While some persons have questioned government’s contention that eighty percent of the Guyana Power and Light’s (GPL) customers pay less than $10,000 monthly, the utility company yesterday stated that the figure is correct.
“That is an accurate number that was taken from our customer data base,” Acting Chief Executive Officer of the company, Renford Homer told Stabroek News.
He said that the data was obtained after studying varying periods of usage. “That number was not used say from one month. The data was looked at over different months so it is very accurate,” he asserted.
During his presentation of the proposed 2017 national budget on Monday, Finance Minister Winston Jordan announced both plans to reduce the 16% Value-added Tax (VAT) to 14% as well as to apply it to monthly electricity and water bills exceeding $10,000 and $1,500, respectively.
Prime Minister Moses Nagamootoo had given the statistics as he reasoned that while government has proposed a 14% VAT on power consumption over $10,000, starting next month, eighty percent of GPL’s customers would not be affected, since they use below that amount.
He said that of the 138,000 GPL customers, about 105,000 residents and 4,800 businesses pay less than $10,000 per month, hence some 80% of customers would not be affected by the new VAT measures.
The Acting GPL CEO explained that the bulk of GPL’s revenues comes from a small percentage of its customers, mostly large businesses.
“You should know that a very small percentage of GPL’s customer base brings in over 50% of its revenue,” he stated.
Government has been heavily criticized for its move to implement not only the 14% tax on power but on water changes over $1500.
The opposition PPP/C, the Private Sector Commission (PSC) and other bodies and persons have called on government to reconsider proposed changes to the VAT regime, with the PSC warning that they would hurt the business community by driving up costs and forcing higher prices on consumers.
The PSC has said that it could not endorse the changes in the VAT regime as they would have several negative impacts on the business community and explained that the application of the new 14% VAT to the consumption of electricity and water, is a “big blow to small businesses.”
Using estimations based on the 2012 audited reports of GPL, Chairman of the PSC’s Finance and Economic Sub-committee Ramesh Persaud has said that if the company brings in $32 billion a year, only $12 billion of that sum comes from residential use.
“The rest is from businesses, especially small businesses. Many companies fall below the VAT threshold who will not be able to reclaim VAT they now have to spend on electricity. This is a big blow to small businesses,” he stressed.
Persaud noted that while he doesn’t want to sound like a scaremonger, he must present the less than positive reality which exists in the absence of further clarification from Jordan.
He was most vehement about the impact that the proposed changes to the list of zero-rated and exempted products would have on the manufacturing and telecommunications industry. He noted that while in the last budget Minister Jordan had taken several steps to add a lot of items to the zero-rated VAT list, this year “he’s eliminating the zero-rated list.” He added that that kind of uncertainty in government policy worries businesses that have to operate in the long term.
Persaud noted that there are, broadly, taxable and nontaxable supplies, with the former including standard-rated and zero-rated supplies. While non-taxable items are considered exempt from taxes, he said manufacturers and suppliers of zero-rated items or services are eligible for refunds on VAT they would have paid on products inputted into the production. “VAT refunds are only applied to taxable supplies, not exempted supplies, so where you can claim a refund of VAT paid on zero-rated items, you cannot do the same for items which are exempt. If you are a provider of a totally zero-rated product, like education, you would’ve been able to reclaim all of your input VAT from government. If you were a mixed supplier, your refund was prorated based on proportion of items which were taxable and non-taxable,” he said, while stressing that taxed inputs cannot be reclaimed on exempted supplies.
