With virtually 80% of the Guyana Revenue Authority ‘s (GRA) VAT resources being spent verifying refunds, the movement from zero-rated to exempt items will allow more focus on enforcement and compliance according to Commissioner General Godfrey Statia.
In a statement yesterday, GRA gave its rationale for the change from zero-rated items to exempt times which was announced in the 2017 budget and which has raised concerns in the public. Zero-rated items have long been a way to ease the tax burden on the poor. The zero-rating allowed businesses to reclaim their input taxes on the items, thereby reducing the prospect of a mark-up on the item to consumers. With the exempt rating, businesses cannot claim a VAT refund for input costs and are therefore likely to pass on the cost to the consumer.
The radical shift from zero-rating to exempt status has also triggered complaints about the lack of coherence in the government’s tax programme as items were added to the zero-rated list in the 2016 budget.
In its statement yesterday, the GRA said that Statia was prompted in recent weeks to meet local manufacturers to allay fears in wake of the removing of the “zero-rated” from a significant number of items.
Meetings have so far been held with several organisations and companies and their representatives. The statement said that Statia explained that this new direction was mandated by the need for more “equity in the system”. The statement added that the system was found to be riddled with persistent failure by many VAT registrants to maintain proper records and also by “unwarranted” refund claims.
“We used to spend virtually eighty percent of our VAT resources on verification of refunds claimed by manufacturers/sectors. By moving certain items from being Zero-Rated to exempt, we do not have to do that anymore. It means that our staff could now concentrate on enforcement, audit and compliance activities and paying over the VAT collected”, the GRA said, referring to remarks that Statia had made at a December 16 press conference.
The meeting with the stakeholders allowed the GRA to clarify the distinction between zero-rated as against exempt and highlight the advantage which such a move is seeking for local manufacturers.
The elimination of zero-rated items with the exception of exports and manufacturing inputs was announced in the 2017 Budget read by Minister of Finance Winston Jordan.
