The Private Sector Commission (PSC) on Monday expressed extreme dissatisfaction over the announced intention of Government to disallow exporters the right to re-claim the Value Added Tax (VAT) on inputs used to produce goods and services to be exported from Guyana- a refund claim which has been in effect since 2007 when VAT was initially introduced.
According to the PSC in a statement, which canvassed support from, Guyana Manufacturers and Services Association (GMSA), Georgetown Chamber of Commerce and Industry Limited (GCCI) ,Guyana Rice Exporters and Millers Association (GREMA) and the Guyana Forest Products Association (FPA), this specific decision made by Government and the Guyana Revenue Authority (GRA) is “ill-advised and counterproductive to the interests of the businesses [they] represent and to the economy of our country.”
They stated that based on the Finance Minister’s [Winston Jordan] response to concerns raised by the President of the Guyana Rice Exporters and Millers Association, it appears as though he has been misled on the chronology of amendments he made to the VAT Act since 2017 and on the specific provisions of the Act.
“…Finance Minister, Mr. Winston Jordan advised that the export of rice is an exempt item, that exempted goods and services are not considered taxable goods and services, and that the provisions of the Value-Added Tax Act which provide for the zero-rating of exports do not apply. In justifying the position, the Minister volunteered that he had consulted with the Commissioner General of the Guyana Revenue Authority,” the statement said, while noting that even if he was misled, “the Minister must be held responsible for the amendments which he piloted in the National Assembly.”
The PSC contends that the GRA is conflating two amendments-neither of which supports the interpretation and advice offered by the GRA to the Minister.
“Most significantly, in the process, the GRA is causing the Minister to reverse an undertaking given to the National Assembly in January 2018 that ‘None of these proposed amendments will negatively affect any individual or business’” said the collective statement.
In their explanation, the PSC recounted that the first amendment, which became effective on 1 February 2017, resulted in a significant shift of items from the zero-rated list to the exempt list.
However, exports remained on the list of zero-rated items.
The second amendment, which became effective on 24 January 2018, resulted in a deletion of guidance from the VAT Act on how to treat with an item appearing in both lists.
In that case as well, no changes were made to the zero-rated list in respect to exports.
However, according to the statement, Jordan and the GRA are now advising that exports of goods and services listed in the Exempt Schedule are not zero-rated even if they are listed in the Zero-Rated Schedule.
“The consequence of denying VAT refunds is that the exporter must either absorb the VAT, which can make their operations loss making, or seek to recover these losses by increasing prices for their exports of the goods and services, making them uncompetitive…. We therefore consider that should the Government proceed with this policy, the country, the economy, the exporters and consumers will suffer” said the PSC.
Opposition Leader, Dr Bharrat Jagdeo had on Thursday last disclosed that local Guyanese exporters are next in line to be taxed by the current Government, as serious consideration is being given to have the zero rating of exports for VAT purposes removed.
According to him, this move is a misguided approach to collect more taxes.
“Almost every country in the world where VAT is in place, they have a zero rating of the exports. So, it allows the producers to claim back their input VAT on their imports, so they can be internationally competitive. In our case, this will change,” Jagdeo told a media conference.
Further, Jagdeo asserted that this decision could destroy the entire local export sector, where goods are going to become internationally uncompetitive, factories will have to close, and more people could lose their jobs.
However, in a statement issued a day later by the Finance Ministry, Jordan denied this claim.
“The ministry categorically denies this allegation and makes pellucid that the export of taxable items remains zero-rated… Please be assured that such a proposal with far-reaching consequences would not be introduced without proper consultation and analysis of the impact on the manufacturing sector, and the export and local economy,” his statement said.
According to the PSC issued statement however, “at a time when the Government should be encouraging the export of products to earn foreign exchange and to avert the Dutch Disease and a “one-horse economy”, the measure will negatively affect the following products, among others:
Raw brown, white and parboiled rice; paddy; raw brown sugar; vegetable, corn or coconut cooking oil; fresh fruits and vegetables; plywood, logs and construction lumber; raw gold or diamonds; sanitary napkins; bleach, soap powder and soap; ice used in the fishing industry; uncooked fresh, chilled or frozen chicken; fresh, chilled or frozen pork, beef, shrimp, prawns and mutton; fresh, chilled or frozen fish, salted fish; raw gold or diamonds.
Moreover, the statement outlined that the “policy will also affect collection from Income Tax and Corporation Tax since the absorption of the input tax will reduce taxable profits and therefore tax revenues. More fundamentally however, it is already affecting the international competitiveness of the country’s exports and hurting a slowing economy.”
