Government applied different standards to VAT on medical services from those on education services

Dear Editor,

Clearly unmoved by fifteen thousand signatories and the heartfelt arguments, pleas and entreaties of hundreds of parents and students at the Government-Parents-Adminis-trators VAT on Education consultation, Cabinet’s subsequent announcement of no review of VAT on education until 2018 has effectively killed any further meaningful discussion on this issue. In this my last contribution to the debate, I write only to show how the government has applied vastly different standards to VAT on medical services and education services, and more particularly private education services.

In his Budget 2017 Speech, the Finance Minister announced proposals to “expand the list of exempt items and [to] eliminate all zero-rated items, with the exception of those pertaining to exports and manufacturing inputs.” In neither list of exempt nor zero-rated items attached to the Budget Speech did education or health services appear, meaning that those items, both of which were previously zero-rated, would become taxable. The doctors at a meeting at the Ocean View Hotel protested and lo and behold, when the actual law was published, not only did health services mysteriously appear in the exempt list (Schedule II), but whole ranges of medical supplies appeared on the zero-rated list (Schedule I).

Maybe because the two issues were never linked, the request by parents, students and administrators for the removal of VAT from education services was met with the response from government that VAT on education would bring in $350 million which cannot be forgone. Well, well. I did a search of the four top private hospitals in Georgetown and found that two of them alone reported gross revenue in 2016 of $2.701 billion on which VAT would otherwise have been charged. By deciding to place VAT on medical services in the exempt list, the Ministry of Finance lost an immediate amount of $378 million in VAT forgone in respect of just two hospitals.

Note that this does not include the other private hospitals, private medical services, or the medical supplies later added to the original zero-rated list. Even if these were to account for only another $1 billion in gross revenue, the VAT forgone would be another $140 million.

The combined total of VAT forgone in respect of medical services and supplies is therefore an estimated $518 million, or $168 million more than the estimated $350 million on education services.

Of course, to ask how that sum is being recovered makes one the enemy of the government and a friend of the opposition. And in a most bizarre and reverse case of good governance, the government demands of the parents and public that they tell them where the $350 million will come from.

And when not one, but several specific recommendations were made to the government, its response was tone deaf.

Meanwhile, on the issue of VAT on education versus VAT on private education, the government is still to come up with an answer to the reading of the VAT Act that VAT applies to all education, including the fees charged by the University of Guyana. Anything else would be a clear case of discrimination.

All Guyanese know only too well that at some point, the chickens do come home to roost. And they may ponder on President Johnson’s biographer Robert Caro’s sobering response to Lord Acton’s famous aphorism that “power corrupts and absolute power corrupts absolutely.” According to Caro, “Power doesn’t always corrupt. Power can cleanse. What I believe is always true about power is that power always reveals.”

Sadly in the case of Guyana, both Lord Acton and Robert Caro may be correct.

Yours faithfully,

Christopher Ram

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