GRA slaps charges on two businesses -says stepping up VAT enforcement
By Nicosia Smith
Stabroek News
January 6, 2007
Muneshwers Limited and N.P. Home Department Store were served summonses yesterday for alleged invoicing violations of the Value-Added Tax (VAT) law.
The Guyana Revenue Authority (GRA) in a press release yesterday named the two companies in relation to invoicing violations and said that several other businesses will be prosecuted for similar offences.
Shipping Manager, Robin Muneshwer, of Muneshwers Limited told Stabroek News in an interview yesterday afternoon that the GRA on Thursday visited Muneshwers and pointed out aspects of their billing that were not VAT compliant. The Shipping Manager explained that they were issuing cash bills and hand-written bills and the bills did not have the Tax Identification Number (TIN) or the words Sales Invoice for sales under $10,000 and Tax Invoice for sales over $10,000, or the description of the items.
The company official said that they agreed to immediately rectify the violations and were told that a check would be made next week to ensure compliance. The service yesterday of the summons, said Muneshwer, was "a total shock."
He said that they are properly registered, charging VAT correctly and the bill shows the VAT amount being collected.
"We are not in any way robbing the government or consumer," he stated, adding that the invoicing lapse "was not intentionally done" as they did not know of these requirements.
Yesterday, the company said that all the requirements were put in place including the TIN on the bills and the words Tax Invoice or Sales Invoice and a description of the item.
"We are in support of VAT, we are not against VAT," argued the manager, noting that the GRA had said that a grace period would be given.
"We accept that there are things that we did not do out of ignorance and things we overlooked but not intentionally. I think the GRA could have handled things a little better," he said adding, that the GRA approach should be evaluated.
Today, the business plans to close at midday to computerize its stock and the Shipping Manager said that this is the first time the company will close for such a move. The summons will raise the question about how decisions are being reached by the GRA on who to charge as there have been well-publicised violations by other establishments since the January 1, 2007 launch date - some occurring over several days. The GRA did not explain in the press release how it arrived at the decision to single out these two companies.
The GRA had also been warned prior to January 1 that leaving invoicing in the hands of individual registrants would be rife with difficulty. The GRA had been accused of permitting this because it was in no position to manage this part of the process itself.
Thanked
Meanwhile, the Managing Director of N.P. Home Department said that one hour after being told of his violations he was served a summons.
Estwick Northe told Stabroek News that GRA representatives visited his store yesterday at 11 am and pointed out that the words Sales Invoice or Tax Invoice were not on his bill. Northe said that he did not know that these words were requirements on the bills. The managing director explained that he thanked the GRA representative for pointing out the violation and moved to correct the error immediately.
But at noon the GRA responded with a summons and he said that he was shocked by the move. Northe said that the business is registered and is charging the VAT correctly.
Currently the business is writing the VAT amount on the bills but from Monday the bills will have the initials - VAT - printed thereon.
The whole country needs to be re-educated on VAT, said the managing director. The business environment, he added, is such that he is on the verge of selling out. "I am planning to sell out because I cannot take it."
Both companies have to make court appearances on Tuesday.
On Wednesday, the GRA had said that charges would be brought against three VAT-errant businesses but no charges were eventually pressed.
The legal summons, the GRA press release said, is as a result of the GRA supplementing its audit procedures with additional investigative methods to ensure that businesses remit all the VAT due and unearth any violations of the VAT law.
The law requires that VAT returns be filed within 15 working days following the preceding tax period (one calendar month) and the correct amount of tax paid to the VAT Department, said the press release.
It was also noted that staff from the GRA continued their outreach and monitoring of VAT processing at several businesses and at the ports of entry. Their report suggests that businesses have improved their systems and are in greater compliance with the VAT law.
The GRA continued to implore businesses to play their role in contributing to a seamless transition to the VAT regime. The press release said that businesses are reminded that a key factor which will aid in this transition is a steady rate of commodity consumption in the country.
"If consumers shop less as a result of higher prices, businesses stand to suffer revenue losses."
The GRA said that it is heartened by the growing number of businesses adjusting the Consumption Tax out of their pre-VAT prices before applying the VAT rate in order to either maintain or reduce final prices.
"In addition, since businesses will invest less to supply products eventually, they will not bear the VAT, even after applying their current percentage mark-up their prices should be maintained."
Nevertheless, the GRA continues to note that some businesses are charging VAT but are not displaying their certificates and some businesses are not complying with the invoicing requirement. Some businesses are also not mounting adequate signs to indicate whether their prices are VAT inclusive or exclusive.
The release also said that some businesses are inordinately increasing the prices of their products, implying a price-increase effect of the tax.
The GRA is reminding businesses that the VAT Law stipulates penalties for violations relating to these incidents and that that they will not spare any effort to enforce the law.
Consumers are reminded that registered businesses which display an authentic VAT Certificate are obligated to charge the appropriate VAT on the commodities they supply. Businesses are also urged to follow closely the legal requirement in preparation of their invoices.
Individual traders who have received VAT certificates with their home addresses and wish to change their trading or business address are asked to contact the VAT Department.
The GRA also continues to register businesses with a turnover of $10M or more. The press release said that some businesses are evading the VAT monitoring teams and in some instances are closing for business activities.
Over the coming weeks, the GRA said it will continue to reach out and work with businesses and also monitor the system to ensure full compliance with the law and realization of the benefits of the system.
Reports continued to flow in yesterday of widespread uncertainty and irregular practices. Yesterday Stabroek News visited businesses on the West Coast Demerara to ascertain how well they were able to implement VAT.
Checks there revealed that most stores had prices inclusive of VAT and their prices from last year were maintained. The store owners who maintained their prices inclusive of VAT said that their consumers would not be able to afford the items if VAT was applied to the old prices and it would not be fair. Some businesses had applied for their VAT registration certificates but were still to receive these. Some businesses that were registered to charge VAT were not charging the VAT and did not have VAT inclusive prices. Stabroek News pointed out to one store owner that although VAT was not being charged she would still be liable to remit the VAT to the GRA. It was then the woman declared to the customers present that her prices would have to increase since her mark-up was small and she could not afford to lose 16% from her mark-up to the GRA. The woman said that she was not an importer and was not eligible for tax relief. (See more on this visit in a subsequent edition).
Consumers were also finding out that practices varied widely from place to place. A man bought a bottle of nutrophos from two places and was charged VAT at one and zero-rated at the other. Showing his bills, the man said he purchased a bottle from Guyana Stores Limited and was charged $1,080 plus $172 at the cashier for a total of $1,252. He then purchased a similar size of nutrophos at Mike's Pharmacy for $970 with VAT at zero % - a difference of $282. Calls have been made for a full description of the over-the-counter drugs to benefit from zero-rating.