Govt urged to include tax reform recommendations in 2018 Budget

Finance Minister Winston Jordan is preparing to lay the Annual Expenditures for 2018 (Budget) in the National Assembly, but many of the measures that had been presented by the Tax Reform Committee—measures recommended in support of local businesses, including the introduction of a seven per cent Value Added Tax (VAT) on certain items — remain unimplemented.

The matter was recently brought to the fore when committee member Christopher Ram reiterated calls for the Administration to implement them, especially the support tax measures aimed at helping to cushion small businesses. According to Ram in a recent public missive, “the Tax Reform Committee never had the opportunity to discuss the Report or any of its recommendations with the Minister.”
One such measure that Ram is advocating the Minister implement is reduction of the corporate tax rate on telecommunication companies from 45 per cent to 40 per cent, and on commercial companies from 40 per cent to 35 per cent.
The Tax Reform Committee, according to Ram, called for implementation of unlimited carry-forward and unlimited utilisation for losses incurred in the first three years; losses incurred in subsequent years should be limited to seven years and subject to a 50 per cent recovery in any one year.
Ram wants to see the Administration provide more tax incentives, “which themselves should be based on clear and rational criteria, through tax laws, which must include provisions for an annual review and withdrawal of the incentives where conditions are not met.”
During the course of the recently held Private Sector Commission’s Business Summit, the matter of balancing taxes charged and concessional incentives offered to the business community was raised as a matter of concern.
Ram recalled that the Tax Reform Committee, in order to widen the tax net, recommended granting a tax amnesty and addressing the presumptive tax.
As it relates to supportive measures for the business community, the Tax Reform Committee had recommended the Administration increase the Value-Added Tax registration threshold from G$10 million to G$12 million, reduce the standard rate to 14 per cent, and introduce an intermediate rate of 7 per cent for some types of goods.
Increasing the threshold for businesses would mean that, in addition to the reduced tax charged, businesses with a turnover of less than G$12 million would not have to fall into the accounting regime.
The TRC had recommended that education services be exempted from taxation; and 21 items of education materials, including all textbooks, children’s books, dictionaries, pencils, lunch kits and charts, continue to be zero-rated; while others, including recipe books, instructional newsletters and music manuscripts, be charged at an intermediate rate of 7%.
The TRC had also recommended that VAT Returns should provide for explicit adjustments to credit carry-forwards caused by refund claims or rejection of these claims, and that GRA pay all refunds within 15 days of a claim being verified.
The measures that were recommended by the Government’s Tax Reform Committee were meant to be revenue-neutral, meaning there was not supposed to be an additional burden on taxpayers. Many of its measures were never implemented, and Ram believes they should be incorporated into the 2018 Budget.
According to Ram, the Tax Reform Committee “had estimated that its proposals excluding amnesty, Government transfers, and other such measures would be revenue-neutral, but that there would be some rebalancing in the system.”
Revenue-neutral means the changes in the tax system would not increase or decrease the taxes received by Government. This did not obtain, and Government used its tax measures over the past two years to rake in billions more than had been projected.
The calls from Ram came following Finance Minister Winston Jordan’s statement that there would be no new taxes in the 2018 Budget—an announcement made a day before the opening of the Business Summit.