VAT Amendment Bill passed
By Chamanlall Naipaul
Guyana Chronicle
January 24, 2007
THE Value Added Tax (VAT) (Amendment) Bill was yesterday approved in the National Assembly, paving the way for an additional number of items to be zero-rated or become exempt from taxation.
But passage came after contentious exchanges between the government and the opposition, with the latter chiding the former for not heeding advice in relation to the implementation of VAT, and charging that this resulted in confusion, and increased prices for goods and services.
The bill sought to amend the VAT Act to provide for the Minister to amend Schedules I and II, by an order subject to negative resolution against the backdrop of consumers facing increased prices since the implementation of VAT on January 1 last.
Proposed amendments to the bill by the People’s National Congress Reform-One Guyana (PNCR-1G) were rejected and when the vote was taken the government majority prevailed.
Minister of Finance within the Ministry of Finance, Ms. Jennifer Webster, who piloted the second reading of the bill, said the government has been closely monitoring the impact of VAT on consumers and has found that indeed consumers have been faced with increased prices which have been causing “hysteria.”
Consequently, she said, in an effort to normalise the situation and reduce prices, the government has sought to introduce the bill to amend the VAT Act, explaining that introducing new legislation will be a long drawn out process in a situation which needs to be addressed expediently.
However, Webster pointed out that in no country where VAT has been implemented, has there been an absence of glitches in the transition period and the government is prepared to continuously make adjustments as the need arises to ensure that the system operates smoothly and does not impact negatively on consumers.
The minister noted that the costs of hinterland travel and certain food items have been among those which have gone up since the implementation of VAT, and the proposed legislation aims at regularising this trend.
She observed also that some businesses have been complying with VAT, passing on its benefits to consumers and commended them, but lamented that others have been exploiting the situation,
But opposition members, including the Leader of the Opposition and PNCR, Mr. Robert Corbin, Mr. Winston Murray of the PNCR-1G, and Co-Leader of the Alliance for Change (AFC), Mr. Khemraj Ramjattan, chastised and blamed the government for the current problems the new taxation system is causing.
Corbin, in a scathing attack on the government, accused it of “arrogance and irresponsibility”, asserting that his party had warned of the consequences of hastily implementing VAT without properly creating the pre-conditions.
He also accused the government of grandstanding on the issue because on one hand it wanted to pass the legislation through all its stages last Friday in order to bring down prices, but up to now parliamentarians and the public do not know what additional items the government intends to zero rate.
Corbin charged that the government has been heading in the direction of moving power from Parliament to the executive, contending that the bill is seeking to give the minister the right to make adjustments, asserting that subsidiary legislation cannot be a replacement for substantive laws.
In the face of the present scenario, the Opposition Leader called on the government to reduce the range of zero rated food items, but also on a basket of goods which poor people use such as beef, chicken, toothpaste, school clothes and parboiled rice. He said it should also reduce the VAT rate of 16%.
He said his party supports VAT in principle but lamented that “you could have the right tool but if you do not know to use it you could make a mess.”
Against the background of a 5% increase of salaries in the public sector, Corbin contended that because the government has been responsible for the cost of living increasing, it should use funds from the Guyana Lottery to make an interim payout of one month’s salary to public servants to cushion the effects of price increases. He said his party will fully support such a move.
He called on the government too to reduce the income tax threshold for workers seeing that VAT will be capturing a wider net of tax payers and exhorted that the Guyana Revenue Authority (GRA) should establish a consumer complaint centre.
Murray indicated that his party is prepared to support the legislation and grant the minister the expediency being sought under the condition that the number of items under Schedules I and II of the VAT Act will be expanded.
However, he argued that the legislation in its present form could also allow for the minister to reduce the number of items and as such proposed amendments to that effect.
However, he commended Finance Minister Dr. Ashni Singh for consulting and giving prior notice of the intention of the government to introduce the legislation.
Ramjattan accused the government of hastily implementing VAT, claiming that the business community and consumers were ill-prepared for its introduction. He called the present situation one of “crisis and catastrophe.”
In a sense, Ramjattan claimed, the government “tricked” people because it did not educate them on the 126 items which prior to VAT attracted a consumption tax of zero to five per cent but now attracts a 16%, thus bringing significant increases in prices. He said these items are used mostly by the working class.
He also claimed that the government is moving in a direction of eroding the powers of Parliament with an increasing tendency to transfer greater powers to the executive, as in the case of the present legislation.
Minister of Health, Dr. Leslie Ramsammy insisted that there is common ground on VAT but conceded that no one thought that the implementation of VAT would be a “seamless one”.
As such, he said, the government from the outset indicated that it will continuously monitor the situation and make adjustments accordingly.
He also agreed that public awareness and education with respect to VAT should be intensified.
Education Minister, Mr. Shaik Baksh, said that because of the caring nature of the government, it is seeking to bring relief to people through the proposed bill and its response over the past three weeks has been reflective of this.
He noted that members of the government have not been “sitting in their offices” but instead have been moving around to get a feel of the “pulse” of communities.
Minister of Labour, Mr. Manzoor Nadir also assured that the government continues to monitor the implementation of VAT and its regulations to determine and address its grey areas by making the necessary adjustments.
He indicated too the intention of the government to carry out a comprehensive review of the impact of the implementation of VAT after a six-moth period has elapsed.