The time has arrived for the authorities, in conjunction with the private sector, to review the performance of the Value Added Tax (VAT) system. Many years ago, when VAT was first proposed to replace the punitive consumption tax regime, the opposition to implementing VAT came not from the private sector but from the government of the day. The argument was that Guyana was not sophisticated enough to manage such a tax. Many people at the time suspected that the Government did not have the willpower to make the necessary change. The present administration did have the willpower to make the change after consultation with the various private sector bodies and other social institutions. Mr. Editor, in the late 1980’s, the GMA and GCCI (Guyana Manufacturers’ Association, now GMSA and the Georgetown Chamber of Commerce and Industry) were at the forefront for the change to VAT. These organizations had prepared a three-tier VAT system with certain essential items being zero rated. We need now to consider seriously such a proposal. If my memory serves me well, I believe that the GMA had proposed rates of 20%; 12% and 6%. The twenty percent rate would be applied to goods considered to be of conspicuous consumption in nature such as jewellery, automobiles above a certain price and engine size, alcoholic beverages etc. The twelve percent regime would be applied to goods of a durable nature such as TV’s; refrigerators, furniture, etc. The six percent rate would be put on goods that people use every day or in the short term. The fact is that the present tax of sixteen percent has yielded much more revenue than has been budgeted for since its implementation. I am absolutely certain that with more vigilance and careful attention, the GRA could collect more than it now collects. The full force of the law should be applied to those who evade the tax. The population as a whole, should not be allowed to suffer because a few unscrupulous persons wish to enrich themselves. The present rate of sixteen percent, while not as punitive as the consumption tax of years gone by, has yielded a lot of extra revenue for the government. This money can be used to reduce the internal debt of the country or for infrastructure works.
However, there is another side that needs to be considered. Revenue collected above that which has been budgeted for, can be considered as reducing the disposable income of the wage earner. The proposition is that if this extra income is left with the wage earner, he/she would spend it and therefore the economy will grow. It will also reduce the attempts to ask for increases in wages and salaries. The government does not lose this extra revenue but still gains from the sale of more goods and services. Only then can you consider VAT to be revenue neutral. Mr. Editor, I close by saying it is time for all interested parties to review VAT. I cannot help but remember a speech given by the late President, Dr. C. Jagan, in which he said that when the worker took care of all of his expenses, he would still have enough left to buy sweets for his children. He/she would think twice before buying sweets and cakes or an ice cream carrying a sixteen percent VAT. It is time for a review.
Yours faithfully,
Alston A. Kissoon
