President says: VAT price drops not as quickly as expected
Guyana Chronicle
January 14, 2007
IMPLEMENTING the Value Added Tax (VAT) is proving to be a bit challenging for consumers and the government as some businesses are using the new tax system for extra profit gains, and projected price decreases on selected goods are not happening as quickly as anticipated, the Government Information Agency (GINA) said yesterday.
The agency reported that in a statement, President Bharrat Jagdeo said: “We need to address this, we will review the situation and next week we probably will be making some adjustments. That is what we said at the beginning. We will implement VAT, monitor its implementation until we have a functioning system that does not bring too much burden on the consuming public.”
According to GINA, he said the government through the Guyana Revenue Authority (GRA) and the Ministry of Finance, since VAT’s introduction, has been closely monitoring the new taxation system as it unfolds and the feedback is mixed.
“We are very pleased that the system seems to be settling down now, although there are many areas of concern and we have expressed these concerns prior to the introduction of VAT. The biggest fear of the government at that time was that the adjustments we are making to many of the taxes paid before by consumers, would be at a lower rate and that benefits would not pass through to the consuming public. Many of their fears and concerns are justified because we have seen a lot of items not reflecting those downward changes,” President Bharrat Jagdeo said.
GINA said the Head of State in his New Year’s message to the nation and at other previous fora had predicted that unscrupulous businesses would have hiked their prices.
“My big concern is that unscrupulous businesses may want to charge Value Added Tax on the old prices which would have already included the hidden taxes that you are paying,” the President had told Guyanese. In this light, he had warned that they be vigilant against this taking place, GINA said.
“Many people are putting it down to transitional changes and that finally after the next month or two prices should start to settle down. The business community has been saying they have old stocks and when these go there should be lower prices for many commodities.”
He said over the past couple of days he has had meetings with representatives of several businesses.
“What we have found in some cases is very encouraging,” President Jagdeo said, citing the example of the cost of bread at one of the larger bread companies in the country. “Bakewell said they have retained their wholesale prices of $152 and the recommended selling price is $180 so there is no price change to the retailers.”
According to GINA, he said despite the price remaining the same some people have been retailing a loaf for $200 and in some cases $220.
“There is no justification for this. They do not have additional cost, bread is zero rated,” the Head of State said adding, “We are also very concerned about the movement in the price of basic food stuff with protein. In some markets the prices for meat did not move much but in the supermarkets that have the 16 per cent VAT we have seen some upward movement.”
GINA said he explained that this has led to a number of consumers reverting to the informal market place instead of purchasing meat products at supermarkets.
President Jagdeo said concerns have been expressed about the cost of school uniforms.
“We have to examine that …the tax came down on clothing from 30 to 16 per cent so the price of clothing should fall,” the Head of State explained.
He said the government will also look at the issue of interior travel to ensure the impact on the hinterland community is minimal.
GINA said the Head of State concluded, “I hope that the public does not let itself be ripped off because many people have been using the introduction of VAT to push their profit margin and to raise their prices in an unjustified fashion. We have to be vigilant about that but we will review the situation and make adjustments as we go along.”