Major business groups in the country yesterday voiced dissatisfaction over the decision by the Government to disallow exporters the right to reclaim the Value-Added Tax (VAT) paid on inputs used to produce goods and services to be exported from Guyana.
In statement, the Private Sector Commission of Guyana, the Guyana Manufacturing and Services Association, the Georgetown Chamber of Commerce and Industry Limited, the Guyana Rice Exporters and Millers Association and the Guyana Forest Products Association said that such refund claims were allowed since 2007 when the Value-Added Tax was introduced.
The business groups said that they considered the decision by the Government and the Guyana Revenue Authority (GRA) ill-advised and counterproductive to the interests of the businesses they represent and to the economy of our country.
The statement said that responding to concerns raised by the President of the Guyana Rice Exporters and Millers Association, that the action by the Government is affecting the competitiveness of the rice exporters, Finance Minister, Winston Jordan said that the export of rice is an exempt item, that exempted goods and services are not considered taxable goods and services, and that the aspects of the Value-Added Tax Act which provide for the zero-rating of exports do not apply. In justifying the position, the Minister said that he had consulted with the Commissioner General of the GRA. “We respectfully point out that it appears the Minister is misled on the chronology of amendments he has made to the Value-Added Tax Act since 2017 and on the specific provisions of the Act. Nevertheless, the Minister must be held responsible for the amendments which he piloted in the National Assembly.
“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.’
“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. Nevertheless, 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 Value-Added Tax Act on how to treat with an item appearing in both lists. No changes were made to the zero-rated list in respect of exports but the Minister and the GRA are 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 statement said.
It added that the consequence of denying VAT refunds is that the exporter must either absorb the VAT or seek to recover these losses by increasing prices for their exports of the goods and services, making them uncompetitive.
“Our members have asked us to remind policy makers that while the margin in the trade for their goods and services internationally are often small, it yet allows those exporters the opportunity to offer competitive prices on the domestic market. We therefore consider that should the Government proceed with this policy, the country, the economy, the exporters and consumers will suffer”, the statement said.
The statement said that a fundamental premise of VAT as operated in every country which has introduced it, including Guyana, was expressed in two major recent reports on the country’s Tax system – the Duke University (2014) and the Caribbean Regional Technical Assistance Centre (CARTAC) (2016). The Duke University Report, the statement said, noted that “The typical IMF recommendation for a VAT is to only zero rate exports of goods and services, including the related transportation services”, while CARTAC noted that “Ideally, the zero rate should be restricted to only exports.”
The statement said that at a time when the Government should be encouraging the export of products to earn foreign exchange and to avert the Dutch Disease, 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.
The groups said it is their sincere hope that the Minister will honour his stated intent and commitment made earlier this year that “None of these proposed amendments will negatively affect any individual or business.”