● Income tax threshold to rise from $720,000 to $780,000 per annum ● Small businesses and non-commercial companies for lower tax rates ● Threshold for property, capital gains taxes to rise ● Remigrants scheme to be revamped to end abuse ● New tax regime f
A. Measures in Support of Our Green Agenda
1.3 Mr. Speaker, in our continued thrust to build a green economy, I propose the following tax incentives for companies utilizing alternate energy technologies; renewable energy options, such as gasifiers to use biomass; and harnessing renewable energy through wind, solar and water, I propose to:
i. Change the Wear and Tear Schedule of the Income Tax Act to allow for the write off of (the) capital expense within two years; and
ii. Waive import duties and VAT on new equipment.
1.4 These additional measures, which are effective from January 1, 2019 build on those announced in Budget 2017 and Budget 2018.
1.5 In addition, Mr. Speaker, hybrid and electric vehicles were exempted in Budget 2017, from the payment of Excise Tax. I now propose: 1.1 i. To amend the Customs Act to include relief from Customs duty for cars with a capacity equivalent to 2000 cc in Watts
ii. To amend Part III B(i) of the First Schedule to the Customs Act and Schedule 2 of the VAT Act to exempt change-over kits
iii. To waive the Excise Tax on all electric motor cycles.
1.6 If the vehicles are modified within two years of entering Guyana, to accommodate gasoline or diesel, the full duties and taxes would become payable.
B. Measures to Increase Workers’ Income
1.7 Mr. Speaker, I propose to increase the income tax threshold to $780,000 or onethird, whichever is greater, with effect from year of income 2019. This represents a 30 percent increase in the threshold, since the Coalition Government came to office in 2015, and would see approximately $805 million being returned to taxpayers. In addition, Mr. Speaker, the wages and salaries of public servants will be increased in 2019, after discussions with the respective unions. It is our hope that a multi-year package can be concluded that progressively improves workers‘ income to a liveable wage over a defined period. Also, we will recommence negotiations on improving allowances in the public service with the Guyana Public Service Union.
C. Exemptions for Public Officers/Public Officials
1.8 Mr. Speaker, vehicles less than 4 years old currently pay zero percent, up to 1,499 cc, and 10 percent, up to 2,000 cc. However, qualifying public officials pay 10 percent and 30 percent, respectively for these two categories of vehicles. This is more than the rate specified in law for regular imports without exemption. I propose, therefore, to amend the Excise Tax Regulations to remove this anomaly and ensure consistency with the applicable law.
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D. Exemptions for Remigrants
1.9 Mr. Speaker, the current remigrant system is flawed and has led to abuse on a number of occasions. In order to ensure compliance, minimize, if not eliminate, the abuse, while simplifying the process, I propose the following:
i. A system of credits up to a limit of $5 million for vehicles imported by a remigrant. With this system, a remigrant can bring as many vehicles as he/she wishes. For example, suppose a remigrant brings in three vehicles, with an assessed value of $20 million. Then the remigrant will be credited with a tax free allowance up to a value of $5 million, and would be required to pay all applicable taxes on the balance of $15 million.
ii. The removal of the 6 month overseas ownership. This allows the remigrant the option of purchasing the vehicle locally, within six months of his/her arrival. This would be advantageous to the remigrant who lived in a country where driving is on the right, as opposed to Guyana, where it is on the left.
iii. Returning students who have completed at least 3 years of continuous study be eligible for remigrant status.
1.10 The granting of remigrant status will continue to be determined by the Department of Citizenship and Immigration.
E. Measures in Support of the Elderly and those in Difficult Circumstances
1.11 Mr. Speaker, I propose to increase the Old Age Pension from $19,500 to $20,500. At the same time, I propose to increase Public Assistance from $8,000 to $9,000. This brings to 55 percent and 53 percent, respectively, the increases granted to these two categories since the Government came to office. Both increases, which take effect from January 1, 2019, will see persons taking home an additional $800 million, in 2019.
1.12 Mr. Speaker, many former public servants, Members of Parliament and other categories of workers, who retired prior to 1992, have approached me with a view of doing something about their pensions, which were decimated as a result of repeated devaluations in the 1980s and early 1990s. They have indicated that they are getting on in age and wish for the Government to bring urgent relief to them. I want to assure those persons that the matter is under active consideration.
F. Measures in Support of Persons Living with Disabilities
1.13 Mr. Speaker, with a view of ameliorating the difficulties faced by persons with disabilities, I propose to exempt from Excise Duty and VAT, vehicles for use by persons with disabilities or vehicles that will be converted for their use. Such vehicles must be able either to be driven by the disabled person, or designed for such a person. Second, Mr. Speaker, the Government will examine the feasibility of granting a tax rebate on handsets with accessibility features for persons living with disabilities. This will allow Guyanese who are visually- and hearing-impaired to afford a smartphone. In order to avoid abuse, the exemptions would be granted, after the Commission representing Persons with Disabilities certifies that the person, the vehicle and the handset are eligible for the concessions. These two initiatives solidify government‘s commitment to equity and inclusion for all its citizens through the use of ICT.
G. Measures in Support of the Private Sector
a. Final Tax – Gold and Diamond Miners Withholding Tax
1.14 Mr. Speaker, in Budget 2018, I announced a series of measures designed to simplify the tax regime applicable to the gold and diamond sector. Specifically, I indicated an intention to amend Section 33 (E) (1) of the Income Tax Act to allow for the tax to be assessed based on a sliding scale, and that such a tax would be a final tax on income from gold mining activities. Unfortunately, the law did not make this explicit. I now propose to amend the law to treat as a final tax, the tax assessed on income derived from gold mining activities. It will also be made clear that this final tax relates only to declarations made to the Guyana Gold Board; that the income must be from individual
gold mining and not from the sale of gold or the rental of blocks; that income from other sources are excluded from this tax treatment.
b. Small Businesses
1.15 Mr. Speaker, in Budget 2018, I stated that many small businesses do not make full use of the concessions available under the various Tax Acts, the Small Business Act and those offered through Investment Development Agreements. Small businesses, as defined in the Small Business Act, are usually taxed at the respective individual and corporate tax rates. In keeping with our Government‘s recognition of the role small businesses play in adding value and employment in the country, I propose to reduce the income and corporate tax rates to 25 percent on taxable profits. To benefit from this reduction, the business must be registered with the Small Business Bureau, and be involved in either manufacturing or construction activities. We estimate that this measure will cost $120 million.
c. Non-Commercial Companies
1.16 Mr. Speaker, in 2017, the non-commercial or manufacturing rate was reduced from 30 percent to 27.5 percent. This enabled these businesses to improve their profit margins, thereby allowing for new investment and capitalization. Following my visits to several businesses, and in an effort to boost activities in the sector, I propose to further reduce the manufacturing and non-commercial rate to 25 percent, with effect from Year of Income January 1, 2019. This measure, which keeps a promise by our Government to reduce the manufacturing rate to 25 percent before the end of our first term, will cost
$1.1 billion.
d. Property Tax – Individual and Companies
1.17 Mr. Speaker, in an effort to restore equity and consistency in the tax regime between individuals and companies, and to further reduce the burden of Property Tax and Capital Gains Tax, I propose the following:
i. An increase in the threshold for filing a return for: individuals, from the current net property of $1.5 million to $40 million; and for companies, from $0.5 million to $40 million.
ii. A reduction in the current rate for both individuals and companies, from 0.75 percent to 0.5 percent for the first $20 million in taxable net property, and the remainder being taxed at 0.75 percent.
1.18 By way of example, two persons A and B, have net property of $38 million and $105 million, respectively. Individual A will not be required to file a Property Tax return, since he is under the threshold of $40 million. However, Company B will have to file a return and pay Property Tax as follows: taxable net property: $105 million - $40 million = $65 million. Tax payable on first $20 million = $100,000. Tax payable on
balance of $45 million = $337,500. Total taxes payable = $437,500. Under the new measure, Individual A saves $285,000 while Company B saves $346,250. The revenue loss from this measure is estimated to be $100 million.
e. Capital Gains Tax
1.19 Mr. Speaker, households who sell their homes and invest in newer dwellings are still subject to Capital Gains Tax. I propose to exempt from the payment of Capital Gains Tax the proceeds from the sale of a house which is reinvested in another home of equal or greater value, during the said year of assessment or within 60 days of the end of the year in which the property is sold. The revenue loss is estimated to be $200 million.
1.20 In addition, Mr. Speaker, in recognition of inflation through the years, I propose to increase the threshold for Capital Gains Tax arising from disposal of property from $1,000 to $500,000. The revenue loss is expected to exceed $102 million. 1.21 Also, Mr. Speaker, in light of the wear and tear allowance given to buildings used for service and warehousing, and property tax valuations being updated to the 01/01/2011 market value, I propose the removal of the twenty-five year limitation. This means that Capital Gains Tax will be applicable on the gains accrued between the 2011 valuation or the date of acquisition, if later, and the selling price of the property when assets are disposed of, regardless of the date of acquisition. These three measures are contemplated to be revenue neutral, in view of the fact that the 2011 market value of assets are realistically closer to the current 2017 market value.
f. Wear and Tear Allowance for Service and Warehouse Buildings
1.22 Mr. Speaker, changes to the capital allowances‘ structure have been a subject of discussions between the business community, accountants and the Ministry of Finance for some time now. It is argued that Guyana has neglected to recognize that buildings suffer from Wear and Tear, not only by housing machinery but also by warehousing and providing services. As such, I propose to amend Section 17 of the Income Tax Act to provide for an allowance for wear and tear on any building used for services and warehousing purposes. The Schedule provided in the Income Tax (Depreciation Rates) Regulations made under Section 117 would be amended to include buildings (used for services and warehousing purposes) and the rate proposed is 2 percent on cost.
1.23 I also propose to amend Part II of the Income Tax in Aid of Industry Act to allow for an initial allowance on buildings used for services and warehousing purposes. This means that not only manufacturing companies will benefit, but also hotels and any industry that produces value that is primarily intangible, such as customer service, management, advice, knowledge, design, data and experiences. This measure will cost over $400 million, annually. However, this will again increase after tax profits in the hands of the beneficiaries.
g. Export Allowance
1.24 Mr. Speaker, the law provides for the Export Allowance to be claimed by exporters of non-traditional products to markets outside of CARICOM. The rationale was to provide an incentive to boost exports to markets where receipts were in a tradable currency, such as the US$, as distinct from CARICOM, where payments were settled in soft currency such as the Barbadian or Trinidad and Tobago dollar. This situation has diminished substantially. Therefore, I propose to extend the export allowance to exporters of non-traditional products who are paid in a recognized tradable currency. The cost to the economy in tax dollars will be $300 million. However, this should be counter balanced by the increased exports of non-traditional products and increased hard currency receipts.
h. Exemption from Customs Duty, Excise Tax and VAT
1.25 Mr. Speaker, I propose to make the following amendments to the Customs Duty, Excise Tax Act and Value Added Tax Act:
i. Reduction of the Excise Tax charged on Shandy and other beverages containing less than 1 percent alcohol by volume, from $126 per litre to $65 per litre. The revenue foregone is $37 million.
ii. Reduction in the Excise Tax charged on indigenous wines and other fermented beverages that are manufactured using 100 percent local inputs, from $150 per litre to $65 per litre. The revenue loss is $128 million.
iii. New regime for taxing tobacco consisting of a combination of ad valorem and specific taxes as follows: the imposition of a specific Excise Tax of $2,500 per 1,000 sticks, together with Customs Duty of 100 percent and VAT of 14 percent. In addition to reducing smuggling and simplifying administration, the new regime should result in a net increase in revenue of $50 million.
iv. Exemption of pesticides used in the agriculture sector from Custom Duty and VAT. The revenue loss is $3.2 million.
v. Exemption of limestone used in the agriculture sector from Customs Duty. The revenue loss is $4.2 million. vi. Exemption from VAT, aircraft engines and main components/parts. vii. Exemption from VAT, concrete blocks used for housing and construction. This follows the exemption from VAT on complete housing units up to $6.5 million, which formed part of the measures in Budget 2018. Together, these measures will propel the housing drive, as Government seeks to make available decent and affordable homes to the population.
viii. Exemption from VAT, equipment and chemicals for water treatment and production plants.
ix. Exemption from VAT, orthopaedic appliances and artificial parts of the body. (All items contained in the First Schedule to the Customs Act under Tariff Heading No. 90.21, being orthopaedic appliances, including crutches, surgical belts and trusses; splints and other fracture appliances, artificial parts of the body; hearing aids and other appliances which are worn or carried or implanted in the body, to compensate for a defect or disability), and artificial teeth and others.
x. Exemption from VAT, Educational Robot Kits, in order to boost the `Reading & Robotics’ programme targeted to children in communities all across Guyana; to encourage more young people to become avid readers; and to develop necessary soft skills like communication, collaboration and conflict resolution.
xi. Exemption from VAT, boats used in rural and riverain areas designed for the transport of goods and persons not exceeding 7.08 cubic metres (250 cubic feet). The import Duty of 5% will also be waived.
i. VAT Credits for Electricity and Water
1.26 Mr. Speaker, I propose to amend the Income Tax Act to give exporters a tax credit equivalent to the applicable VAT paid in relation to water and electricity, once proven to the satisfaction of the Commissioner General, GRA, that such VAT was charged and paid in relation to the goods manufactured and exported.
j. Remission of VAT
1.27 Mr. Speaker, in order to ensure the consistent application of the tax laws, and in keeping with Section 105 of the Income Tax Act – which allows the Minister of Finance to remit income tax – I propose to amend the VAT Act to provide for the Minister of Finance to make regulation to remit, in whole or in part, the VAT and the interest on VAT payable by any person, where good cause is shown.
H. Tourism
1.28 Mr. Speaker, in Budget 2018, I alluded to the critical nature of the transportation sector in the economy. In recognition of that, the rates of Excise Tax on overland transportation imported for tourism purposes in the interior/rural and riverine areas were reduced, thereby bringing relief to businesses operating in those areas, especially Regions 1, 7, 8, and 9. I now propose to add Region 10 to the regions identified to benefit from this concession.
1.29 I propose to introduce a tax credit, equal to 75 percent of income and corporate taxes payable on profits from tourism activities, for persons investing in Regions 1, 7, 8, 9 and 10.
1.30 I propose to exempt from the payment of import duties and excise taxes, motor buses with twelve (12) or more seats, not exceeding four years old, purchased and used exclusively for the transportation of tourists anywhere in Guyana, and registered and licensed as a tourism operator by the Guyana Tourism Authority (GTA). The GTA will also verify that the said operators satisfy the registration and licensing conditions for five years subsequent to receiving any concessions, and all such vehicles will have painted stripes similar to the zoning for minibuses.
1.31 Further, Mr. Speaker, hotels in the named Regions will benefit from the proposed amendments to the Income Tax Act and the Income Tax (In Aid of Industry) Act that will allow the grant of wear and tear and initial allowances on hotel buildings.
I. Passports
1.32 Mr. Speaker, I wish to announce the introduction of a 46 page, machine readable passport. Business persons and other frequent travellers would find this new passport both attractive and convenient. It is priced at $10,000. The 32 page passport remains available at the current price of $6,000.
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J. Refunds of Revenue
1.33 Mr. Speaker, as currently obtains, refunds for the overpayment of customs duty and income tax are dependent on resources made available in the budget. In addition to causing unnecessary delays and inconvenience to the taxpayer, it is administratively burdensome for the GRA. I propose, therefore, to amend the Customs Act and the Income Tax Act to allow for the payment of customs duty and income tax refunds to be done out of the Customs Duty revenue and the Income Tax revenue, respectively. Only the net revenue collected for Customs Duty and Income Tax will be paid into the Consolidated Fund. This treatment of refunds is identical to, and consistent with, the payment of VAT refunds, which is done out of current VAT revenues. I believe that this new system will reduce the angst and anxiety suffered by taxpayers as a result of the protracted delays in processing refunds.
K. Miscellaneous Measures
i. Mr. Speaker, I propose to amend the relevant sections of the Tax Act, in particular Sections 18, 19, 20, 22, 40, 41, 44, 46, 47, 48, 50 and 54 to include the ten established towns - Anna Regina, Bartica, Corriverton, Georgetown, Lethem, Linden, Mabaruma, Mahdia, New Amsterdam and Rose Hall – for licence purposes.
ii. I propose to amend the Motor Vehicle and Road Traffic Act to increase the duration of a driver‘s licence from 3 years to 5 years, and a small increase in the fee from $4,000 to $5,000. In keeping with prior amendments, pensioners will not pay any fee for a passport. The longer duration will allowing for the freeing of human and other resources, which will be devoted to the critical oil and gas area.
iii. I propose to amend Section 60A of the Income Tax Act to reduce the cost of reprint/replacement of a TIN certificate from $5,000 to $2,000. The cost for a TIN certificate for a first time applicant would remain at $1,000.
iv. I propose to amend the relevant section of the Income Tax Act to bring greater clarity to the definition of `contractor’, for the purpose of deducting the 2 percent withholding tax.
v. I propose to amend the First Schedule of the Tax Act to include the profession of Tax Preparer, to allow for a tax practice certificate to be issued to persons who, in the opinion of the Commissioner General, are so qualified to offer accounting and tax services to taxpayers. A registered Tax Return Preparer who is not a member of a recognised accounting body will be required to pass a competency test covering such issues as taxation, preparation of individuals‘ tax returns, and ethics.
vi. I propose to amend the Income Tax Act to remove the requirement for the Commissioner General to send Notices of Assessment to taxpayers whose liability is less than $1,000. This would reduce the cost and administrative burden of printing and posting these Notices of Assessment. At the same time, the law will also be amended to provide for the service of Notices of Assessment either by e- services, regular post or registered post.
1.34 Mr. Speaker, altogether, these measures will result in a net loss of revenue of $3.5 billion, which will clearly redound to the benefit of the taxpayers.