parents, who choose to send their children to privately owned schools and now have to pay more, as a result of the tax which took effect from January 1, 2017.

There have been protests over the VAT and Friday’s consultation between a ministerial team and operators, parents and students, probably allowed interested parties to articulate, as best as they could, their position on the tax,” the Prime Minister said.

He said before last Friday’s consultation, Cabinet, on at least three separate occasions, discussed a possible review of the measure. “Though there have been mixed views, no one has ever justified any measure that could constitute an oppression on parents,” the PM said.

He made clear that VAT was introduced in 2007 by the Bharrat Jagdeo Government, with wide application at the rate of 16%. He said whilst the minimum wage was frozen and increases were contained to an average 5% annually, there was justifiable agitation for reduction of VAT to bring down the cost of goods and services. But the Government held on to the 16%, and refused to compromise. It had argued that for every one percentage point that VAT was reduced, the Government would have lost $2.5 Billion in revenues.

The Prime Minister said that as part of the sweeping tax changes advised by a Tax Reform Committee, the income tax threshold was raised to $60,000, which removed several thousands of wage-earners from the tax net; and the rate of income-tax deduction was reduced to 28% for persons earning up to $100,000 and one-third for persons earning more than that. Besides, the minimum wage and old age pensions were increased, and public service wages went up by 38%.

“The State gave up some $10 Billion in revenues from the general package of tax relief and concessions, even though the current budget was in deficit to the tune of some $38 Billion. The way out was to increase borrowing, cut expenditures or widen the tax base, or all three.” He said to avoid cutting social sector spending, the Government introduced some new tax measures, among which was a 14% VAT on tuition fees charged by privately-owned schools. This tax was expected to bring in some $360 million, which is hardly enough to impact on spending, but was worth pursuing on the ground that most of the private schools were not paying taxes on their profits. That argument for VAT on private tuition fees has spawned big contention, but in the exchange of views, some revelations about private education operations have reached the public domain.”

Delinquents
The PM quoted Finance Minister, Winston Jordan, who had estimated that there are some 86 private schools operating in Guyana, many of them making huge revenues. Fees range from between $144,000 and $300,000 annually, which do not include extra lessons, uniforms, books, coaching fees, etc. The top eight among these private schools rake in fees estimated at over $2 Billion annually. ”It might be revealing, if the Guyana Revenue Authority (GRA) could indicate how many of these private schools pay taxes. In spite of the spirited agitation for withdrawal of the 14% tax, only about one-quarter of the private schools are registered for and are VAT-compliant, and prior to 2017, some of these entities were refunded some $150 million in VAT. It was expected that the refunds would have been ploughed back into the school system, and resulted in reduced tuition fees,” the Prime Minister reasoned.