Consumers to spend less on average with VAT
Kaieteur News
November 15, 2006
Commissioner General of the Guyana Revenue Authority (GRA), Khurshid Sattaur, yesterday sought to quell concerns that the introduction of Value Added Tax (VAT) on January 1, 2007 will increase the cost of living.
Speaking at a media briefing yesterday at the GRA Secretariat on Lamaha Street, Sattaur threatened to take legal action against businesses that use “Beat the VAT” advertising lines, suggesting to consumers that they should buy now when the prices are cheaper, rather than to wait next year when VAT is introduced.
“These businesses are driving fear of higher prices accompanying VAT's implementation into consumers…the Government of Guyana and GRA do not view this as only a misrepresentation of the effects and benefits of the VAT, but also as a malicious business practice, especially since, several of the items advertised are currently attracting 30 per cent Consumption Tax (C/Tax), and VAT, which is only 16 per cent, will replace C/Tax,” Sattaur stated.
The Commissioner General is appealing for the businesses to use their judgment.
“I am not ruling out legal action, but at this point in time I am appealing for commonsense and good judgment,” Sattaur noted.
He alluded that some of the items that are advertised as part of the “Beat the VAT” campaign — such as furniture, household and electrical appliances — are currently attracting a higher tax rate than that of the 16 per cent VAT rate.
While there are mixed reactions to the implementation of the new tax system, especially from the business community, Sattaur stated that the system could result in some imported products retailing at lower prices.
He stated that under the new tax arrangement, registered businesses will be able to recover VAT paid on inputs used in their businesses, such as stock, raw materials, fuel, telephone expense, advertisement, maintenance, and services fees.
“I must stress that on average, consumers are expected to spend less for a basket of goods when VAT is implemented at a rate of 16 per cent as compared to what currently exists,” Sattaur posited.
He added that VAT is a test of the integrity of businesses and expressed some confidence that Guyanese businesses will maintain their integrity as Guyana introduces VAT, which is aimed at ensuring a greater degree of fairness and efficiency in Guyana 's tax system.
VAT education
Addressing concerns that not enough education is being delivered on VAT with just over 30 days before its implementation, Sattaur noted that ideally he wants to go out and do more.
He stated that he is stymied in his actions, since there are still policy decisions that have to be made regarding basic food items.
“These are being given very careful consideration by the administration, and very shortly a policy decision will be taken. Once that is done, GRA will be able to engage in a fullout campaign to enlighten the public on the implications of VAT as it would affect the consuming public and the business at large,” Sattaur stated.
The GRA started registration for VAT on October 1, and according to the Commissioner General, this process will be ongoing.
He stated that of the 2500 businesses that are likely to qualify under the new tax system, some 10 per cent have completed registration.
“We are heartened by the response we have received…despite there are some amount of unresolved issues. We are making all endeavours to reach out to the business community at the moment to encourage them to conclude the registration process,” Sattaur noted.
All businesses engaged in making taxable supplies must register for VAT once they are making taxable supplies which amount to $10 M or more within a twelve-month period. The VAT Act also provides for voluntary registration of persons who are below the $10M marker.
Underscoring the importance of the VAT registration, Sattaur stated that with the registration process, GRA will be able to implement a system to administer the VAT.