2017 Budget contains benefits of value for workers, private sector – Minister Jordan
Georgetown, GINA, December 1, 2016
The 2017 National Budget has been described by Finance Minister Winston Jordan as the “finest budget that this country has ever seen at this time”.
The Finance Minister, who has had a hand in budget preparations for the last 20 years or more, was speaking during a programme aired on the National Communications Network last evening, titled ‘Budget in Focus’. Minister Jordan was accompanied by the Guyana Revenue Authority’s (GRA) Commissioner General, Godfrey Statia.
Thanking his staffers at the Finance Ministry for their hard work in preparing the budget, Minister Jordan said that the 2017 Budget, which is his third to be laid before the National Assembly in 18 months, is more than just about the Value Added Taxes (VAT) on electricity and water. There is a range of benefits of value to workers and the private sector, Minister Jordan said.
The subject of several proposed tax reforms was discussed with the Finance Minister. He described the previous system as decrepit and one that “allowed massive amounts of concessions, given for want of a better word in ‘airy fairy’ manner. Depending on whom you know, or approaching this minister or that president, there was no transparency in the tax system. There was no efficiency of administration and there were multiple rates, high rates, and the high incidences of tax evasion and tax avoidance.”
The Minister said that he immediately set about correcting this state of affairs. “I put that Private Sector on notice, that I don’t like concessions. I much prefer them to ask for lower tax rates so that everybody could benefit, not just a certain section or a certain interest group.”
According to Minister Jordan, concessions have a way of becoming “prolonged and sticky” as once given they are often difficult to remove. He stated that lowering taxes are better since they can encourage business owners to reinvest, encourage growth and expand employment opportunities. Adding to these issues, the Minister pointed out was a computer system that did not work as designed, there were many reports of alleged corruption, high leakages in the payment of VAT, and challenges at ports of entry. “What we are trying to do is fix a system that has been broken for a long, long time,” Jordan explained.
The inefficiency that existed previously at the GRA was highlighted by both officials who confirmed that tax refunds are still being assessed dating back to 2011. Minister Jordan said, “While revenue was being reported as sky high, those years, nobody was telling you that there were VAT refunds in the system to be given back.”
Adding his voice, the GRA Commissioner Statia opined that the 2017 Budget has “actually gone a long way towards eliminating some of the tax burdens on the ordinary citizens.” He referenced issues about the VAT on electricity and water, noting that some 85% of consumers will be exempt. Government proposed a 14% VAT on electricity exceeding $10,000 per month and 14 percent VAT on water use exceeding $1,500 per month in the budget.
The new increased Income Tax Threshold and other allowances are designed to jump start spending and improving the economy, Statia added.
Garnishing of bank accounts
The move by the GRA to ‘garnish’ the bank accounts of those who owe taxes was put to the two officials. The GRA head explained that this feature was actually made into law since the 1929 but it has not been used. Statia explained that there are ‘garnishment and distress proceedings’ in the VAT Act which are not in the Income Tax Act or the Customs Act. Efforts are underway to synchronise all of the Acts, the Commissioner General said.
“We need to understand that the amounts owed by taxpayers to Government are the first in line. They are the first in line against all debts, even to debts that may be owed to the banks.”
Statia explained that many businesses that collect VAT, or even the National Insurance Scheme (NIS) payments, on behalf of the GRA and refuse to actually pay these funds over, can be targeted easier now. Many of these businesses use these funds to their own benefit, he pointed out.
Statia opined that a lack of political will and the court system has resulted in the collection system, “not functioning as it should”.
The GRA has asked for assistance in having tax lawyers come to Guyana to educate and train their local counterparts in this aspect of the law. Statia stated, “By the end of January, we will get a team from the UK (United Kingdom) to come down. I’ve spoken to the Chancellor and the Chief Justice and they will be able to hold some seminars so they’ll know exactly what they need to do. There seems to be a misinterpretation of the law that deals with garnishment versus the Constitution which says that you have a right to be heard, notwithstanding the fact that you have already been heard by the GRA so these are some of the measures we are trying to put in place.”
Offering additional information, Finance Minister Jordan said that by increasing the tax threshold, an extra 7,000 persons would be exempt. Approximately 51,000 people are now included, the Minister explained. To take effect from January 1, 2017, the income Tax Threshold will be increased to $60,000 per month from $55,000 while Pay As You Earn (PAYE) will be reduced fr0m 30 percent to 28 percent for persons earning less than $180,000 per month.
“By increasing the VAT limit from $10M to $15M, a number of small entities have been removed”. He added that several sweeping reforms to be implemented will further strengthen the arm of the GRA, “The idea now is that the GRA will be focusing on the big and broader picture as opposed to concentrating on a set of small people. A lot of time is being taken up whilst a lot of so called big fishes are going through the net.”
The Finance Minister is optimistic that by the end of 2016, “there will be a substantial improvement in the effort of the GRA on where the revenues are and a more visible presence in the society as it relates to people who are escaping the tax net.” This will see the GRA shifting its focus more from compliance into audits and enforcement, the Minister said. It was noted that some 20% of the economy is responsible for 80% of the taxes.
It was further explained that there are approximately 10,000 people that the GRA has to pursue for suspected tax breaches. These persons, the GRA Commissioner General indicated are displaying their wealth for all to see. “These persons, we need to go after them but we have not been putting our resources in the right places. We intend to focus our resources towards that area.”