Back to Press Page

8TH JULY 2005
MEDIA RELEASE
Vat and Excise Bill

The Private Sector Commission (PSC) on Tuesday July 5, presented to the Parliamentary Special Select Committee its views on the Value Added Tax Bill and Excise Tax Bill. The PSC delegation was led by the Chairman, Yesu Persaud and included leading members of the PSC Sub-Committee on VAT Implementation.

In their oral presentation to support the 85 page written submission, the PSC noted that the Bills, as presented, raised far too many concerns of omissions and contents to allow the PSC supporting them in their present form.

Some of the PSC’s major concerns with the legislation are:

VAT

The PSC observed that the provision for the rate and threshold for VAT will be set by the Minister of Finance by subsidiary legislation is unique among Caricom countries, introduces an unacceptable level of uncertainty in a key business issue and is a delegation of a parliamentary function to the Executive which may not be proper in law. The PSC also drew attention to conflicts with other laws and the excessive powers being given to the Minister and the GRA. The PSC cautioned against legislation that can be challenged on legal and technical grounds.

In the absence of the regulations which will operationalise the Act when it becomes law, the PSC indicated that the business community is unable to assess the full cost of the administrative burden or the economic cost on their businesses due to price elasticities of their goods and services. In particular businesses are calling for a full tax credit for their costs of implementing the VAT.

The PSC pointed out that the tax can have a major inflationary impact if tax is imposed on items or elements of items previously subject to no or lower rates of indirect taxes. Noting that the inclusion of basic food, animal feeding items and medicines within the VAT tax net will have both an inflationary impact and create extreme hardship among a large segment of the population, the PSC strongly recommended that such items be zero-rated and therefore excluded from VAT.

Unless adequate steps are taken to deal with the potential inflationary impact, the PSC is of the view that VAT will exacerbate an already punitive tax burden on Guyanese taxpayers which is higher than the average of the G8 countries, Caricom or Latin American countries.

This level of taxes which lead to and reward evasion makes earlier calls for tax reform by the private sector even more urgent. The PSC believes that the introduction of VAT should be part of the wider tax reform designed to reduce the overall tax burden, lower the rates of personal and corporate taxes, unify corporation tax rates and remove the 2% Minimum Corporation Tax. In particular, since VAT is inherently a tax on turnover, the rationale for the MCT can no longer be justified.

Excise Tax Bill

The PSC considers this Bill dangerously vague in that it identifies neither the goods subject to the tax nor the rates of those taxes and allows the Minister of Finance to re-impose the Consumption Tax under a different name. The PSC also noted that the approach taken in the Bill is inconsistent with the earlier recommendations that the rates and categories of items subject to the tax be fixed.

As serious as the technical and legislative defects are the delay in addressing critical policy and administrative issues are of even greater cause of concern. The PSC has addressed a series of questions to the Minister of Finance who had undertaken responsibility for the VAT implementation. The PSC firmly believes that failure to address fundamental questions, issues and uncertainties even with the GRA could seriously jeopardize the successful implementation.

Noting that a mid-year implementation is wholly inappropriate and impracticable, the PSC recommended a lead time of twenty four months after the availability of all the legislation. It drew the Committee`s attention that rushed implementation has had serious consequences in other countries including public protest and disorder.

In response to the stated desire by the Minister of Finance for an early passage of the two Bills, the PSC cautioned against an approach that is fraught with danger that could result in an inefficient VAT that may not have the full support of the business community and does not seek to address the deficiencies of the existing tax system.

Noting that a delayed VAT is much better than a badly established VAT, the PSC recommended that the services of an expert be acquired to ascertain the level of preparedness and assist in the development of an implementation plan, implementation budget etc. The PSC also noted that in revenue terms, a delay will not cause any loss of revenue since the proposed package of taxes is intended to be revenue-neutral.

The PSC expressed its desire to work closely with Special Select Committee to ensure that the Bill is appropriately revised and to be included in the VAT Implementation Committee.

he Private Sector Commission of Guyana ( PSC ) in collaboration with the Embassy of the Federated Republic of Brazil hosted a delegation of Brazilian Businessmen and women on February 15 2005.

The Business Encounter was initiated by H.E. Ney do Prado Dieguez the Brazilian Ambassador in Guyana, in honour of the visit to Guyana by His Excelency the President of the Federative Republic of Brazil. Mr. Luiz Inacio Lula da Silva.

The priority areas for discussion were:-

• BANKING
• INSURANCE
• TRANSPORTATION
• AGRICULTURE

The delegation from Brazil included a delegation from the Brazil/Guyana Chamber of Commerce in State of Roraima, which was led by their Vice President Remidio Montessi.

The Brazilian Embassy hosted a Breakfast at the Le Meridien Pegasus at 09.00 hours
which was attended by the Brazilian delegation and their Guyanese counterparts.

Special guests at the breakfast included Jose Anchieta Junior, Secretary for Infrastructure in the Government of Roraima, Joao Batista Fagundes, Secretary of Security, Alex Moura Viana, Director of Tourism, and Paulo do Vale Pereira Fillho, the Honorary Consul for Guyana in Roraima.

In the absence of Ambassador Ney who was with President Lula, the Deputy Chief of Mission, Minister Counsellor Luiz Antonio Bubliux Fonseca welcomed everyone and outlined the background to the meeting. The Chairman of the PSC, the Secretary of Infrastructure and the Secretary of Security of Roraima also made brief presentations.

All of the participants introduced themselves, and translators were there too assist those who were not bi-lingual. Discussions continued at the Pegasus and then the participants continued their business discussions.

Participants were asked to assemble at the Georgetown Club for a wrap-up meeting to
relay to the PSC the general outcome of their meetings and to identify the specific problems in the various sectors.

The Chairman of the PSC Mr. Yesu Persaud was present at this meeting and there were a number of contributions by the Brazilian and Guyanese participants. It was agreed that minutes of the meeting would be prepared and circulated in Portugese and English.

The delegation was then hosted at a Cocktail Reception at the Georgetown Club which was attended by the Brazilian Ambassador Ney do Prado Dieguez. Both Ambassador Ney do Prado Dieguez and PSC Chairman Yesu Persaud made brief remarks.

A very special guest was Col. Paulo Sergio Santos Ribeiro the Commander the Military Fire Brigadiers of Roraima who led the convoy of four Brazilian trucks with 40 tons of Relief items for the Guyanese who suffered in the recent floods. The PSC Chairman thanked Col. Ribiero and the people of Roraima, Brazil for this excellent gesture.

The PSC and the Brazilian Embassy agree that the Business Encounter was a success and will work together to reduce the bottlenecks to the expansion of trade between our two