Government earns $3.4 Billion more in VAT in first six months of this year

In 2017, VAT from imports of goods grew by $1.2B, partly as a result of policy changes in Budget 2017. The value added tax on domestic goods for that year also increased by a marginal $838.5M, primarily due to higher payments from the telecommunication and wholesale and retail trade sectors.

Government earns $3.4 Billion more in VAT in first six months of this year

By Ravin Singh

In the first six months of this year, the government raked in an increase of $3.4B in Value Added Tax (VAT) when compared to the corresponding period last year, the Ministry of Finance has revealed in its mid-year report.

The report details that revenue collections totalled $109.2B at end-June 2018 – a 12.4 percent increase compared to the same period in 2017 – primarily due to increased collections from all the major tax categories.

Those categories include: income taxes, which increased by $5.3B; VAT, which increased by $3.4B; excise tax, which increased by $3B; and trade taxes which increased by $2B.

The report states that VAT collection for the first half of 2018 was $22.7B, compared to $19.3B for the same period last year.

It was explained that over the comparison period, VAT from imports of goods and services grew by $2B, while VAT on domestic goods grew by $1.3B, primarily from higher payments in the telecommunication and wholesale and retail trade sectors.

In 2017, VAT from imports of goods grew by $1.2B, partly as a result of policy changes in Budget 2017. The value added tax on domestic goods for that year also increased by a marginal $838.5M, primarily due to higher payments from the telecommunication and wholesale and retail trade sectors.

In keeping their promise, the APNU+AFC Government reduced VAT to 14 per cent, down from its initial 16 per cent, after it was introduced by the former PPP Government. This move by the coalition government was intended to ease the burden on taxpayers and the ordinary citizen, since VAT was yielding significant revenues.

They had promised too that the reduction would be a progressive one, but since their assumption to office, the APNU+AFC has only reduced VAT once.

At the same time, while there was a 2 per cent decrease in VAT, the base for this tax was expanded to include items which did not attract VAT initially. Some of those items are water and electricity, which consumers now pay VAT on, if they exceed $1,500 and $10,000 (per month), respectively.

Last year, President David Granger had said that: “We will reduce the amount of items and reduce the rates at which those items are taxed, but I don’t want to make a prediction now because the government’s spending is based on its earnings.”

Accounting firm, Ram and McRae had discovered last year that the reduction of VAT and the expansion of the tax base will pose “severe consequences” for Guyanese, since it would further diminish their purchasing power.

“We have taken an actual spending of a taxpayer and calculated the VAT under the current and proposed regimes… VAT increases by 155 per cent and total expenditure by 7.3 per cent,” the accounting firm had contended.

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