Revenue collection for the first part of the year was 9.7 percent higher than the same period in 2015, buoyed by a 5 percent increase in revenues from Value Added Tax (VAT) as well as an increase from company taxes, which included $675.2 million from a company operating in the oil industry.
“Tax revenue collections increased by 6.1 percent, reaching $75.1 billion during the first half of 2016, compared with $70.9 billion during the same period in 2015,” the Ministry of Finance’s Mid-Year Report on the economy says.
It revealed that VAT collections totalled $17.3 billion during the first half of 2016, which is 5 percent more than the same period in 2015. VAT on imports declined by $1.4 billion, while VAT on domestic supplies increased by $436.4 million. Declining VAT revenues on imports were due to a fall in imports by the wholesale and retail sector, while significant collections of VAT arrears, amounting to $124.4 million and $74.7 million from the manufacturing and services sectors, respectively, were responsible for the increases in VAT on domestic supplies, the report said.
It noted that government has requested assistance from the Caribbean Regional Technical Assistance Centre (CARTAC) to review the efficiency of the application of VAT, for which a mission is due to arrive in the third quarter of this year.
Excise tax collections, meantime, reached $14.9 billion during the first half of 2016, a decline of $311.5 million compared to the same period in 2015. This resulted from a decrease in collections on imports for petroleum products of $428.9 million, tobacco of $71.2 million and alcoholic beverages of $43.5 million, which together more than offset increases in domestic collections of which collections on alcoholic beverages rose by $227.7 million, the report said.
It noted that the reduction was also due to measures implemented during this period. In particular, policy changes under the Excise Tax Act 2005, which came into effect on 1st February 2016, in an effort to support the greening of the economy and protecting the environment, which included the removal of Excise Tax (30 percent) on motor vehicles under four years under 1500cc; and the reduction of Excise Tax from 50 percent to 10 percent on motor vehicles under four years old between 15000c and 2000cc. Together, these two policy changes on motor vehicles resulted in an increase of 47 vehicles, under this category, being imported, the report said.
Earlier, the report had noted that internal revenue collection increased by $4.9 billion or 15.6 percent, reaching $36.5 billion in the first half of 2016, compared to the same period in 2015. This half year achievement reflected 57 percent of the annual target, the report said. Of the increase, almost $3 billion was related to arrears and advance payments. The remainder was primarily attributed to increased collections from the telecommunications, manufacturing, and construction sectors, and significant payments made by a new company from the architectural and engineering sector.
Company taxes
Company tax collections grew by $2.6 billion of which $675.2 million related to a significant increase by one major company in the oil industry and $921.2 million attributed to arrears collections, the report said. Net property tax on private sector companies increased by $261 million, supported by measures which targeted the collection of arrears of $99.8 million. As at June 2016, a total of 292 companies made payments, compared with 276 during the same period in 2015, representing a 5.8 percent increase. Similarly, a total of 925 individuals, including self-employed, made payments during the first half of 2016 compared with 887 during the same period in 2015.
The report revealed that personal income tax collections grew by $922.3 million during the first half of 2016 compared to the same period in 2015, the main drivers of this growth being a $553 million increase in personal income tax or Pay As You Earn (PAYE) and a $339.1 million increase in income tax from the self-employed.
The growth in PAYE was mainly due to increases in wages and salaries awarded to public servants in the second half of 2015, while the increase in self-employed taxes was due to increased compliance, from 8,167 to 10,488 individuals, as a result of measures undertaken by the Guyana Revenue Authority (GRA), the report said. It added that despite this progress, compliance remains low for self-employed individuals.
Withholding tax grew by $933 million, as a result of increased gold declarations, as well as significant payments made by companies involved in oil and gas exploration, marine support activities, and building construction. However, capital gains tax collections declined by $40.4 million, mainly due to lower payments from companies in the real estate industry.
Additionally, customs and trade tax collections rose to $6.5 billion in the first half of 2016, $0.6 billion more than for the same period in 2015. While the value of imports declined, import duties grew by $928.6 million or 17.3 percent above the first half of 2015. This was due in part to a decrease in tax exemptions and a change in the composition of imports.
Meantime, tax remissions for January to June, 2016, were $20.7 billion – equivalent to 27.5 percent of tax collections – compared to $26.4 billion (37.3 percent of tax collections) for the same period in 2015. This $5.8 billion decline in tax remissions is directly due to government’s review of concessions to sectors, businesses, and individuals, in order to ensure that concessions are in line with the country’s development agenda, the report said.
The main categories of reduction in remissions were companies/businesses, $5.5 billion; Ministries and Departments of Government, $430.6 million; and foreign projects, $197.4 million. However, remissions to diplomats increased by $329.5 million, public officials/officers by $85.1 million, hospitals by $65.9 million, and remigrants, $18.6 million.
Meanwhile, non-tax revenue collections grew in the first half of 2016 by $2.4 billion compared to the same period in 2015, representing an increase of 61.1 percent. Rent and royalties were boosted by the expansion in gold production, resulting in collections moving from a paltry $5.2 million to $2.3 billion. Fees, fines, and charges grew by $120.5 million or 22.5 percent, resulting from a $75.4 million increase in citizen registration fees, the report said. Dividends and transfers totalled $4.4 billion during the first half of 2016, an increase of $863.3 million compared to collections during the same period in 2015. This was due mainly to a $1 billion dividend payment from Guyoil in the first half of 2016.
The report also said that consumer price inflation was moderate in the first half of 2016, following a mild deflation in 2015. The overall consumer price index (CPI) for Georgetown increased by 1.1 percent from December 2015 to June 2016. The increase was largely due to rising food prices, especially for fruits and vegetables. Food prices increased by 3.2 percent from December to June, the report said.
It added that producer prices may have been affected by lower harvests caused by adverse weather due to El Nino. In other major categories, prices either fell, or increased modestly. Prices for clothing, footwear, housing, and transportation and communication fell from December to June, while prices for furniture; medical and personal care; education, recreation and cultural services; and miscellaneous goods were either unchanged or rose only slightly.
The report said that during the second half of 2016, it is expected that expenditure will be significantly higher than revenue collections. The overall deficit projection of the Central Government for 2016 improves to $28.7 billion (4 percent of GDP), from $33.2 billion (4.7 percent of GDP) budgeted in 2016.
Projected revenues for 2016 have been revised up to $179.9 billion, from a budgeted $173.3 billion, while capital expenditure for the year has been revised down to $49.1 billion from $52.2 billion. There was a significant reduction in disbursements of loans to the non-financial public sector, from $11.0 billion in the first half of 2015 to $2.7 billion in the first half of 2016, reflecting the slow pace of implementation of foreign-funded projects, the report says.
