– GRA says PSC, other groups do not understand the VAT Act

COMMISSIONER General of the Guyana Revenue Authority (GRA) Godfrey Statia, has refuted claims of VAT on exports even as he called on local companies to produce evidence of them being adversely affected by the amendments made to the Value-Added Tax (VAT) Act.

Statia’s comments came in the wake of a statement issued on Monday by the Private Sector Commission (PSC) expressing concerns about the amendments which came into effect in 2017. Statia, however, said that members of the PSC, in particular, the Guyana Rice Exporters and Millers Association, the Georgetown Chamber of Commerce and Industry Limited, the Guyana Forest Products Association and the Manufacturing and Services Association, do not understand the VAT Act.

“So all I am asking is if you are saying that you are adversely affected prove it to me. Show me the facts. We are yet to see any facts. No one has brought any facts to show that they are adversely affected. I would like to rest that there is no VAT on exports and I am asking the Chairman of the PSC …to show me the facts. He who asserts must prove,” declared Statia.

The Commissioner-General maintained that his entity has been in constant discussions with all of the stakeholders, and he pointed to a letter dated April 9 and penned to the Minister of Finance Winston Jordan by the Guyana Rice Exporters, seeking clarification on exports. Jordan in response advised the association to supply the GRA with the empirical data to support their claims of significant losses on costs, due to the changes from zero-rated status to exempt status by the 2017 amendments to the VAT Act, so that remedial action can be taken.

Statia said the request was made in light of the previous initiatives taken to exempt the raw materials and other items used in this industry to reduce the burden of VAT. The items that are exempt include the supply of paddy, fertilisers, ploughs, import of raw materials and packaging materials among others.
Additionally, he said the Investment Development Agreements (IDAs) allow for substantial waiver in duty and VAT on imported items for the rice industry. “Further, it should be noted that the VAT placed on electricity and water would rarely apply to the GREMA since they enjoy their own power generation and have their own water supply. This data is yet to be submitted to the GRA,” Statia noted.

The refunds of VAT, he said, were paid in cases of exempt supplies through the IDAs. “Currently, the GRA is encouraging the strict adherence to the provisions of the law and the IDAs by encouraging the industries to apply for the tax exemption prior to incurring costs. This in fact assists with adequate monitoring and ensures cash flow for businesses.”

FISHERS GET RELIEF
In the case of the fishing industry, Statia said after detailed submissions from the stakeholders and an analysis by the GRA, it was observed that the industry needed additional relief. As such equipment and spares for the industry were made exempt.
Meanwhile, in response to the contention that government has disallowed exporters the right to reclaim the VAT paid on inputs used to produce goods and services to be exported from Guyana, the GRA head said that from the implementation of VAT in 2007, only exempt goods exported from Guyana are unable to reclaim input VAT and not all exports as alluded to in the PSC release. He said that in the past the Government used zero-rated goods to lower the tax burden on low-income households by zero-rating essential goods. For items with no value-added or, that are the first in the chain, there is no difference to the consumer between exempting and zero-rating the items.

“Zero-rating breaks the VAT chain and invites revenue leakage and fraud (eg. Submissions of fake invoices showing VAT paid in order to claim fraudulent refunds, or charging VAT and not remitting VAT due). Exemptions also break the chain but they pose much less of a revenue risk since they do not generate excess credit positions and applications for refunds,” Statia explained.

He told reporters that in order to ensure that local manufacturers of exempt products that were previously zero-rated whether for export or local supply were not unduly affected; many of the products exempted were the first in the chain so they would not have attracted any value-added element. As a result, no significant input VAT is to be reclaimed via lumber and lumber products, poultry and fish.

Statia noted that GRA has been in discussions with the Aircraft Owners and while those discussions were had, the changes had fallen through the cracks. As a result, the Commissioner-General will be meeting with the Aircraft Owners today. “I do not understand where people are getting the impression that exports will be subjected to VAT. There is nothing in the VAT Act that says exports will be subjected to VAT,” he stated.
Turning his attention to the PSC claiming Minister Jordan would have misled manufacturers on the chronology of events and that the GRA was conflating two amendments, Statia said amendments to Section 17 and the repeal of Section 18(2) of the VAT Act were done to clarify the law since it was an example of circular reasoning and was the cause for much confusion.

“Further, Section 18(2) was never utilised by the GRA from the inception of the implementation of VAT in 2007; as such this would have no impact on the industry.” In response to elements of the CARTAC Review and Duke University Study reports on VAT relative to the zero rating of exports of goods and services, the Commissioner General said the amendments to the VAT Act are consistent with the recommendations expressed in the Duke University Study and the CARTAC Review and Assessment of VAT Administration in Guyana Report which was done in August 2016.

The GRA head stressed that government has considered the impact of measures introduced and made all efforts to minimise production costs, by ensuring that VAT is not charged or payable on items first in the chain of production and other major expenditure items.