Finance Minister granted powers over VAT regime
-- Corbin calls for one-month payout to cushion price hike
Kaieteur News
January 24, 2007
Parliament, yesterday, passed an amendment to the Value-Added Tax (VAT) and Excise Act, giving the Finance Minister sweeping powers to determine items that should be zero rated or exempt under the new VAT regime, without first having to seek the approval of the National Assembly.
Prime Minister Samuel Hinds succeeded in moving a motion to suspend the Standing Orders to allow the Bill to be taken through all the stages yesterday.
Since the Bill was tabled, Friday last, Government, without the Prime Minister's motion, would have waited seven days before debating the Bill, as stipulated by Standing Orders 28(1) and 54 (1)(a).
Opposition Leader Robert Corbin roundly criticised the Bill. He asserted that the legislation gave the Minister too much power, especially since no mention was made of the additional items that were expected to be either zero-rated or exempt from VAT.
Instead, he stated, his party, the People's National Congress-Reform-One Guyana (PNCR-1G), would support an initiative to pay public servants a one-month pay out to cushion the hike in prices occasioned since the introduction of the new Tax regime, from January 1.
Minister within the Ministry of Finance, Jennifer Webster, who piloted the Bill in the absence of Finance Minister Dr Ashni Singh, noted that the legislation is part of Government's commitment to monitor the impact of VAT on the cost of living.
She posited that the Bill was a simple one which seeks to give the Finance Minister the power to make timely interventions to appease concerns over the new Tax without going through lengthy debates in the National Assembly.
The Minister pointed out that the scrutiny of Parliament has not been removed since, under the Constitution, a member could effect changes to an Order made by the Finance Minister, through the negative resolution of the House.
Under the previous legislation, the Finance Minister first had to take a proposed amendment relating to the list of zero rated and exempt items to the National Assembly for its approval.
“We are simply doing what we told the people we would do to ensure that the cost of living remains stable,” Minister Webster stated.
However, PNCR-1G frontbencher Winston Murray, who was the first member of the Opposition to take the floor following Webster's opening statement, warned of the implications of passing power to the Finance Minister.
He stated that the government had reneged on its commitment to bring before the House the specific items that would be zero rated or exempt to bring down prices.
Murray warned that the Finance Minister was now vested with the power to reduce the list of items listed as zero rated and exempt under the Act, without first coming to the Parliament.
Under the amendment Bill, Section 98 of the principal Act is being repealed and replaced to allow the Minister, by order, subject to negative resolution of the National Assembly, to amend Schedules 1 and 11 of the Act.
The amendment Bill also states that the Minister may, by order, subject to affirmative resolution of the National Assembly, increase or decrease any monetary amount set out in the Act, and amend Schedules III, 1V and V of the Act.
Schedule I of the Act lists zero rated supplies, and Schedule II lists exempt supplies.
However, Schedule III covers tax invoice, tax credit notes, and tax debit notes, while Schedule IV covers the registration threshold, interest rates and calculated amounts.
The last of them, Schedule V, deals with the repeal of laws under Section 99.
Murray proposed two amendments to the Bill.
One amendment sought to confine the Minister of Finance to only expand the list of supplies to be zero rated and exempt by an Order without first having Parliamentary approval, and the other related to having the Finance Minister amend Schedules I and II for any purpose set out in Section 2 (1) of the Bill.
Murray stated that the party was in favour of any initiative that would bring relief to consumers, and was against the amendment to the VAT Act, since it gave the Finance Minister a garb launch.
“Why has the government not brought to this Parliament the list of those items that they intend to make zero rated or exempt? The Finance Minister, when he spoke with me, said that he would bring the items. Where are the items?”
Corbin accused the government of lacking foresight in that it was responding to a situation.
He repeated calls for the VAT rate of 16 per cent to be reduced, and urged government to focus attention on the basket of goods for the low to middle income earners.
Corbin also said that he could not support the passage of the amended Bill.
He urged that the government address, as a matter of urgency, the salaries of public servants, since there is no indication of when the price will stabilise.
“The PNCR-1G will support you if you decide to pay public servants a one-month payout for January to offset the effects of VAT…and if, by next month, the cost of living is still high, then we will support another one-month payout…We call this a cost of living allowance,” Corbin stated.
Minister of Labour, Manzoor Nadir, stood to support the amendment, and hinted that government had noted the increase in prices, especially in the area of interior travel.
He noted that it was worrisome to observe the hike in fares that commuters are now paying and the increased fares along the Georgetown/Lethem road.
He said that the powers being given to the Finance Minister were in keeping with a promise made by Government that comprehensive review of the system would be done in six months.
Nadir alluded that the study could be done earlier, and noted that it will bring anything on board.
He said that, after three weeks into the new Tax regime, the government was proving that it is very responsive.
However, AFC MP Khemraj Ramjattan said that the government had failed to heed the warnings about the introduction of VAT.
He said that there are cries and catastrophe in the public domain. He reminded that the AFC had called on the government to delay the implementation of VAT.
“They [government] are in a crisis and emergency, now they want us to hand over to the government, at the expense of Parliament,” Ramjattan stated.
He added that removing the scrutiny of tax laws from the Parliament under the guise of exigency was setting a dangerous precedent.
Minister of Health, Dr. Leslie Ramsammy, and Minister of Education, Shaik Baksh, conceded that the government expected some problems. They sought to establish that VAT was revenue neutral, with no increase in the prices of commodities.
Minister Ramsammy said that maybe there was not enough education being carried out in the communities, but he noted that the Guyana Revenue Authority (GRA) was taking steps to remedy this situation.
However, Minister Baksh, in alluding to the need for more educational work on VAT, noted that prices are beginning to stabilise.
“This amendment Bill will now allow us to start making the necessary adjustments to relieve the people of Guyana,” Baksh stated.
Since the introduction of VAT, consumers and businesses have lodged complaints about the tax driving up the cost of living.
Consumers have openly stated that most prices have gone up by 16 percent, while the government has repeatedly defended its position that the cost of living should be heading downward.
Late last year, the government, in response to concerns, announced that several basic food items will be either exempt or zero rated.
It also announced that stock-on-hand bought in December will be eligible for stock relief.
However, the businesses community has stated that the stock relief period needed to be extended since this was helping to drive up the prices of commodities.