Would smuggling increase?
Editorial
Kaieteur News
January 28, 2007
When the Guyana Revenue Authority implemented the Value Added and Excise Taxes at the start of the year, the message was that since the taxes had been reduced on items, prices would go down.
In this country, when the worker is feeling the edge of every dollar, none could have been happier than the people who had to face the markets and the stores. Everyone wants something other than that which he usually acquires, and the thought of having some more disposable income was alluring.
However, the dream of the disposable income disappeared faster than electricity from the power lines when a blackout strikes. The opposite became the reality, as prices on just about everything jumped by substantial amounts, sometimes more than the 16 per cent that the Value Added Tax was supposed to impact.
The frantic haste to level blame could be understood. The authorities kept insisting that the prices would go down, but the business community retailed everything at a higher price.
Needless to say, those in the wings felt that the government should waive VAT until all the necessary measures were put in place. They pointed to Trinidad and Tobago, where the business community had an entire year to prepare for the introduction of this tax, which is said to be one of the most transparent and which would expose under-invoicing and restrict tax dodging.
But there were some things that were not explained to the local consumer. For example, he did not realise that the business men and women, unless they were prepared to lose money, could not offer their goods at a reduced rate, because they had imported some of the stock three or four months in advance, and had paid a relatively high consumption tax.
Given those conditions, one could be sympathetically understand why some simply attached 16 per cent to their pre-VAT prices. Importers of motor spares were among those most likely to be caught up in this. One does not import spares every month since these are not fast moving stuff. Some dealers had stock for more than a year, because a motorist would not buy a spare unless it is needed, and more often than not, one would not need the same type of spare every week, or every month.
Indeed, there were those who had spares for as long as three years. What was also not recognised was that spares attracted charges higher than VAT, because they are among the products described as sin products, and they fall into the same category as alcohol and tobacco.
On Friday, even more goods became zero-rated, but the businessmen are saying that even this measure would not lead to a decline in prices in the immediate future. The goods already in stock have been priced because of the taxes they attracted.
The GRA is bent on ensuring that there is a reduction in the cost of living, while the business community is bent on having the buying public recognise that any price drop would not take effect until the new shipment of supplies. And that would not happen until the next three months, when existing stocks are exhausted.
This has led to a decline in sales, particularly by the major distributors. DeSinco Trading, for example, has recorded a 30 per cent decline in sales. Berbicians have not been taking supplies, having been led to believe that they have another three months before they apply VAT. The GRA said that this is so far from the truth that it is wondering who had been talking to the businessmen in the Ancient County. Since then, the GRA Commissioner General has been meeting with the Berbice business community to set the record straight.
But he has to do more. Berbice has long been a haven for smugglers. In the days when many articles were banned, the smugglers used Berbice to move supplies between this country and Suriname. Just about anything crossed the border, and the middle man prospered.
That has not changed. Smuggling is still rife, and although there is a branch of the GRA in Berbice, one could be certain that it is ineffective given the scope of the smuggling. Since the smuggled goods would not be accounted for in stock, one could imagine the measures to which the businessmen would go to prevent such stock coming under the scrutiny of the authorities. The smuggler would not be paying VAT, the middleman would not be paying VAT, and the buyer should get cheap goods. Berbice could record a drop in the cost of living.
It is going to be interesting to see the extent to which the GRA would be collecting VAT in Berbice; and if not, the consequences.