Private sector deeply concerned over VAT-led price hikes
-GRA rejects relief suggestions
Stabroek News
January 13, 2007
The Private Sector Com-mission (PSC) yesterday expressed deep concern over the VAT-led increase in prices and pointed to suggestions to ease the problem but Com-missioner General of the Guyana Revenue Authority (GRA) Khurshid Sattaur says he is not prepared to support these including one to lower the 16% rate.
Speaking at a press conference yesterday, the Commis-sioner General said that he didn't support the idea that Government should reduce the Value Added Tax (VAT) rate of 16 per cent and provide compensation for Consumption Tax for stock on hand. He said that these recommendations, among others, were unrealistic and impractical and wouldn't be supported by him in any way.
"I am aware of some of the demands [from the Private Sector]. On stocks which have to be sold, our position is that we feel businesses who claim stock relief have not been preparing themselves for VAT, [having known of the changeover for some time]," he said.
"We're seeing a strange manipulation of prices…the high mark-up leaves me to conclude that people are using this opportunity to [blame VAT]," he said. He added that the high level of stock that some business are claiming to have should be reflected in their accounts, rendering them liable to higher levels of corporate taxes. He said, too, that businesses are now recognising that with VAT in place there is a high level of accountability, hopefully a deterrent against cheating the Government of its taxes.
The PSC said in a press release yesterday that is it deeply concerned, though not surprised that the introduction of the VAT has immediately resulted in an increase in the prices of a wide range of food and other goods and services to consumers.
According to the release, the Chairman of the PSC Michael Correia Jr had earlier warned of the probability of an increase in the cost of living because the wide range of basic goods which had no consumption tax, or were previously taxed at a rate of ten per cent, will now be subject to VAT at a rate of 16 per cent. Correia's warning had come at the opening of GuyExpo last year and it was immediately ridiculed by President Bharrat Jagdeo. Correia had urged a lowering of corporate and personal income tax rates to compensate for the likely increase in the cost of living.
The PSC is of the view that because of the high number of commodities which didn't previously attract Consumption Tax such as beef, fish, chicken, pork, butter, margarine and a range of everyday consumer items, VAT has increased the cost of living.
It also noted that the majority of everyday consumer items which are imported and locally produced and which were taxed at less than 16% and are now being slapped with VAT will increase in cost. "The PSC has made strong representation to the Government, prior to the introduction of VAT, for basic goods to be zero rated or exempted when the application of VAT was being considered," the PSC said in its press release yesterday. "It is important for the consumer to understand that under the VAT system businesses are responsible for the application and collection of VAT for the Government and are not responsible for the increase in prices which result. Businesses have to remit all the taxes collected to the Government which is the sole beneficiary," the PSC release said.
The release from the PSC stated that in the case where goods are sold from stock held prior to December 1, 2006, the consumer must now pay both the Consumption Tax and the VAT on those goods. "The Government, in fact, will be the beneficiary of double taxation on the consumer. Where retailers are concerned, no form of tax relief for goods in stock has been granted," the PSC said.
The PSC says it has also met with and expressed to the Government its dismay at the "highly irresponsible and dangerously provocative" statements which were made by the Commissioner General Sattaur. The release said that these statements were intended to lead the public to believe that it is the business community that is responsible for the increase in prices of goods and services following the imposition of VAT.
"The PSC has pointed out to Government that these statements have resulted in consumers threatening violence at business places which are obligated by law to apply VAT to goods and services. The PSC has urged the Government to publicly correct the false impression being given to the public," the statement said.
To this, Sattaur said that he apologised for the strong language he might have used during his press appearances and said that he will however continue to speak on the issue, albeit with 'softer words'.
Businesses around the city have recorded significant declines in their sales since the institution of the VAT. And prices of meat products have increased since they are now subject to VAT after having no Consumption Tax previously. Many meat retailers have complained that because of a steep drop in sales, freezers had to be decommissioned to save on power. Sales in meat have declined by as much as 50 per cent, businesses reported.