FINANCE Minister, Winston Jordan unveiled a range of measures to help the private sector here during the presentation of the $300.7B 2019 budget in the National Assembly on Monday.

Gold and Diamond Miners Withholding Tax, Final Tax
Mr. Speaker, in Budget 2018, I announced a series of measures designed to simplify the tax regime applicable to the gold and diamond sector. Specifically, I indicated an intention to amend Section 33 (E) (1) of the Income Tax Act to allow for the tax to be assessed based on a sliding scale, and that such a tax would be a final tax on income from gold mining activities. Unfortunately, the law did not make this explicit.

I now propose to amend the law to treat as a final tax, the tax assessed on income derived from gold mining activities. It will also be made clear that this final tax relates only to declarations made to the Guyana Gold Board; that the income must be from individual gold mining and not from the sale of gold or the rental of blocks; that income from other sources are excluded from this tax treatment.

Gov’t slashes income, corporate taxes for small businesses
In Budget 2018, Jordan said that many small businesses do not make full use of the concessions available under the various Tax Acts, the Small Business Act and those offered through Investment Development Agreements (IDAs). Small businesses, as defined in the Small Business Act, are usually taxed at the respective individual and corporate tax rates.

In keeping with government‘s recognition of the role small businesses play in adding value and employment in the country, I propose to reduce the income and corporate tax rates to 25 per cent on taxable profits. To benefit from this reduction, the business must be registered with the Small Business Bureau, and be involved in either manufacturing or construction activities. We estimate that this measure will cost $120 million.
Non-Commercial companies

Jordan said that in 2017, the non-commercial or manufacturing rate was reduced from 30 per cent to 27.5 per cent. This enabled these businesses to improve their profit margins, thereby allowing for new investment and capitalisation. He said that following visits to several businesses, and in an effort to boost activities in the sector, he proposes to further reduce the manufacturing and non-commercial rate to 25 per cent, with effect from Year of Income January 1, 2019. This measure, which keeps a promise by Government to reduce the manufacturing rate to 25 per cent before the end of our first term, will cost $1.1 billion.

Property Tax – Individual and Companies
In an effort to restore equity and consistency in the tax regime between individuals and companies, and to further reduce the burden of Property Tax and Capital Gains Tax, I propose the following:

An increase in the threshold for filing a return for: individuals, from the current net property of $1.5 million to $40 million; and for companies, from $0.5 million to $40 million.
A reduction in the current rate for both individuals and companies, from 0.75 per cent to 0.5 per cent for the first $20 million in taxable net property, and the remainder being taxed at 0.75 percent.

By way of example, two persons A and B, have net property of $38 million and $105 million, respectively. Individual A will not be required to file a Property Tax return, since he is under the threshold of $40 million. However, Company B will have to file a return and pay Property Tax as follows: taxable net property: $105 million – $40 million = $65 million. Tax payable on first $20 million = $100,000. Tax payable on balance of $45 million = $337,500. Total taxes payable = $437,500. Under the new measure, Individual A saves $285,000 while Company B saves $346,250. The revenue loss from this measure is estimated to be $100 million.

Capital Gains Tax
Mr. Speaker, households who sell their homes and invest in newer dwellings are still subject to Capital Gains Tax. I propose to exempt from the payment of Capital Gains Tax the proceeds from the sale of a house which is reinvested in another home of equal or greater value, during the said year of assessment or within 60 days of the end of the year in which the property is sold. The revenue loss is estimated to be $200 million.

In addition, Mr. Speaker, in recognition of inflation through the years, I propose to increase the threshold for Capital Gains Tax arising from the disposal of property from $1,000 to $500,000. The revenue loss is expected to exceed $102 million.

Also, Mr. Speaker, in light of the wear and tear allowance given to buildings used for service and warehousing, and property tax valuations being updated to the 01/01/2011 market value, I propose the removal of the 25-year limitation. This means that Capital Gains Tax will be applicable on the gains accrued between the 2011 valuation or the date of acquisition, if later, and the selling price of the property when assets are disposed of, regardless of the date of acquisition. These three measures are contemplated to be revenue neutral, in view of the fact that the 2011 market value of assets are realistically closer to the current 2017 market value.

Wear and Tear Allowance for Service and Warehouse Buildings
Mr. Speaker, changes to the capital allowances‘structure have been a subject of discussions between the business community, accountants and the Ministry of Finance for some time now. It is argued that Guyana has neglected to recognise that buildings suffer from Wear and Tear, not only by housing machinery but also by warehousing and providing services. As such, I propose to amend Section 17 of the Income Tax Act to provide for an allowance for wear and tear on any building used for services and warehousing purposes.

The schedule provided in the Income Tax (Depreciation Rates) Regulations made under Section 117 would be amended to include buildings (used for services and warehousing purposes) and the rate proposed is two per cent on cost.

I also propose to amend Part II of the Income Tax in Aid of Industry Act, to allow for an initial allowance on buildings used for services and warehousing purposes. This means that not only manufacturing companies will benefit, but also hotels and any industry that produces value that is primarily intangible, such as customer service, management, advice, knowledge, design, data and experiences. This measure will cost over $400 million, annually. However, this will again increase after tax profits in the hands of the beneficiaries.

Export Allowance
Mr. Speaker, the law provides for the Export Allowance to be claimed by exporters of non-traditional products to markets outside of CARICOM. The rationale was to provide an incentive to boost exports to markets where receipts were in a tradeable currency, such as the US dollar, as distinct from CARICOM, where payments were settled in soft currency such as the Barbadian or Trinidad and Tobago dollar.

This situation has diminished substantially. Therefore, I propose to extend the export allowance to exporters of non-traditional products who are paid in a recognised tradable currency. The cost to the economy in tax dollars will be $300 million. However, this should be counter balanced by the increased exports of non-traditional products and increased hard currency receipts.

Exemption from Customs Duty, Excise Tax and VAT
Mr. Speaker, I propose to make the following amendments to the Customs Duty, Excise Tax Act and Value Added Tax Act:
Reduction of the Excise Tax charged on Shandy and other beverages containing less than one percent alcohol by volume, from $126 per litre to $65 per litre. The revenue foregone is $37 million.

Reduction in the Excise Tax charged on indigenous wines and other fermented beverages that are manufactured using 100 per cent local inputs, from $150 per litre to $65 per litre. The revenue loss is $128 million.
New regime for taxing tobacco consisting of a combination of ad valorem and specific taxes as follows: the imposition of a specific Excise Tax of $2,500 per 1,000 sticks, together with Customs Duty of 100 percent and VAT of 14 percent. In addition to reducing smuggling and simplifying administration, the new regime should result in a net increase in revenue of $50 million.

Exemption of pesticides used in the agriculture sector from Custom Duty and VAT. The revenue loss is $3.2 million.
Exemption of limestone used in the agriculture sector from Customs Duty. The revenue loss is $4.2 million.

Exemption from VAT, aircraft engines and main components/parts
Exemption from VAT, concrete blocks used for housing and construction. This follows the exemption from VAT on complete housing units up to $6.5 million, which formed part of the measures in Budget 2018. Together, these measures will propel the housing drive, as Government seeks to make available decent and affordable homes to the population.
Exemption from VAT, equipment and chemicals for water treatment and production plants
Exemption from VAT, orthopedic appliances and artificial parts of the body. (All items contained in the First Schedule to the Customs Act under Tariff Heading No. 90.21, being orthopedic appliances, including crutches, surgical belts and trusses; splints and other fracture appliances, artificial parts of the body; hearing aids and other appliances which are worn or carried or implanted in the body, to compensate for a defect or disability), and artificial teeth and others.

Exemption from VAT, Educational Robot Kits, in order to boost the ?Reading & Robotics? programme targeted to children in communities all across Guyana; to encourage more young people to become avid readers; and to develop necessary soft skills like communication, collaboration and conflict resolution.
Exemption from VAT, boats used in rural and riverain areas designed for the transport of goods and persons not exceeding 7.08 cubic metres (250 cubic feet). The Import Duty of five per cent will also be waived.