Old Age Pensioners can look forward to a ‘whopping’ $800 (US$4) increase from next year, while workers across the spectrum will also benefit from an increase in the income tax threshold, which has been moved from its current limit of $55,000 monthly to $60,000.
These are among the measures announced by Finance Minister Winston Jordan when he presented the 2017 National Estimates to the members of the National Assembly on Monday.
Jordan was at the time speaking to the measures proposed by Government to reduce inequality and increase disposable income for 2017.
Minister Jordan, in announcing the adjustment in the income tax threshold, said Government proposed to increase the current threshold of $660,000 per annum to $720,000 per annum or one-third (1/3) of the employee’s salary.
He said this would result in an additional 7600 persons being taken off the tax register.
The Minister announced too that there would be a reduction in the Personal Income Tax rate from 30 per cent to 28 per cent for individuals earning less than $2,160,000 per annum or $180,000 per month.
“I propose to introduce an element of progressiveness in the tax system…A new rate of 40 per cent will be applied to the incomes of individuals earning in excess of $2,160,000 per annum,” he added.
Explaining the proposal, Minister Jordan said, “These measures will allow for an annual increase in take-home pay for persons earning under $720,000 or $180,000 and for persons earning $2,160,000 to benefit from an additional annual take-home pay of $46,800.”
In the case of the higher paid employees, “by allowing for one-third of their income to be tax-free, the incidence of tax will not exceed 25 per cent, thereby allowing for a higher take-home pay”.
According to Jordan, “this would reduce the need for tax-free benefits, in kind, now being paid to employees in the Private Sector in lieu of salaries, and claimed by self-employed persons in lieu of income.”
He said the measures would result in Government forgoing almost $4 billion.
OLD AGE PENSION
Meanwhile, as it relates to the increase in the Old Age Pension, the Minister said this would be increased to $19,000 per month, up from $18,200, an increase of $800, the equivalent of US$4.
The fiscal measures announced by the Finance Minister, however, are not all aimed at increasing disposable incomes, since Government is now looking to impose a two per cent withholding tax on the gross payments made to all contractors.
The two per cent shall be deducted from every payment made to contractors by contractees and shall be remitted to the Guyana Revenue Authority (GRA).
The amounts, he said, will be deducted and would be allowed as a credit against the final taxes payable by the contractors.
This means that contractors will now be required to make a two per cent tax payment upfront.
Adjusting the Mortgage Interest Relief that was introduced by the previous Administration, Minister Jordan has now announced a restriction saying that only persons taking loans up to $15 million will be allowed to benefit.
He suggested nonetheless that “this measure will ensure that only low- to middle-income earners benefit, as was intended.”
With regard to measures aimed at spurring economic growth, Minister Jordan said for many years, the manufacturing sector has clamoured for a reduction in the corporate tax rate, in order to improve their competitiveness locally and overseas. Further, companies that conduct both commercial and non-commercial operations engage in income shifting in order to meet the 75 per cent criteria, thereby allowing them to be taxed at the lower corporate tax rate applicable to manufacturing concerns.
According to Jordan, “In relation to the two per cent minimum tax on commercial operations, certain companies are at a disadvantage whereby their effective tax rate exceeds the commercial tax rate of 40 per cent.”
As such, Jordan has proposed a reduction in the corporation tax rate, from 30 per cent to 27.5 per cent, for manufacturing and non-commercial companies.
He explained that there would be a dual tax-rate for companies carrying out both commercial and non-commercial activities.
“This means that the non-commercial part of the business will benefit from the lower corporate tax rate of 27.5 per cent, but will pay the commercial tax rate of 40 per cent for their commercial operations…companies must, therefore, engage in segment accounting and keep separate books of accounts to so benefit.”
He pointed out that the two measures would result in a loss of $752 million in taxes, but “we anticipate this amount being invested in renewal and expansion of businesses”.
The Minister also announced budgetary measures aimed at easing the red tape for contractors looking to take on Government contracts.
Currently, bidders for contracts are required to have valid Income Tax and NIS compliance certificates and according to Jordan, this has especially hampered small contractors from participating in the procurement process.
As such, Jordan has announced that while these requirements will remain, he proposed to make it easier for potential bidders to access these documents.
He has since announced that Government will be pursuing the automatic issuance of Temporary Income Tax and NIS Compliance Certificates.
According to Jordan, prospective bidders will be given a one-off, three-month, temporary certificate, regardless of their status with GRA and NIS.
“During the three months, they are expected to make the necessary arrangements to become compliant.”
He announced too that there will be the issuance of Trusted Trader Compliance Certificates and these will be valid for three years and will be issued to companies that have a demonstrated track record of compliance.
These measures, according to Jordan, will take effect from January 1, 2017.
The West Demerara Proactive Women Producers Cooperative Society, in Stanleytown, Region Three (Essequibo Islands-West Demerara), dedicated its $4.6M salt fish processing facility today.