AHEAD of Budget 2018, the Georgetown Chamber of Commerce and Industry (GCCI) is imploring the government to remove the Value Added Tax (VAT) from finished products in the logging industry and from the inputs for rice operations, in addition to the reinstatement of the 10% Tributors Tax against the 20% imposed this year.

The GCCI is also calling on government to reduce the Corporate Income Tax by 10% from its current high of 35% through a process of gradualism. On Friday, GCCI released its 14-page submission to the Minister of Finance Winston Jordan on Budget 2018. The document was submitted to the Finance Ministry on September 20, 2017. In justifying its recommendations, the GCCI pointed out that the forestry sub-sector has been on the decline in 2017 with contraction totalling 18.2% during the first half of the year, following the 13.1% decline at the end of June, 2016.

“The forestry sector performance has been declining over the last few years; this can be ascribed to greater market conditions and sector review within Guyana,” the Chamber stated, while further pointing out that statistics indicate that the output of logs has declined, while roundwood and plywood declined by 1.3% and 52.2% respectively during the same period. Only sawn wood recorded a positive growth rate of 20.5%.
Based on the trends, GCCI lobbied government through the Finance Ministry for removal of VAT from finished products.

“We received many complaints that [the] 2017 budget measure to increase [the] tax burden on the stakeholder, we register that this has a negative impact on trade in the sub sector and we request the Ministry of Finance to review and remove VAT on these finished goods,” the GCCI stated in its submission.
A similar concession was recommended for the rice industry.

“Having witnessed a drastic decline by 26.2% in the first half of 2016, the rice sub-sector recovered in the first half of 2017 with a growth rate of 35.4%. This recovery was justified by higher acreage cultivated, higher yields per hectare and better disease management,” the chamber said as it gave an overview of the industry’s performance.

In doing so it also took note of the fact that rice farmers and millers during the early months of 2017 secured new rice markets in Cuba and Mexico. But while rice production is expected to increase significantly by the end of 2017, reaching 590, 000 tonnes, GCCI said production costs have increased to the disadvantage of farmers although the sector provides economic and social gains in Guyana.

“We are informed that cost of production increased and market prices for rice has[sic] not improved proportionately, causing reduction in profits in the venture at a small-scale level. We are informed that land rent increases, VAT on fertiliser, herbicide and pesticides caused great financial harm to farmers,” GCCI reported while calling on the Finance Ministry to remove VAT from the inputs to rice production. It also wants the rental fee for rice lands to be reduced.
Addressing the issue on a much wider scale, the GCCI said VAT has been a financial burden to many commercial entities.

“A revision and amendment to the Value Added Tax Act of 2005 to re-examine and shift the taxpoint for goods manufactured at the point of finished goods sold rather than at the point of importation of raw and packaging materials for those said goods. The effect of this law has been that government stretched its hands into private corporations and taxed them via VAT, causing significant strain on working capital. To address the working capital woes, bank financing at a cost of 10% to 12% is sought to continue operations,” GCCI stated.
As such, it is also calling for the removal of VAT on finished foods. “Currently fast food outlets are competing on uneven playing fields with other forms of food vending,” the chamber further noted.

The increase in Tributors Tax was also among concerns raised by the Georgetown Chamber. It was pointed out that gold output declined from 322 troy ounces at the end of June 2016 to 317 troy ounces at mid-year 2017. “This 1.7% contraction was justified due to adverse weather conditions and falling gold prices. It should be noted, however, that as at June 2017, Gold still accounts for 15% of Guyana’s GDP (GYD$21.340 Million,)” the chamber noted.

Based on the trends detailed, the Georgetown Chamber has recommended that the 10% Tributors Tax be re-instated as against the 20% that was imposed. “…knowing the nature of this business and the workers’ culture, it has created confusion in the small and medium-sized workforce,” GCCI posited.

Additionally, GCCI said that data illustrated by the National Tax Reform Committee Report of January 2016 shows that Guyana’s Corporate Income Tax Rates are uncompetitive. On this basis, the chamber has proposed a reduction of Corporate Income Tax by 10% through a process of gradualism.

“We are proposing a sliding -scale reduction of corporate income tax by 10% from its current high rate of 35% of income generated by a corporation. This sliding scale over six years can be as follows: 2017 – budget reduction resultant rate at a period end 27.5%; 2018 – 1.0% reduction resultant rate at period end 26.5%; 2019 – 1.0% reduction-resultant rate period end 25.5%; and 2020 o.5% reduction resultant rate at period end 25.0%,” GGCI detailed.

The Georgetown Chamber, in its submission, told the Finance Minister that it is cognisant that such recommendations if implemented would result in revenue loss and as such, it further proposed that in return the cost of goods produced and sold to the wider population be reduced and sold at more affordable prices. It is believed that such actions would reduce the cost of living and simultaneously control the inflation rate.