Finance Minister Dr Ashni Singh on Friday told manufacturers that the government could not await perfection before implementing VAT and he reminded them that it was the private sector that had lobbied for the tax.

In the feature address to the Guyana Manufacturers' and Services Association (GMSA) Ltd awards dinner at Thirst Park, Singh touched on the growth rate, interest rates and the hotly-debated Value Added Tax (VAT), urging businesses to "hasten to prepare for it."

The invitation had noted that the feature address by Singh was of 'momentous magnitude' to the business community. In his presentation however, there was no declaration on how soon a food list that would not attract VAT would be produced, how stock in hand would be treated come January 1 and the cash flow implications if refunds were not given in a timely manner. In the latter regard, letter writers have complained about refunds owed to them by the Guyana Revenue Authority (GRA) and that VAT would have to be paid upon importation or at wholesale or retail outlets and then reclaimed. The private sector has welcomed VAT but wants urgent answers from the government on issues like stock on hand at December 31 and refunds.

In an almost hour-long speech Minister Singh ventured into the much debated "topic of the day", after admitting 30 minutes into his presentation that he could not complete his address without speaking on it.

Singh noted that the government appreciated the support given to it by various private sector institutions toward the implementation of VAT. He placed great emphasis on the earlier debates on VAT as presented by the private sector including the then Guyana Manufacturers' Association to reform the tax system through the introduction of VAT. It was noted that during VAT debates in Parliament as early as 1993, arguments for and against VAT were raised. Among those debating the topic was noted economist, Professor Clive Thomas, said Singh. The "arguments were very eloquent," posited the minister. The arguments against VAT at that time were also very eloquent and "it was felt that we were not very prepared to implement VAT and its implementation was not pursued," said the minister, adding that similar arguments for VAT rose again in 2000-2001.

The press also carried articles arguing the merits of VAT and reprimanded the government for not introducing VAT, he noted.

The question was, he said, "whether we will wait for perfection before we actually embark on implementation."

The minister posited that if "we wait for perfection we would be paralyzed into inaction", telling the businessmen that as entrepreneurs "you would share this view." Singh assured them that the government would continue to listen to the concerns of all and endeavour to address those concerns.

"The support of your business will be critical," he said, adding, "we have done a lot of work and we will be prepared sufficiently" to implement VAT come January 1. "I want to urge you to hasten to prepare for it.

"Change sometimes can be a very traumatic thing."

The minister noted that the government would monitor the implementation of VAT, taking into consideration the consequence to consumers and the macro-economy. The entrepreneurs were urged to advocate as they have done in the past for the implementation of VAT.

The GMSA was encouraged to work with its membership and the whole supply chain - wholesalers, retailers and consumers to educate them on VAT.

The finance minister said it was a good thing for Guyana and noted that the government anticipated being placed in a situation where it was better able to examine the tax system and to see how it can be better aligned. "But this is going to be a process," said the minister.

There were many positive stories, he noted. For example, he contended that one should look beyond the Gross Domestic Product (GDP) growth of 0.3% last year and examine the sectoral growth where there was expansion in the production and services sector. Another criticism which the minister said he has heard was that sustained levels of high growth were not there. "I will be the last to say that all is well," said Singh, adding again that a number of the sectors were doing well.

The Finance Minister, a former Guyana scholar, made the point that the people of Guyana were at one with the government's policy of achieving and distributing prosperity; high growth; exploiting natural resources sustainably; creating jobs and reducing poverty.

In relation to the cost of borrowing, the minister's explanation was that every firm which took a capital loan and redirected it to other uses or if the loan officer did a poor job leading to a bad debt, affected other persons seeking loans and caused the interest rate to rise. "Every bad loan affects the interest rate that you pay," said Singh. Small businesses needing finance have complained over the years that the interest rates at the commercial banks were too low and they often opt for the micro loan facilities or seek grants from foreign donors.

Calls for a development bank are also growing. In May at the Presidential Summit on Private Sector Development, Bank of Guyana Governor Lawrence Williams had told Stabroek News that the commercial banks were the dominant force in the lending sector and since 2000 have kept in excess of the mandatory 12% of their total liabilities as reserves with the Bank of Guyana which signals excess liquidity. He further indicated that the credit extended by the banks to the private sector at the end of 2005 was only 38% of the total deposits held by banks.

Awards

The coveted President's Award for Export Achievement went to Bulkan Timber Works for the company's sustained value-added business model which has resulted in significant export earnings using 100% local labour and raw material.