Dear Editor,
I have hesitated to engage in the ongoing debate in the print media on whether the VAT being imposed on educational services extends to fees charged by the University of Guyana. However, because even the media seems unsure, I do not think further hesitation helps.
VAT is not a particularly complex tax and has a few basic principles. Section 9 of the VAT Act imposes VAT on (a), every taxable supply by a taxable person; and (b), on every import of goods or import of services, other than an exempt import. We are here concerned with (a) and can disregard (b). Because the section dealing with taxable person also refers to taxable activity, it seems preferable to look at the definition of “taxable person” before going on to examine taxable activity.
A taxable person is a person who is registered, or who is required to register under section 11 of the Act. “Person” is defined in the Act to include the State, an agency of the State, a local authority, board, natural person, trust, company, and partnership. In other words, there is no automatic or definitional exception of the state or, by extension, educational institutions funded by the State.
Section 11 requires VAT registration by any person carrying on a taxable activity with total annual value, either retrospectively or prospectively, of more than $15 million.
A taxable supply is a supply of goods or services in Guyana in the course or furtherance of a taxable activity, other than an exempt supply. Section 6 defines a “taxable activity” as an activity carried on continuously or regularly by a person (a) in Guyana, or (b) partly in Guyana, whether or not for profit, that involves or is intended to involve, in whole or in part, the supply of taxable goods or services to any other person for consideration.”
The section goes on to exclude from taxable activity any activity carried on by a person essentially as a private recreational pursuit or hobby or an activity that involves the making of an exempt supply. An exempt supply is a supply of goods or services listed in Schedule II to the Act.
In summary, unless the particular service is included in Schedule II, or zero rated by inclusion in Schedule I, the service is taxable at the standard rate. Schedule II has sixteen paragraphs of which 2. (e) and (f) are relevant to UG. Here is the introductory paragraph followed by sub-paragraphs (e) and (f).
“The following supplies are specified as exempt supplies for the purposes of section 18 (the section that authorises exempt supplies):
(e) a supply of any goods or services by the State, a local authority, or a charity where the consideration for the goods or services is nominal in amount or not intended to recover the cost of such goods or services;
(f) a supply of all goods and services by budget agencies named in the schedule to the Fiscal Management and Accountability Act and by state agencies that perform regulatory functions by statute;”
The University of Guyana is clearly not a charity or local authority. It is a statutory body and while it is funded partly by the State it is not the State and its employees are not public servants. Accordingly, the services UG offers does not fall within exemption (e).
Apart from the Ministries and Regions, the only other bodies listed as budget agencies in the Schedule to the Fiscal Management and Accountability Act are the Georgetown Public Hospital Corporation and the Guyana Defence Force. And since UG is not a regulatory body, its services clearly do not fall under (f).
In the circumstances, until there is a change in the law, UG should register for VAT, charge VAT on its services, and claim credit on the VAT it pays on inputs. If UG fails to register and to charge VAT, it would be liable to pay the VAT which it is required to charge. UG should note as well the legal principle that one is taxed by law, and not untaxed by concession. We cannot simply state that UG is being excluded; that requires legislation.
Finally, I draw attention to a letter by Dr Melissa Ifill of the University of Guyana in which she stated that Bangladesh is the only country she could find which charges VAT on university education. In fact, following protests by students in that country, the VAT which was explicitly charged on private university education, was removed.
Yours faithfully,
Christopher Ram
