Changes on the Revenue of the Guyanese Economy
The AFC proposes to increase the present Income Tax Threshold of $480,000 per annum to $600,000 per
annum and income in excess of the threshold to be taxed at the current tax rate of 33.3%.
The justification for this is that:
§ Each taxpayer will benefit by retaining more of their earnings i.e. an increase in their disposable
§ The increase in taxpayers’ disposable income will result in an increase in their purchasing power.
§ The increase in the taxpayers’ purchasing power will result in an increase in the purchase of
more goods and services.
§ The increase in the purchase of more goods and services will result in the payment of more VAT
§ The Government will be able to recoup more revenue as a result of an increase in the payment
of VAT by taxpayers/consumers.
§ There will be a reduction in the number of income tax returns to be processed by the Guyana
§ Approximately 50,000 more persons will no longer be required to file income tax returns.
If this measure is implemented, revenue loss is estimated to be $3.6B annually.
The AFC should note that over the years, government has imposed pay increases for public servants. In 2011, the government has granted approval for the eight per cent across- the- board increase to be paid to government employees with effect from January 1, 2011. The increase will be payable to all public servants and members of the disciplined services. Teachers will get an additional three per cent across- the- board increase with effect from January 1, 2011 on top of the five per cent increase previously paid by the government with effect from the same date, pursuant to the multiyear agreement concluded between the administration and the Guyana Teachers Union. Approval was also given for an additional increase of three per cent to be paid to employees of GuySuCo, who were previously paid a five per cent increase for 2011. This decision has brought the total increase paid for 2011 to all these categories of employees to eight per cent.
Moreover, it must be highlighted that the 2011 budget it was announced that an increase in monthly Public Assistance from $4,900 to $5,500 or a 12% increase over 2010, and an increase in Old Age Pensions from $6,600 to $7,500 per month, or a 14% increase over 2010, both with effect from February
Value Added Tax
The AFC proposes to reduce the current VAT rate from 16% to 12%.
They have stated that:
§ A reduction in the VAT rate is likely to result in an increase in consumers' purchasing power/
propensity to consume
§ An increase in consumer spending would result in a higher demand for goods and services
§ A higher demand for goods and services will boost revenue collections and may result in the net
effect being a positive impact on revenue collections.
§ Companies will engage in more economic activities in the country.
§ It will also serve as an incentive to encourage potential investors who are exploring
opportunities to invest in Guyana.
Negative Impact : However, if this measure is implemented, revenue loss is estimated to be $8.6B per annum for the local economy.
The AFC should acknowledge that currently several categories of items are zero rated or exempted from VAT including essential food items, medical supplies, education supplies, transportation supplies and locally produced goods which are mainly purchased by poorer class of citizens. Therefore the impact of the 16% VAT on the ordinary citizens is currently not very significant as is propagated. In addition they are also benefiting from no taxes being paid on the first $40,000 of their monthly income.
The AFC proposes to reduce Corporation Tax rate of 40% to 35% for Commercial Companies and
the Corporation Tax Rate of 30% to 25% for Non-Commercial Companies. The exception here is
They have noted that:
§ Commercial companies will pay less corporation tax on their profits
§ Payment of less corporation tax will result in companies retaining more of their earnings
§ More capital will be available for investment in goods, services, equipment, staff, etc
§ Companies are likely to expand operations, employ more staff and thereby pay more taxes
§ Companies will engage in more economic activities in the country
§ It will serve as an incentive to encourage potential investors who are exploring opportunities to
invest in Guyana.
However, if this measure is implemented, revenue loss would be approximately $2.4B annually.
Therefore, the total revenue impact as a result of these measures is likely to exceed $14.6B in taxes
annually, if they are to be implemented simultaneously.