VAT differences surface at GuyExpo as PSC Chairman calls for lower income and corporate taxes
Stabroek News
November 3, 2006
We'll give concessions to consumers directly, not through the private sector - Jagdeo
The protracted differences between government and the private sector over the impending introduction of Value Added Tax (VAT) in Guyana spilled over into a sharp exchange between President Bharrat Jagdeo and Chairman of the Private Sector Commission (PSC) Michael Correia last Friday evening with the President taking issue with what he described as the 'hijacking' of the opening ceremony forum by the PSC Chairman to raise an issue that did not belong at the opening ceremony of Guyana's seventh national trade and exhibition showpiece, GuyExpo.
Up until recently, the private sector's uneasiness over issues related to the implementation of VAT has been fairly muted. Correia's presentation at the GuyExpo forum where top government and private sector officials were present restated concerns listed by the private sector in a similarly animated press release following a meeting early last month with Finance Minister Ashni Singh.
In his address to the forum Correia repeated previous private sector calls for government to reduce income and corporate taxes as a mechanism of reducing the cost of living which he said will "go up" with the implementation of VAT. But President Jagdeo in a sharp response which, by his own admission, departed from his intended remarks at the GuyExpo opening ceremony, dismissed talk of a cost of living increase arising out of VAT implementation as "scaremongering."
Significantly, President Jagdeo declared that he did not share the view expressed by the PSC Chairman that the lowering of income and corporate taxes in the wake of the implementation of VAT would result in a reduction in the cost of living. "I don't want to give the concession back to the private sector and hope that with the goodwill of the private sector this benefit will be passed on to the consumer, because our experience has been different," President Jagdeo said.
In what appeared to be a direct reference to publicly expressed private sector concerns that the implementation of VAT will result in a hike in the cost of living President Jagdeo cautioned against what he described as "talk up" statements that could be used as an excuse by businessmen to raise commodity prices. Government has already declared that its monitoring mechanisms will seek to take action against illegal and unwarranted price increases using VAT as an excuse.
Private Sector Commission Chairman Michael Correia
Private sector officials have continually expressed scepticism over government's assertion that VAT would be revenue neutral. However, President Jagdeo insisted that that remained his administration's position. "We said from the very beginning that VAT should be revenue neutral. We're not looking to increase taxes with the collection of this tax," President Jagdeo said.
The private sector has, over the years, voiced its concern over the success of the country's informal economy in evading the tax net and in his address at the GuyExpo opening ceremony Correia referred to what, up until now, has been the limited official success in curbing smuggling across the country's unprotected borders. In calling for more effective efforts to curb trans-border smuggling Correia said that the practice could prove "a huge threat to VAT.
Private sector sources with whom Stabroek Business spoke said that cross border smuggling could indeed negate the effectiveness of both the VAT and excise taxes but conceded that the effective policing of the country's borders could prove "a weighty task" for government given the lack of "policing capacity."
At Sophia last Friday the effectiveness of the public education programme initiated by the Guyana Revenue Authority (GRA) to educate the public as well as to seek to register businesses for VAT came under criticism from the PSC Chairman. While conceding that the GRA needed to do more to accelerate its public education programme President Jagdeo said that he expected the local private sector to play a role in ensuring its own VAT readiness. Correia was one of three private sector speakers who shared the GUYEXPO forum with President Jagdeo and while Guyana Manufacturers Association (GMA) President George Robinson steered clear of the VAT issue President of the Georgetown Chamber of Commerce Gerry Gouveia also called on government to introduce measures to enhance the VAT public education programme as well as to reduce any negative impact on the cost that might result from the introduction of the new tax.