“If it is truly the case that VAT is a revenue neutral tax, then postponement of its application for, say, a year will not affect revenue negatively,” the PNCR-IG posited.

It said the other point that may be worthy of consideration is whether there should not be initial application of VAT on a narrow range of goods and services, with an expansion of the range over time as the kinks in administration and application are sorted out.

The party at a news conference yesterday pledged support in principle for VAT on the grounds of equity in tax burden among producers, but argued that it could be less than 16% if revenue neutrality is truly the objective.

VAT, together with a set of excise taxes, is due to come on stream January 1, 2007 and will replace some nine existing taxes.

“It is a more broadly-based tax on the production of goods and services and thus, in principle, acceptable to the PNCR-1G on the grounds of equity in tax burden among producers,” the party said.

With regards to the operational date for VAT, the party said that from all appearances it seems that many matters are not quite clear to either consumers or producers.

In addition, the party said, there is doubt as to whether there are enough trained officers with the requisite knowledge of the tax itself and of its administration.

The outlying offices of the Guyana Revenue Authority (GRA), it is suggested, does not have enough, if any, officers who can deal with queries.

“Is it possible that the administration of other taxes will suffer while personnel and financial resources are diverted to deal with VAT?”, the party questioned.

It is also calling on the government to honour the undertaking given by its representatives in the Select Committee that the food items which were not subject to consumption tax now would be zero rated under the VAT regime.

The PNCR-1G said the GRA needs to inform consumers as to whether there is, or will be, a mechanism through which they could seek redress if they believe they may be overcharged.

The party also noted that private sector businesses are concerned that they may be in possession of stocks at December 31, 2006 on which they would have paid current taxes.

From the time of the introduction of the VAT bill in the National Assembly during the 8th Parliament, the PNCR-1G said it has consistently raised several concerns, almost all of which remain unaddressed.

One, it said, is that VAT is not revenue neutral as presently arranged.

The party contended that from the inception, the government advertised and sold VAT to the public as a revenue neutral tax but that the consultants who did an estimation of the impact of a value added tax pointed out that “from all our simulations the net yield of the VAT and excise taxes exceeded the yield of the taxes to be replaced.”

Noting that only rates of 15% and 16% were used, the PNCR-1G said the consultants also pointed out that official Gross Domestic Product (GDP) data is underestimated “and it therefore does not reflect the level of economic activity in Guyana, particularly in the wholesale and retail sector... we therefore believe that conclusions based on the use of such data for the analysis of the impact of VAT and associated excises are likely to be inaccurate and misleading.”

Notwithstanding this, the PNCR-1G said the government, in applying a VAT rate of 16% completely ignored that official GDP is underestimated by at least 40%, thus the yield of the VAT plus excise taxes is heavily underestimated based on the use of official GDP estimates.

“The PNCR-1G therefore believes that VAT could be less than 16% if revenue neutrality is truly the objective.”

Another issue of concern raised by the party is that essential food items will cost more if these are not ‘zero rated’.

“During the Select Committee examination of the bill, the PNCR pointed out that the scenario chosen by the government, and indeed the bill that was before the Parliament, did not zero rate certain essential food items such as onions, garlic and split peas,” the party said.

“The law that is on our statute books at present does not zero rate these items; nor does the law zero rate certain educational materials and textbooks,” it charged.

The party claimed that when questioned on these matters, the Minister of Finance would only say that the government would make an announcement shortly.

“There are now less than two months before the Act comes into operation. If the government does not zero rate the consumer goods and educational materials that currently pay no consumption tax, then it is indisputable that the prices of these commodities to consumers would increase by at least 16%,” the PNCR-1G contended.

The opposition party also called on the government to honour the undertaking given by its representatives in the Select Committee that the food items which were not subject to consumption tax now would be zero rated under the VAT regime.

“We also call upon the government to zero rate those educational materials which currently do not pay consumption taxes (since) to fail to do so would, in the case of food items, be breaching an undertaking and, in the case of educational items, be an act of callous disregard for the children of the poor,” the PNCR-1G argued.

It contended that what consumers need to know is exactly how the tax is to be applied, what items will be zero rated, how they could recognise and calculate exactly what amount of VAT is payable on a given item and whether this tax would be explicitly shown for any item purchased. “There is certainly no provision in the law as it stands requiring this,” the party declared while adding that GRA needs to inform consumers as to whether there is, or will be, a mechanism through which they could seek redress if they believe they may be overcharged.

With regards to treatment of stocks on hand at December 31, the PNCR-1G said this is a matter that needs to be clarified with certainty, expeditiously.

Private sector businesses are concerned that they may be in possession of stocks at December 31, 2006 on which they would have paid current taxes. Then come January 1, 2007 these stocks could be subject to VAT.

“It is difficult to understand why a decision could not be forthcoming on this issue,” the PNCR-1G charged.

It said one possible solution could be for the GRA to grant a tax credit equivalent to the current taxes paid.