Bills to give incentives to renewable energy companies passed
GINA, GUYANA, Thursday, January 6, 2017
The Income Tax (in Aid of Industry) (Amendment) Bill and the Corporation Tax (Amendment) Bill were passed by the National Assembly last evening.
The Corporation Tax Bill, it was explained by Finance Minister Winston Jordan, will lower the corporation tax for non-commercial companies such as those engaged in manufacturing from 30 percent to 27.5 percent. It will also introduce a dual rate for companies that are engaged in commercial and non-commercial activities, with the latter being taxed at 27.5 percent and the former at 40 percent.
The Bill, Minister Jordan added will seek to make the two percent minimum tax or the rate of 40 percent payable. This, he said is where, for any year of assessment, the Corporation Tax payable by a commercial company is less than two percent of the turnover of the commercial company in the year of income declared.
The corporation tax, which was raised in 1993 from 25 percent to 35 percent, was later reduced to 30 percent, in 2012. The Finance Minister acknowledged that Caribbean corporation tax rates were comparable, with Guyana paying less than Jamaica, but more than Barbados and Trinidad and Tobago. The structure of the tax in rate for regional states, Minister Jordan explained, varied due to the financial peculiarities of each.
The Bill was described as another incentive to the manufacturing sector by the Minister “allowing them to do more retooling etc…. It will encourage more people to go into manufacturing.”
The Minister recalled that he read an article in the print media which supported Government’s view that the lowering of the tax rate will enhance some of the benefits already granted. These benefits, he added, included duty-free concessions, and industrial development agreements for duty-free concessions for equipment etcetera. He stressed that Government is showing its faith in the manufacturing sector and giving it a “spur to develop further.”
Small and start-up companies are also expected to benefit from the new provision, the Minister further stated. He noted that it was still unclear why the local manufacturing sector has not thrived as it did in the 1970s when many items were produced using local products, but hoped that this measure could see improvements.
Addressing the House, after the Minister, Opposition Member of Parliament (MP)Irfaan Ali said that hindrances to the manufacturing sector included the lack of cheap reliable power. He called for Government to proceed with the Amalia Falls Hydro Project to make this a reality.
Ali also mentioned the new Value Added Tax on electricity costs and water, increased fuel costs, and a lack of adjustments to taxes, which he said, will result in extra costs to consumers.
In response, Minister Jordan noted that Government has already put out a statement on Amaila Falls.
Challenges, Minister Jordan said, should be seen as something which needed to be overcome. He added that the measure would prove to be beneficial in the long run, as it was another step in trying to answer the manufacturing sector’s plea for help. He further noted that as the tax base is expanded, all will eventually pay reduced taxes.
The Bill was read for the third time, after being resolved into committee and passed.
Income Tax (in Aid of Industry) (Amendment) Bill
The Income Tax (in Aid of Industry) (Amendment) Bill number 30 of 2016, was also passed after a short debate. The Bill is aimed at permitting the Finance Minister, the power to grant corporate tax concessions to companies seeking to import sustainable energy equipment such as wind turbines, solar power systems, recycling equipment and more.
This will boost the efforts being made to move Guyana further along the path to a Green Economy, the Minister said. He pointed out that the Wind Farm at Mabaruma is already under construction and the benefits of this will soon be realised. There will also be tax relief granted to those seeking to provide waste water recycling activities, waste disposal/ recycling of plastics, glass and used tyres.
The measure will encourage the Private Sector to move in this direction, as “generous incentives will be granted,” Minister Jordan added.
Rising to voice his opinion of the Bill, Opposition MP, Nigel Dharamlall, said he supported the efforts being made, but questioned whether they were designed to cater for special interest groups. He also queried the spinoff benefits from the granted exemptions, job creation, and overall costs to the country’s finances.
Opposition MP, Juan Edghill, who followed his colleague, said that at a first glance the Bill appeared laudable, but posed several questions. He called on Government to understand the benefits that could be derived from constructing the Amaila Falls hydropower project, noting that the economy was lagging due to the high cost of power.
The MP also raised questions about the wording of the Bill which would see a one-off tax holiday being granted to companies that are engaged “exclusively” in the supply of renewable energy equipment. This caveat, Edghill said would exclude other companies and persons who wanted to set up their own environmentally friendly energy sources.
Opposition MP Anil Nandlall also voiced his reservations about the Bill, noting that whilst it would be supported, there were several inconsistencies in the approach by the Government. He too called for the Government to support the “Mother of all Greening Project, Amaila Falls”.
Making his final presentation and response, Minister Jordan said that the reactions from the Parliamentary Opposition were surprising. The Minister rebutted claims that the Bill catered to “Special Interest Groups” reminding that individuals seeking to import similar green energy equipment” such as solar panels are already given concessions.
The Finance Minister added that the Bill had nothing to do with the Procurement Act or Amaila Falls. He noted however, that independent contractors and engineers would be asked to look to the report on Amaila Falls. The Minister added that the process would be open to all who were interested in moving Guyana forward to the green economy.
The Bill was then read for a third time and passed.
By: Paul McAdam