Motion to revisit VAT defeated in National Assembly
Guyana Chronicle
May 12, 2007
A motion calling for the re-visiting of the implementation of the Value Added Tax (VAT) piloted by the main opposition party the People’s National Congress Reform-One Guyana (PNCR-1G) was voted down in the National Assembly last Thursday as it did not find favour among the government benches with their commanding majority of seats.
Leader of the Opposition and the PNCR-1G Mr. Robert Corbin, who moved the motion, argued that the implementation of VAT has resulted in sharp increases in the cost of living and severe hardship for working class and poor people.
He spoke of the need for a reduction of the rate of VAT which stands at 16% , arguing that the government is in possession of studies which show that revenue neutrality can be achieved with a lower rate.
At the same time, Corbin advocated significant salary increases for workers on the lower rung of the salary ladder to cushion the increased cost of living, and called for the establishment of Tax Reform Commission to review the tax system and make recommendations with respect to the raising of the income tax threshold and reduction of income and corporate taxes.
He also indicated the need for a phased implementation of VAT.
However, Finance Minister Dr. Ashni Singh rebuffed the motion, arguing that its premise is questionable and has been overtaken by time, and raises more questions than answers.
Nevertheless, he acknowledged that during the initial stages of the implementation of VAT there were predictably some kinks and glitches, but that the situation has changed drastically since, with some 2, 200 businesses registered, and market forces beginning to take effect, with prices stabilising.
He also noted the long list of items that have been zero rated.
As regards to the studies referred to by Mr. Corbin, the Finance Minister said they were merely theoretical models and simulations which could not be applied wholesale to the real situation; and in any case it is too early at this stage to make an evaluation to determine whether the rate of VAT could be lowered.
On the issue of significant salary increases, he exhorted that such a move has to be linked to the macro-economic situation and analysed scientifically, to see if it would trigger inflation and a higher cost of living, defeating the very purpose it was intended for.
While agreeing that prices for some items have increased, Dr. Singh however, argued that there have not been dramatic increases and this cannot be hastily attributed to VAT, as several other factors relating to market forces could also be responsible.
He disagreed with the notion of the establishment of a Tax Reform Commission to re-examine tax reforms, contending that these issues can be ventilated in the Special Select Committee.
With respect to phased implementation, the Finance Minister said this is not possible, as VAT had already been implemented and is a reality.
PNCR-1G’s Winston Murray, while agreeing that phased implementation cannot happen as the implementation of VAT is a fait accompli, accused the minister of studiously avoiding issues such as the degree of hurt it has been causing to the poorer sections of the population.
He further contended while prices may have been stabilising, they have been doing so at higher levels prior to the implementation of VAT.
He chided the minister for not presenting any statistics to show whether VAT has so far been revenue neutral, or has been on the positive side, providing an opportunity to discuss whether the rate could be lowered.
However, on this score, Minister of Labour Manzoor Nadir explained that it is not possible to provide such information as the computation of collections and refunds have not been completed.