New VAT regime threatens hundreds of medical jobs – Ali

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– says Finance Minister ‘buried in oblivion’, presented ‘hocus pocus’ budget

The National Assembly will from Monday commence what is expected to be an intensely heated debate over the 2017 National Estimates, presented to the nation on November 28, 2016, by Finance Minister Winston Jordan.

PPP/C Member of Parliament, Irfaan Ali
PPP/C Member of Parliament, Irfaan Ali

Chairperson of the Parliamentary Public Accounts Committee, Irfaan Ali was interviewed by the Guyana Times newspaper to give his take on the growing voices of opposition with regard many measures that were announced by the Finance Minister, including the restructured Value Added Tax (VAT) regime being applied to electricity, water, pharmaceuticals and medical supplies and services.

In relation to pharmaceutical and medical supplies, Ali told the newspaper that not only will the cost of accessing private medical service increase dramatically, but medical staff such as nurses, medics, laboratory technicians and others may face the risk of losing their jobs, since patients will now be forced to seek medical service from public hospitals.

This, he said, could lead to the closure of several private operations threatening literally hundreds of jobs in that field.

Ali said another of the possible effects of taxes being applied to drugs, medical supplies and services is the fact that it will inherently lead to increased overcrowding at public hospitals will lead to an increase in the death rate.

“Out of desperation, the vulnerable might now be forced to seek alternative medicine, hence putting their lives in additional danger,” he suggested.

This past week the Private Sector Commission (PSC) had also lamented the move on the part of Government to apply VAT to medicines and medical services.

According to Chairperson of the PSC Committee on Economics and Financial Affairs, Ramesh Persaud, essential drugs and medical supplies will now be attracting VAT, and as such, this means that a patient will not only have to pay VAT on their doctor’s visit at a private hospital but any prescriptions to be filled will become more expensive.

This obtains since drugs will also now be attracting a 14 per cent VAT, inherently driving up the costs to be paid by consumers.

According to Persaud, “it is a significant challenge,” even as he called on behalf of the PSC for Government to revisit is new VAT regime.

Persaud was of the view that should the new VAT regime as indicated by Government were to go ahead then it will inherently drive up prices and the inflation rate in the country.

HOCUS POCUS BUDGET

Meanwhile, Ali  said the “hocus pocus 2017 budget provides no remedy to remove our economy from the midst of the labyrinth.”

He said too that the bearish sentiment about the country’s economic prospects for the rest of the year by Finance Minister Jordan, “remains rife.”

On the matter of VAT, Ali argued that application of the tax will directly cost the people of this nation an additional $14 billion in addition to the indirect hardships to be placed on Guyanese and local businesses.

During his interview, Ali also sought to make it clear that the application of VAT on electricity and water runs contrary to any optimal taxation system.

Ali said electricity and water are considered basic human rights and that the entire regime as proposed is, “regressive and highly convoluted.”

He said Minster Jordan seemed inept to correctly comprehend how the adjustments will work, which points to the glaring fact that he is completely “buried in oblivion, of the detrimental and disastrous ripple effects that will follow.”

According to Ali, VAT on water will cost the people of this nation approximately Gy$110 million, given that approximately 9000 persons, on average that pay $1500 or more per month on water charges.

On the matter of the application of VAT on electricity, Ali used as example the operations of a small sawmill operator and pointed to monthly electricity costs which if calculated at today’s rate could be in the vicinity of $900,000 monthly. Ali said that with the application of VAT on the electricity bill, it will skyrocket to in excess of $1 million monthly; a cost that will no doubt have to be passed on to customers. He said the ripple effect from that single sawmill operations would see an increase cost of lumber, which could induce presumed homeowners to use less lumber and more cement.

Ali noted that this is among the very sectors that Government is looking gather momentum in 2017, but it will certainly encounter a slew of additional hardship.

According to Ali, “the increase in electricity cost for a mall will increase, prompting an increase in the overall cost for renting boutiques, hence further prompting an increase in the price of clothes.”

Ali said too that manufacturing and commercial activities, including a significant amount of private residents will be equally affected, from a reduction in disposable income.

“The ripple effect that will follow will lead to reduction in private consumption and ultimately increase in non-performing loans… Is this the good life the Government has envisioned?”

Ali also indicated that during his presentation to this year’s debate he intends to point out too the effects of the tentacles of VAT being extended “to leach off our Internet service, pharmaceutical and medical supplies.”

According to Ali, “given the inelasticity of demand by consumers for these services, this additional burden would inevitably have to be passed on to consumers, a counterproductive measure that would certainly impede growth in the ICT sector.”

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