VAT confusion
-questionable practices, uncertainty continuing
By Nicosia Smith
Stabroek News
January 5, 2007
Four days after the 16% Value Added Tax (VAT) was introduced a range of questionable practices continued amid widespread uncertainty and frustration among consumers and the head of the Georgetown Chamber acknowledged that there was confusion.
Many businesses continue to simply add 16% to their original prices without any adjusting for repealed taxes or the credit on stock for those who registered on time. One practice that was particularly disturbing, sources said, was the charging of VAT to unsuspecting consumers and the non-provision of receipts by the businesses. The VAT charged would then be pocketed by the businesses instead of remitted.
Stabroek News also put the question of manufacturers applying VAT to their old prices without adjustments to the President of the Guyana Manufacturers' Services Association (GMSA), George Robinson.
Robinson, who is also a director at DDL told Stabroek News that senior level GMSA officials were out yesterday making checks at various members in relation to VAT-related issues. Robinson said that the findings by these senior officials will be discussed this morning and a further comment will be made on the issue.
Gerry Gouveia, President of the Georgetown Chamber of Commerce and Industry told Stabroek News that he is planning a walkabout on Monday to survey the VAT implementation process. He was also asked about businesses just applying VAT to their old prices and he said that there is a lot of concern about VAT and it is "causing a lot of confusion," adding that it "certainly (has) proven to be a challenge." A meeting was planned on Wednesday with GCCI members to discuss VAT but this was cancelled.
Though the GRA had said on Wednesday that charges would be pressed against three VAT-errant businesses there was no sign of this yesterday.
Yesterday, Stabroek News obtained a beverage price list from Banks DIH, detailing its old prices, the VAT and the price inclusive of VAT, and all the prices showed an increase.
For example, a case of 10 oz Coca Cola before VAT was $965.52 and with VAT this price is now $1,120; a case of Coca Cola ½ litre before VAT was $1362 and with VAT it is $1580; and a five-gallon bottle of Tropical Mist before VAT cost $418 and with VAT it is now $485. One case of Banks Beer before VAT was $2676.72 and with VAT it is now $3105 and a case of Banks Malta was $2676.72 and with VAT it is now $3105.
All the 39 products on the Banks list showed an increase and consumers continue to wonder when they will see the benefits of VAT as the prices for envelopes, mints, razor blades, water, cooked plain rice, snacks and soaps and deodorant rise. The price rise has also hit zero-rated items like potatoes.
Manufacturers and importers are eligible for a 16% input credit for products manufactured or imported in December 2006 and which have to be sold by March. The GRA has maintained that persons benefiting from this relief should let their prices reflect this.
Yesterday, Stabroek News tried to elicit an explanation from Banks DIH as to its price increases but this proved futile.
Demerara Distillers Limited (DDL) was also contacted for a comment on their price increases, after VAT was applied. Stabroek News was referred to Finance Controller Colin Thompson who said through one of the DDL secretaries that he would return a call. Up to press time the call was not returned.
Review
Meanwhile, the People's National Congress Reform-1G, at a press conference yesterday said that if the government had heeded its warnings and had postponed the January 2007 implementation of VAT to facilitate the development of the institutional capacity to manage such a tax, hiccups would have been minimized or avoided.
The party said that contrary to the GRA's assurance that the cost of living would not increase many are now pointing out that the cost of living has increased.
"This was anticipated, as the PNCR had warned that while we have no problem with the principle behind VAT, 16% is too high and should be reduced."
"VAT should result in the widening of the tax base, the easing of the tax burden on the ordinary man and a better tax regime that will create an environment conducive to the progress and development of businesses," said the statement. Unfortunately, said the party, the direct opposite is occurring.
"It is in this context that the PNCR wishes to recommend that there be a review of Personal Income and Corporate taxes. We believe that to add 16% on an already tax burdened working people is criminal." The party also wants the government to review the 5% and 6% wage increases last year.
Stabroek News visited Nigel's Supermarket again yesterday and the business had its VAT registration certificate displayed after failing to have it for inspection on Tuesday and Wednesday. However, Bonny's Supermarket had a sheet of paper taped on its door stating the VAT registration certificate number but the certificate was not visible when Stabroek News visited yesterday after lunch. It is illegal to charge VAT if the registration certificate is not mounted. On December 28, 2006, the GRA had said that 133 businesses were registered but had not received their VAT registration certificates.
The Ministry of Tourism, Industry and Commerce has advised persons who have paid VAT on zero-rated items to collect refunds and report such cases to its Consumers Affairs Division. Yesterday, another warning came from the ministry about fraudulent practices but there was no sign of any charges. Minister Manniram Prashad was quoted in a Government Information Agency release as saying "Our duty is to protect the consumers… There are businesses out there to con people and they will be dealt with…Like everything else it's a new process and there will be minor glitches here and there but then there are unscrupulous businesses that are deliberately cheating and those are the ones that the Consumers Affairs Division will expose. Not complying with VAT carries a heavy fine and imprisonment".
Stores across the city continue to apply VAT on their old stock without making price adjustments or removing the C-Tax. Businesses have said that they are not willing to bear the loss for doing this, since they are not benefiting from stock relief. A few businesses, as Stabroek News has reported, chose to bear a loss and remove the C-Tax although they are not eligible for stock relief.
A visit to Guyana Stores yesterday revealed that this store has also kept its old prices and is applying VAT when the goods are checked out. All across the store notices have been placed notifying customers that the shelf prices are exclusive of VAT. Stabroek News has also observed that most stores are choosing to use the VAT exclusive model and not the VAT inclusive model.
Shanta's - The Puri Shop on Camp Street says it has decided to bear the total VAT cost until its systems are installed to compute the tax. A representative told Stabroek News that by Monday or over the weekend they will have their computerized system installed to show customers the amount of VAT being charged. Currently, the shop must bear the VAT cost since it is unable to issue bills stating the VAT amount. The representative assured that they will not include the C-Tax when computing their new prices under VAT. The Stabroek News visit came after a member of the public had said that after he made a purchase he was charged VAT by the puri shop but was not provided with a receipt. When he insisted on a receipt he was told that the VAT would not be charged and he then paid the regular amount.