Problems abound as VAT hits consumers
By Melanie Allicock
Kaieteur News
January 3, 2007
A large number of hiccups, which have left the vast majority of consumers dissatisfied and the Guyana Revenue Authority (GRA) concerned, punctuated the first practical day of implementation of the much anticipated Value Added Tax (VAT)
Yesterday, businesses got the first opportunity since the implementation of the tax on January 1, to begin charging the 16% rate on specified goods, thereby abolishing six taxes including consumption tax.
However, while systems ran smoothly at some business entities throughout the country, the procedures surrounding the new tax, at others, were in direct contravention of the new VAT act.
At a media conference yesterday, Commissioner General of GRA Kurshid Sattaur and Finance Minister Dr. Ashni Singh reported that, in monitoring the implementation process, several complaints were received that businesses were not complying with the expectations of the general public, as well as the VAT regulations.
Chief among the discrepancies were that there were hardly any reductions in the prices of some commodities as was to be one of the ‘benefits' of VAT.
Generally it was found that most businesses just slapped on the 16% tax on almost all commodities regardless of the category. This resulted in double taxation for the consumer on a number of items.
Sattaur noted that while he is extremely concerned with this development, he would not readily attribute it to attempts by business owners to ‘gouge prices' or be unscrupulous.
“Maybe they did not effectively acquaint themselves with all the procedures, especially the input credit system. Also it's the first day of a new system and it will take some time to iron all the kinks out.”
He also noted that while consumers were concerned because they were not seeing a reduction in prices, it should be noted that this would not be possible immediately unless the business qualified for stock relief (importers and manufacturers)
The Commissioner General stressed that businesses will be continually monitored to ensure that consumers benefit from the stock relief that they enjoy.
He made it clear that the relief when granted should give the same effect as if VAT were charged on import since those businesses will be reclaiming the Consumption Tax they would have paid.
He made it clear that the monitoring process will continue with a view to effecting changes along with investigations.
The names of persistent defaulters will be published and harsh measures will also be imposed to deal with them accordingly, Sattaur posited.
He however complimented those entities that had prepared for the new tax and had effective billing systems, among other things in place.
“It must be noted that there were a number of businesses that exerted efforts to be prepared. They effected the correct cashing procedures. Some had their new prices prominently displayed and stating what is VAT inclusive and exclusive, and these are to be complemented.”
During visits to Fogarty's and Singer yesterday afternoon, Sattaur lauded both businesses for their efforts at getting the process right.
He said his team also discovered public-spirited businesses that were willing to retain their old price and said that their price would be VAT inclusive so the business would pay the VAT rather than the customers until their old stock was exhausted.
The Consumer Affairs Division of the Ministry of Tourism was also involved in the monitoring of new system.
CONCERNS
Kaieteur News visited a number of businesses around the city yesterday to get a first-hand impression of the implementation process.
These included entities in Regent and Water Streets, North Road , as well as Stabroek and Bourda Markets.
Among the discrepancies observed: businesses not displaying certificates of registration but charging a 16% increase; those registered but not charging VAT, and those charging VAT without bills reflecting same.
Others were adding a markup to the old price and then adding a 16% VAT.
In addition to these problems, the Commissioner General informed that his staffers also discovered that some smaller businesses were having difficulties issuing bills to their customers who bought numerous small items (market vendors).
At the KFC at Stabroek, a new price structure was prominently displayed, however, the same could not be said for the certificate of registration. An employee explained that they were awaiting it from the head office.
The increased prices did not seem to affect the patronage of the facility which was packed. However, customers could be heard complaining about the increased prices.
The configuration of the new computer programmes to charge the tax also proved inefficient in some instances.
At a city supermarket, one customer in plaintive tones complained that that she had bought a number of items which included those that were zero rated, those that had tax exemptions, as well as those that merited the 16 % increase.
However she was charged a standard 16% increase on the entire purchase and given a bill to reflect that.
Sattaur also related to an unconfirmed report that one proprietor had given customers the choice of making a purchase with or without paying VAT.
“The report is that they told customers that if they opted not to take a bill they wouldn't have to pay VAT but if they get a bill they will have to pay it.”
Stressing the illegitimacy of condoning such acts, the Minister warned consumers against it noting that while it may seem beneficial in the long run, they will be depriving themselves of the benefits of a purchase with a bill.
He threatened that anyone caught indulging in this practice would face the full force of the law since it is in direct contravention of the VAT legislation.
RECOURSE
Once a customer is sure that he/she has been incorrectly charged they should return with their bills to the place of purchase and demand a refund.
The Commissioner General informed that the law provides for such action.
Additionally, disadvantaged consumers are also being urged to seek recourse at the consumer division of the Ministry of Tourism or Guyana Revenue Authority.
He assured that the positive action will be taken to provide a redress to persons who pursue this course of action.
He called on consumers to be vigilant and to ensure that businesses adhere to the rules.
“Customers be patient, shop around, look at alternatives, don't buy where prices are not coming down. Don't buy good without a receipt. Don't encourage persons to breach the law. Once imposed properly, everyone stands to gain… including you the consumers. So be vigilant and help us to have a smooth transition of the process.”
Sattaur called on business entities to take advantage of the competitive opportunities to be derived from the VAT implementation.
“Exploit these opportunities to bring the prices down. When some businesses simply slap on 16% on commodities, they are giving the competitors the advantage since they can adjust their prices to reflect VAT and attract the sales.”
The VAT law which was passed in the National Assembly and was amended on December 14, 2006 paved the way for the implementation of the new tax system in Guyana from January 1, 2007.
As at December 29, 2006, more that 1600 businesses were registered with the VAT department and are authorized to charge, collect and remit the tax to the GRA.
Previously, the Consumption Tax on most items was charged at 30%. Now with VAT being calculated at 16% it should result in the cost of many household appliances such as television sets, stereo systems and refrigerators dropping.
The list of food items that are zero rated from VAT includes basic food items such as bread, rice, sugar, cooking oil, milk, baby formula, split peas, onion , garlic , potatoes, local fruits, vegetables (except olives, carrots, black eyed peas, pigeon peas, chick peas, garbanzos, radishes, broccoli and cauliflower.
It also covers medical services and prescription and over-the-counter drugs, education services and materials, including books and materials for construction such as stone and lumber.
It also covers water and sewerage services, electricity, vehicles for public officers/officials and remigrants, vehicles four years and older, computers, and sports gear.
Meanwhile, kerosene, gasoline, diesel and liquid propane gas will also be exempted from VAT but the Excise Tax rates on these items will be adjusted accordingly, where appropriate.
With regards to motor vehicles, the government has made it clear that the excise tax on motor vehicles will be set at such a level that there is no increase in the tax applied.