Despite the new tax measures that Budget 2017 brought, Finance Minister Winston Jordan recently revealed that it is the collection of arrears that is keeping the Government afloat.
He was at the time addressing a gathering of Guyana’s most influential business leaders at the Guyana Manufacturing and Services Association (GMSA) mid-year dinner.
According to Minister Jordan, a shortfall in Value Added Tax (VAT) and income tax collection by some $3 billion has weakened the revenue base.
In its place, however, Jordan reported that Government’s collection of arrears amounted to some $4.3 billion. This, the Minister reported, is what is keeping the Government afloat.
“We are not raking in any money here,” Jordan said.
“Contrary to the belief that we are raking in money, up to May (last), VAT collection was $1.8 billion down relative to 2016 and income tax was down by $1.2 billion relative to last year.”
“What we are raking in at the moment is arrears. Arrears have been up by $4.3 billion. That is what has saved us so far. It’s the collections of arrears for some previously non-compliant sectors,” Jordan added.
During a press conference last month, Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia, had revealed that VAT revenues were down by 10 per cent.
However, Statia had attributed this to slashing the VAT rate from 16 per cent. Government in its 2017 Budget slashed VAT by two per cent, bringing it down to 14 per cent.
According to Statia, the Authority had expected that the revenue collection would go down based on the rate deduction by some 12.5 per cent.
Nevertheless, he had posited that changing certain goods to standard rating and moving away from zero-rated to exempt taxes would lead to a more level playing field.
In the meantime, the GRA Commissioner General had said the tax collection body is working assiduously to ensure that businesses and individuals are tax compliant in the relevant areas. Only recently, it was revealed that work of a special enforcement team has resulted in scores of city businesses being made to register for the payment of VAT.
In explaining the decline in the revenues, Chairman of the GRA Board of Directors, Rawle Lucas, had pointed to the fact that the tax base for the VAT is expenditure, that is, money that people spend, the level of spending in the economy with respect to VAT and the level of input and the value of imports with respect to VAT as well.