Parliament gives effect to zero-rated, tax exempted goods
--Murray fails to have blackeye peas zero-rated
Kaieteur News
December 15, 2006
Parliament, yesterday, affirmed several Motions to give effect to a number of basic food items being zero-rated, and other items being tax exempted when the new Value Added Tax (VAT) and Excise Tax systems come on stream from January 1, next year.
The People's National Congress Reform-One Guyana (PNCR-1G) frontbencher Winston Murray reiterated his party's support for the implementation of the new tax regime, but asked that a number of amendments be made before the National Assembly confirmed the Tax Orders.
The amendments he agitated for included the zero-rating of black eye peas, and the reduction of the 16 per cent rate at which VAT will be charged, since, according to Murray, the government was rescinding from its earlier position to have VAT replace the Travel Voucher Tax on airline tickets and the Premium Tax on foreign insurance premiums.
He proposed a one per cent or more reduction in the VAT rate with the recall of the two taxes, but the Finance Minister alluded that a number of measures that included the zero-rating and exemption of several items would result in revenue losses.
Finance Minister Ashni Singh, who piloted a total of five Motions through the National Assembly, stated that the amendments to the VAT and Excise Tax Act of 2005 are as a result of direct and indirect suggestions made over the last few months.
The Minister, about two weeks ago, had announced that bread, rice, sugar, cooking oil, milk, baby formula, split peas, onions, garlic, potatoes, fruits except apples, grapes, dates, prunes, peaches, plums, and strawberries will be zero-rated.
He also announced that vegetables, except olives, carrots, black eye peas, pigeon peas, chick peas, radishes, broccoli, and cauliflower, will be zero-rated.
Murray, in his arguments to support the zero-rating of blackeye peas, posited that several persons have inquired about the exclusion of the commodity from the list of items to be zero-rated.
He questioned government's move to zero-rate split peas and to take a different approach towards blackeye peas.
However, Finance Minister Singh stated that a decision was made to zero-rate split peas, since it does not attract consumption tax (c/tax) and that this was in keeping with a policy decision to zero-rate basic food items that are currently not attracting c/tax.
He explained that to bring these items under the VAT regime would have seen an increase in the cost of living.
In relation to blackeye peas, the Finance Minister explained that the product currently attracts c/tax of 30 per cent and could not quality to be zero-rated, but alluded that the price should be reduced once VAT is added.
The Minister argued that blackeye peas is grown locally, and many producers will not be bound by the regulations to register under VAT, since they fall below the $10 million profit line required for businesses to be registered.
Murray also questioned the wording of sections of a Tax Order which sought to grant VAT exemption for building materials, excluding concrete blocks.
Murray reminded that cement was a necessary ingredient used to produce concrete blocks, and as such, concrete blocks should be exempt, too.
Finance Minister Singh assented to this amendment.
Murray also stated that the administration needed to be careful with the wording of the Act, and pointed to the use of the word “investor” which, he said, needed to be defined, since an investor is eligible for VAT exemption.
He added that this could create some problems, since some businesses which would, under normal circumstances, set about their tasks might now seek to come under the category of ‘investor' to be eligible for VAT exemption.
Murray also questioned the deadline of December 15, by which businesses must be registered to receive tax relief under the transitional regulation, which was eventually passed by Parliament at yesterday's Sitting.
The Minister had announced, last month, that stock on hand come January 1, 2007, which was purchased in December and on which other taxes would have been paid, will receive tax relief once those businesses would have registered by December 15.
These businesses will be entitled to claim the c/tax, limited to the VAT rate of 16 per cent, and such taxes could be claimed as input tax credit.
Another of the Motions dealt with the preservation of the status of duty-free entitlements under the new tax system.
Under VAT, vehicles purchased by public officials and remigrants will be duty-free, the Finance Minister explained.
During the debate on the Motions, both sides of the National Assembly praised the work of the Guyana Revenue Authority in its implementation of the new tax regime.
“I know that they are very hardworking, and they are competent people, and they try to give of their best in making policy decisions work…but that does not mean that we should turn a blind eye to any shortcomings that may exist in the preparatory work that needs to be done on VAT,” Murray stated.
He stated that invitations to PNCR-1G events need to be accepted, or at least a response entered.
Murray pointed to a VAT symposium held by the party at which neither an official of GRA nor the Minister of Finance attended, despite receiving invitations.