PRESS STATEMENT By People’s National Congress Reform Thursday, November 9, 2006 Media Centre Congress Place, Sophia
• The People's National Congress Reform extended a warm and cordial welcome to H.E. Bhairon Singh Shekhawat, Vice-President of the Republic of India to Guyana;
• The Value Added Tax (VAT), together with a set of excise taxes, replaces some 9 existing taxes. It is a more broadly based tax on the production of goods and services and thus, in principle, acceptable to the PNCR-1G on the grounds of equity in tax burden among producers;
• The PNCR-1G therefore believes that VAT could be less than 16% if revenue neutrality is truly the objective;
• The PNCR-1G calls upon the Government to honour the undertaking given by its representatives in the Select Committee that the food items which were not subject to consumption tax now would be zero rated under the VAT regime;
• The GRA needs to inform consumers as to whether there is, or will be, a mechanism through which they could seek redress if they believe they may be overcharged;
• Private Sector businesses are concerned that they may be in possession of stocks at December 31, 2006 on which they would have paid current taxes;
• The PNCR-1G suggests that the Government rethink the operational date for the commencement of VAT in order to ensure a smooth transition to this tax;
• The PNCR will hold a VAT symposium on Tuesday November 21, 2006 at the Rupununi Room at the Tower Hotel from 4:30 pm;
• The PNCR extends congratulations to all the newly elected Chairmen and Vice Chairmen of the ten Regional Democratic Councils.
PNCR WELCOMES THE VICE PRESIDENT OF INDIA TO GUYANA
In a statement issued on Tuesday last, the People's National Congress Reform extended a warm and cordial welcome to H.E. Bhairon Singh Shekhawat, Vice-President of the Republic of India to Guyana.
The Party has no doubt that his visit has served to strengthen relations between our two countries. In welcoming the Vice-President, the PNCR recalled that, while in Government, the Party enjoyed a long and fruitful association with India in various fields of diplomatic endeavour. The Party also expressed its pleasure at the continued co-operation between our two countries in their diplomatic, cultural and economic relations.
The PNCR notes with interest that only the Guyana Chronicle considered it important to publicise its message of welcome in a timely manner.
VALUE ADDED TAX
The Value Added Tax (VAT) was put on the Statute books in 2005 and is due to become operational on January 1, 2007.
This tax, together with a set of excise taxes, replaces some 9 existing taxes. It is a more broadly based tax on the production of goods and services and thus, in principle, acceptable to the PNCR-1G on the grounds of equity in tax burden among producers.
However, from the time of the introduction of the VAT bill in the National Assembly during the 8th Parliament the PNCR has consistently raised a number of concerns almost all of which remain unaddressed.
VAT IS NOT REVENUE NEUTRAL AS PRESENTLY ARRANGED
From the inception the Government advertised and sold VAT to the public as a revenue neutral tax. The consultants who did an estimation of the impact of a value added tax pointed out that “from all our simulations the net yield of the VAT and excise taxes exceeded the yield of the taxes to be replaced.” Only rates of 15% and 16% were used. They also pointed out that official GDP data is underestimated “and it therefore does not reflect the level of economic activity in Guyana particularly in the wholesale and retail sector….we therefore believe that conclusions based on the use of such data for the analysis of the impact of VAT and associated excises are likely to be inaccurate and misleading.”
Notwithstanding this, the Government, in applying a VAT rate of 16% completely ignoring the fact that official GDP is underestimated by at least 40%. Thus the yield of the VAT plus excise taxes is heavily underestimated based on the use of official GDP estimates.`
The PNCR-1G therefore believes that VAT could be less than 16% if revenue neutrality is truly the objective.
ESSENTIAL FOOD ITEMS WILL COST MORE IF NOT ZERO RATED
During the Select Committee examination of the bill the PNCR pointed out that the scenario chosen by the Government, and indeed the bill that was before the Parliament, did not zero rate certain essential food items such as onions, garlic and split peas.
The law that is on our Statute books at present does not zero rate these items. Nor does the law zero rate certain educational materials and textbooks.
Questioned on these matters, the Honourable Minister of Finance would only say that the Government would make an announcement shortly. There are now less than two months before the Act comes into operation. If the Government does not zero rate the consumer goods and educational materials that currently pay no consumption tax then it is indisputable that the prices of these commodities to consumers would increase by at least 16%.
The PNCR-1G calls upon the Government to honour the undertaking given by its representatives in the Select Committee that the food items which were not subject to consumption tax now would be zero rated under the VAT regime. We also call upon the Government to zero rate those educational materials which currently do not pay consumption taxes. To fail to do so would, in the case of food items, be breaching an undertaking and, in the case of educational items, be an act of callous disregard for the children of the poor.
Other matters of concern to the PNCR-1G are:
(a) The ineffective public awareness and information programme by the Guyana Revenue authority (GRA);
(b) Treatment of stocks on hand at December 31, 2006 which would have already been subject to one or more of the taxes now existing;
(c) The operational date for VAT.
THE INEFFECTIVE PUBLIC AWARENESS AND INFORMATION PROGRAMME BY THE GUYANA REVENUE AUTHORITY (GRA)
By and large the programmes seem to appeal to emotions for support of VAT. Thus emphasis is placed on speaking about equity and the widening of the tax base as well as on the fact that VAT is not a cascading tax.
The PNCR-1G believes that what consumers need to know is exactly how the tax is to be applied, what items will be zero rated, how they could recognise and calculate exactly what amount of VAT is payable on a given item and whether this tax would be explicitly shown for any item purchased. There is certainly no provision in the law as it stands requiring this.
The GRA also needs to inform consumers as to whether there is, or will be, a mechanism through which they could seek redress if they believe they may be overcharged.
TREATMENT OF STOCKS ON HAND AT DECEMBER 31, 2006 WHICH WOULD HAVE ALREADY BEEN SUBJECT TO ONE OR MORE OF THE TAXES NOW EXISTING
This is a matter that needs to be clarified with certainty expeditiously. Private sector businesses are concerned that they may be in possession of stocks at December 31, 2006 on which they would have paid current taxes.
Then come January 1, 2007 these stocks could be subject to VAT. It is difficult to understand why a decision could not be forthcoming on this issue. One possible solution could be for the GRA to grant a tax credit equivalent to the current taxes paid. This credit could then be applied against VAT due. The PNCR-1G urges a swift decision on this matter.
THE OPERATIONAL DATE FOR VAT
From all appearances it seems that many matters are not quite clear to either consumers or producers. In addition, there is doubt as to whether there are enough trained officers with the requisite knowledge of the tax itself and of its administration. The outlying GRA offices, it is suggested, does not have enough, if any, officers who can deal with queries. Is it possible that the administration of other taxes will suffer while personnel and financial resources are diverted to deal with VAT?
The PNCR-1G suggests that the Government rethink the operational date for the commencement of VAT in order to ensure a smooth transition to this tax. If it is truly the case that VAT is a revenue neutral tax then postponement of its application for, say, a year will not affect revenue negatively.
The other point that may be worthy of consideration is whether there should not be initial application of VAT on a narrow range of goods and services, with an expansion of the range over time as the kinks in administration and application are sorted out.
The PNCR-1G looks forward to an early response to the matters raised in this statement.
PNCR SPONSORS VAT SYMPOSIUM ON TUESDAY 21ST NOVEMBER AT TOWER HOTEL
Despite some minimal efforts by the GRA, the general public is still unaware of the full implications of VAT. One reason is that some of the information being disseminated is, at best, based on speculation that the Government would fulfill undertakings given to the Special Select Committee of the National Assembly on the VAT Bill and recent promises to the public by the President. The PNCR finds such a situation wholly unacceptable, especially since the Select Committee concluded its work several months ago and the Law was passed in the National Assembly since 2005. This lack of information or misinformation has influenced the PNCR-1G to sponsor a seminar/Symposium on VAT on Tuesday 21st November 2006 in the Rupununi Room of the Tower Hotel from 4:30 PM. We are inviting, among others, the Minister of Finance to address the seminar and to answer questions which participants may have. Several organizations have also been invited to send representatives. The public is invited.
PNCR CONGRATULATES THE NEWLY ELECTED CHAIRMEN AND VICE CHAIRMEN OF THE REGIONAL DEMOCRATIC COUNCILS
The PNCR extends congratulations to all the newly elected Chairmen and Vice Chairmen of the ten Regional Democratic Councils. It is the Party’s hope that these new Councils will accelerate development in the Regions and that the constituents will be satisfied with their performance. The PNCR is however conscious of the fact that, unless there are changes in the law and the role of the Ministry of Local Government and other State Agencies, the Regions would be made impotent in fulfilling the expectations of the people. It is for this reason that the PNCR considers Local Government Reform as an urgent issue to be addressed and hopes that the outstanding matters such as the role and authority of the Regional Executive Officer, Fiscal transfers from Central Government and remuneration for Councilors are speedily addressed. The fact is that irrespective of who is elected to the Chairmanship and Vice Chairmanship of the Regional Democratic Councils, these Councils will remain powerless and merely instruments of the Local Government Ministry or more particularly, the PPP Local Government Minister.
The PNCR has noted the statement by the PPP/C General Secretary, issued on Saturday November 2nd 2006, which suggested that the PNCR Leadership had reneged on certain undertakings with respect to the Election of Officials to these Councils. The PNCR was surprised at the PPP’s public statement given the state of discussions between the parties and especially in the context of meetings between the General Secretaries of both Parties after those Elections. The PNCR has refused to be side tracked on this issue as it considers as more important the issues being discussed by the parties that are essential for the effective functioning of the Councils and the promotion of local democracy. The PNCR, however, wishes to state for the record that its Leadership fulfilled all undertakings.
In an earlier statement the Party re-emphasized that it campaigned on a platform which promised that a PNCR-1G government would have involved all political parties in the governing of Guyana. The Party also stated that it was guided in the post election period by the principles of inclusive and shared governance. After initial consultation with all Parties except the TUF, the PNCR and the PPP continued discussions on issues related to the promotion of Local democracy, particularly as it related to the functioning of the Regional Democratic Councils.
In those discussions the PNCR’s re-emphasized that arrangements for the election to various posts in the Councils would be meaningless unless the fundamental issues affecting the functioning of local democracy were addressed. The parties therefore agreed to pursue those matters in the hope of arriving at an agreement before the Election of Chairmen and Vice Chairmen of the various Councils.
Among the matters were, the Uniform Treatment of All Regions; allocation of resources for projects identified by the Regional Democratic Councils; Land Distribution issues in the Regions; Selection and reporting relationships of Regional Executive Officers and the RDC’s; implementation of D&I projects in the Regions; Remuneration for Regional Councilors; Facilities for Chairmen, Vice-Chairmen and Councilors of RDC’s to carry out their responsibilities; specific budgetary allocation for Agriculture to each Region and managed by the RDC; Regional budgetary allocation for Culture, Youth and Sports to be managed by the RDC; and Outstanding Local Government Reform Issues, including, Model for Local Government Electoral system; Formula for Fiscal Transfers; Creation of the Local Government Commission; and The treatment of Regional Development Plans.
These matters were the subject matter of a draft Agreement that was submitted by the PNCR to the PPP for signature. While there appeared to be agreement on most matters, the PPP requested time to have further internal consultations on the issue of the role and authority of the REO. However, because of the progress of these discussions the Parties considered it useful to commence the process with collaboration at the level of the Elections at the Regional Democratic Councils. The PNCR, acting in good faith that the PPP would work to conclude these discussions expeditiously, sought to communicate the decisions of those discussions to the distant Regions. Regrettably, time did not permit full discussion on these matters with our constituents in the far-off Regions but the Party used all the means at its disposal to communicate the decisions.
Although there was an understanding with the PPP/C about the elections in Region seven, it appeared that several factors, including the unacceptability of the candidate identified by the PPP, resulted in the elected councilors taking decisions which they considered in the best interest of the Regions. Nine of the fifteen councilors voted for the newly elected Chairman, Mr. Holbert Knights. The PPP candidate declined nomination for the post of for the post of Vice Chairman and subsequently the candidate from GAP/ROAR was elected to the post of Vice Chairman unopposed. The PNCR therefore hopes that the parties will work together to maximize the benefits to the people of Region 7.
In Region 8, the Party made it clear to the PPP that it was unprepared to vote for their proposed candidate for Chairman. This was because their candidate used his PNCR seat as Chairman to campaign for the PPP. The PNCR however undertook to do nothing to prevent his election. This arrangement was honoured in its entirety.
In Region 4, which has some 43% of the National Electorate the arrangements between the Parties also proceeded as planned. What is now outstanding is the completion of the discussions with respect to the functioning of the Local Government system. The PNCR hopes that the PPP will honour the commitments made in relation to the fundamental issue of Local Government Reform.
People’s National Congress Reform
Congress Place, Sophia
Thursday, November 9, 2006
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