January tax revenue figures show gov’t can remove VAT on private education

The Ministry of Finance has disclosed that tax revenues for January 2017 was $11.9 billion or 40% more than tax revenues in January 2016. Total tax revenue for the entire 2017 was budgeted at $162.7 billion, or 8.67% over 2016. Clearly, it is not expected that total tax revenues for the entire year will match the 40% increase but is there any reasonable observer who will say it is not going to be much more than 8.67%, more than enough to make up the $350 million? All it would require for the Government to replace the $350 million it has said it will lose by removing VAT on education services would be a meagre 0.22% over the 2017 budgeted revenue.

The January figures which come from no less a place than the Ministry of Finance remove the final straw of an excuse that Prime Minister Nagamootoo and Co made for the retention of VAT on education. Come on Mr. Nagamootoo, do the right thing, the bright thing and the decent thing. You showed with your dispiriting prediction at the National Cultural Centre that you can sway Cabinet. Do it again. The Government can afford it. And just in case you need to be reminded, the tax revenues come from many of the parents whose plea you so callously rejected.

Government applied different standards to VAT on medical services from those on education services

Clearly unmoved by fifteen thousand signatories and the heartfelt arguments, pleas and entreaties of hundreds of parents and students at the Government-Parents-Adminis-trators VAT on Education consultation, Cabinet’s subsequent announcement of no review of VAT on education until 2018 has effectively killed any further meaningful discussion on this issue. In this my last contribution to the debate, I write only to show how the government has applied vastly different standards to VAT on medical services and education services, and more particularly private education services.

In his Budget 2017 Speech, the Finance Minister announced proposals to “expand the list of exempt items and [to] eliminate all zero-rated items, with the exception of those pertaining to exports and manufacturing inputs.” In neither list of exempt nor zero-rated items attached to the Budget Speech did education or health services appear, meaning that those items, both of which were previously zero-rated, would become taxable. The doctors at a meeting at the Ocean View Hotel protested and lo and behold, when the actual law was published, not only did health services mysteriously appear in the exempt list (Schedule II), but whole ranges of medical supplies appeared on the zero-rated list (Schedule I). Continue reading Government applied different standards to VAT on medical services from those on education services

The case for VAT on education is weak to non-existent

The decision by Dr Rupert Roopnaraine, Minister of Education, to meet five parents and Swami Aksharananda, educator, as representatives of the group protesting outside of his ministry against VAT on education services on April 5 was commendable. Coming on top of the Cabinet decision to hold a consultation with the public at the National Cultural Centre today Friday, April 7 at 11 am, there is some hope that the government is finally ready to reverse the decision to impose VAT on education.

Why it has taken the government over four months to do the right thing is baffling. Almost every argument by the government has been met with cogent, rational and compelling responses. Here are some of those arguments and the responses. Continue reading The case for VAT on education is weak to non-existent

Until there is a change in the law UG should register for VAT

I have hesitated to engage in the ongoing debate in the print media on whether the VAT being imposed on educational services extends to fees charged by the University of Guyana. However, because even the media seems unsure, I do not think further hesitation helps.

VAT is not a particularly complex tax and has a few basic principles. Section 9 of the VAT Act imposes VAT on (a), every taxable supply by a taxable person; and (b), on every import of goods or import of services, other than an exempt import. We are here concerned with (a) and can disregard (b). Because the section dealing with taxable person also refers to taxable activity, it seems preferable to look at the definition of “taxable person” before going on to examine taxable activity.

A taxable person is a person who is registered, or who is required to register under section 11 of the Act. “Person” is defined in the Act to include the State, an agency of the State, a local authority, board, natural person, trust, company, and partnership. In other words, there is no automatic or definitional exception of the state or, by extension, educational institutions funded by the State. Continue reading Until there is a change in the law UG should register for VAT

The spending on education

The Budget debate is over and the spending is now in full flow. Contracts are being hastily awarded and colourable initiatives taken with significant budgetary implications. The President’s misnamed One Laptop per Family has begun, and despite the seriousness of the questions and the strength and logic of the criticisms, the project is proceeding as the President wants. All, it seems, oblivious to the sad state of education in the country, the many plans accumulating dust on the shelves, and the increasing disparity of performance of the poor child forced to attend the public schools and those of the powerful and privileged attending the private schools.

Just before sitting down to write – or rather type – this column I was reading the judgment delivered in fluent and beautiful language by former Chancellor Keith Massiah in the case Attorney General v Mohammed Ally delivered in 1987 in the Guyana Court of Appeal. On the question of the justiciability of the then Article 11 which has been adapted into Article 13 of the current constitution as well as enshrined in the fundamental rights article (149c), the Chancellor said: “[The question] is therefore in Guyana at large for debate and decision. Now that it has arisen, the court cannot retreat into a state of intellectual agoraphobia, refusing to venture forth and to express an opinion one way or another.” Responding to the question the Chancellor said: “I see no reason to think that the articles in Chapter II of the Constitution have no juridical relevance and are merely idealistic references with cosmetic value only. So to think would be to seek to debase the Constitution.” Unfortunately those concerned with the formulation and promulgation of our national budget have their own contrary ideas of what consultation means. By way of footnote the current Attorney General was a member of the team whose argument found favour with the Court of Appeal.

Process, not an event
This column sees financial management as a continuous process rather than an event and supports the call by Professor Clive Thomas for an independent Budget Office. With so much milk in the public purse, some competent, independent body needs to exercise greater oversight over the proliferating and omnipresent cats. There seems a view – not entirely without merit – that the absence of accountability stops with the President. In fact we only have to look across the ministries and the regions to find ministers, regional representatives and other politicos who emulate the President when it comes to careless and improper spending and accounting. In other words, such behaviour does not stop with the President but in fact starts with him. The nation therefore has to be on its guard and the fourth estate ever alert to the opportunities for improper use of the public purse.

Starting today Business Page will address with greater attention some of the spending approvals by some of the ministries and departments and intends to ask whether the National Assembly fully understands what is taking place with the finances of the country. I wonder if there is one per cent of the population which knows who the Accountant General or who the finance officer in the Office of the President is. One clue: it is not the President, despite how often and how flamboyantly he speaks and acts as if he controls the public purse or carries it in his back pocket.

I have chosen for the first of these ministry reviews the Ministry of Education partly because of the topicality and controversy over the One Laptop Per Family project on which more than $5.4 billion will be spent. There is some uncertainty and confusion over the total cost of the programme. The junior Minister of Finance Jennifer Webster announced the cost as US$295 per computer or whatever it is, while for 2010 the total expenditure is projected at $3.6 billion, of which half is from the national budget and the other half is expected from the Chinese. If we take the number of 90,000 households, times a unit cost of US$295 and convert that at G$204 to US$1, the figure is $5.416 billion, some 50% more. I would start then by pointing out that this project is more than half of the budget for the Ministry of Education which is $10.3 billion of which the recurrent budget is $7.544 billion and the capital budget is $2.661 billion. We should bear in mind however that the regions also have budgetary allocations for education, additional to those of the ministry.

A summary of the ministry’s budget follows:

Under-funding at UG
The Berbice Campus of the university, with approximately 550 students, receives $132.6 million or approximately $241,091 per student. By contrast the Turkeyen Campus with approximately 5,500 students receives $575.2 million or $104,581 per student, a significant disparity perhaps explained by the level of fixed cost. Similarly, the capital budget for the Turkeyen Campus is $35 million while that for Berbice is $20 million.

The treatment of the university by the government might come as a shock to Vice-Chancellor Professor Carrington and his team who invested considerable resources in preparing a 2009-2012 Strategic Plan that identified under-financing as the major problem facing the university. The numbers show that the President will be spending on his Laptop programme more than seven times the 2011 expenditure on the University of Guyana.

At a meeting with the private sector last year Prof Carrington reported on an encouraging meeting that his team had had with the President and the Cabinet. He is learning faster than he might have wished about the official policy towards education in Guyana and towards higher education in particular. If it is any consolation to the university, public education as a percentage of the national budget has actually declined from 10.6% in 2007 to 9.4% in 2010.

Information versus education
In its wider Strategic Plan 2008-2013 the Ministry of Education emphasised the critical role which the University of Guyana must play in ensuring quality education throughout the education system. The Laptop programme was not even conceived when that plan was developed and agreed by Cabinet. With such ‘ad hoc-ism’ in planning, it can be no surprise that the 2003-2007 Strategic Plan failed to meet the target of “50% for students meeting the defined standards of literacy and numeracy.”

On teacher training, compare Cyril Potter which gets $87.5 million in 2011 while GINA gets $111.5 million, suggesting that for this government imparting controlled information is more deserving of public funding than teacher training. Or NCN, ostensibly a commercial entity, gets $70 million.

Interestingly enough, employment costs account for 30% of the ministry’s budget for education delivery, while in Region 4 it is 73%, in Region 5 it is 72%, and in Region 6 it is 70%. The 30% in the ministry is partly because the subventions for UG come out of its budget. An interesting comparison too would be the distribution of persons engaged in education delivery across the country. There is a wide disparity across the regions between the ratio of persons engaged in education delivery with Region 6 having the largest number in relation to population of the regions and Region 4 the lowest. Whether this has anything to do with the Ministry of Education being responsible for some schools in Region 4 is not obvious, but it is clear that this would not be true of all the schools.

No contracts
In what is described as the Main Office, eight out of the ten employees are contract employees; under the National Education Policy 21 out of 42, up from 9 out of 28 in 2010; in Ministry Administration 56 out of 194; and Education Delivery 25 out of 2,220 employees. This suggests that the pattern of contract employees does not apply to the teachers, who are among the lowest paid public employees with pay scales range from $38,554 per month to $189,006 for what is called a special scale. Again we only have to compare what happens with the so-called consultants and politicians and other connected persons, who have been placed in the Office of the President at taxpayers’ expense.

One intriguing piece of information is the item ‘Dietary’ under Ministry Administration which is $600 million, a whopping 50% increase in 2010 accounting for 40.2% of that unit’s budget for 2011. This programme appears to have escaped the attention of the Auditor General in recent years. On the other hand it might support the notion that we do in fact have 90,000 poor households in Guyana and they are in receipt of some school feeding or similar programme.

The state of our education system is understandable from the poor, uncoordinated or non-existent policies towards education, the failure to identify and address the problems and the misdirection of budgetary allocation by the government. More than forty years after its birth, UG is treated like an unwanted stepchild, with inadequate support and an uncertain future. Sitting at the apex of our education system, in many ways, UG epitomizes the country’s education woes which it will take more than one laptop to solve.

Next week we will look at another of the ministries.