All flour has now been zero-rated under the Value-Added Tax (VAT) Act by Finance Minister Winston Jordan, who has also put in place tax exemptions for items imported for use by charities and non-governmental organisations.
In addition, to avoid running afoul of trade obligations, Jordan has revised the recently announced list of items due for zero-rating under the VAT Act to no longer limit its application exclusively to “locally-produced” goods.
Under the VAT Act, Jordan issued Value-Added Tax (Amendment of Schedule I) Order 2015, which was read in the National Assembly yesterday. The minister has the authority, subject to negative resolution of the National Assembly, to amend Schedules I and II of the VAT Act, which deal with zero-rated and exempt items, respectively.
Winston Jordan
Some flour types were previously zero-rated in 2008.
In announcing the zero-rating of all flour types as well as biscuits yesterday, Jordan told a post-Cabinet press briefing at the Ministry of the Presidency that it was in part due to representation that was made by the National Milling Company of Guyana (Namilco) after his budget presentation. “So people like me, who can’t take the regular white flour, the multi-grain and the eight-grain flour and the flour… durum and the roti mix and all of these, they are now going to be tax-free,” he said.
However, he also said it was a “compromise” in part to compensate for the decision to no longer include fruit juices among the list of items for zero-rating due to the potential “massive loss” of revenue.
In his budget speech on August 10th, Jordan had announced a planned amendment to the VAT Act to zero rate “locally-produced” fruit juice, “locally-made” chowmein, “locally-produced” Chinese sauce, “locally-made” uncooked pasta, yogurt, cereals, fresh carrots, milo and ovaltine, nestum, vinegar, mustard and mayonnaise, ketchup, chicken sausages in packets, baking powder, liquid detergent, household cleaning agents, rolls of paper towels, liquid detergent, household cleaning agent, and computer printers for non-commercial use.
Jordan had said that the estimated loss of revenue was pegged at $680 million.
But yesterday he said government had been forced to adjust the announced zero-rating of the “locally-produced” items, since it “discriminates” between imports and locally produced products.
Under the World Trade Organisation (WTO) rules and the Revised Treaty of Chaguaramas, the government cannot discriminate, he said, while noting that the current administration has been forced to pay close to $1.3B for discriminating under the environmental tax. He was referring to the settlement the administration reached with Surinamese beverage company RUDISA International NV, which was awarded damages over Guyana’s imposition of the tax on beverages imported from the company.
Under advice, Jordan said, no reference is made in the new order to “local” items.
While chowmein, Chinese sauce and uncooked pasta remain among the items listed for zero-rating, Jordan said the decision was taken not to zero rate juices, given the huge amount of juices that are imported, in comparison to what is produced locally.
“Now, since we can’t use the word locally and it will discriminate, we decided not to go with the juices because, compared to what is produced locally, a huge amount of juices in this country are imported. And therefore, not only would we be mad to do that, ’cause it will saturate the market even further, killing the nascent domestic industry but we will be losing a hefty amount of revenue in the meanwhile,” he added.
In addition, Jordan announced that the order would also see exemptions on items, as approved by the Commissioner-General of the Guyana Revenue Authority (GRA) and excluding motor vehicles and All-Terrain Vehicles, imported or acquired for use by charitable organisations or non-governmental organisations or for free distribution to the poor or less fortunate.
He said the decision was taken after representation by several charitable organisations.
