VAT will cost Banks DIH $200-$300M a year -Clifford Reis
Stabroek News
January 21, 2007
Chairman and Managing Director of Banks DIH Limited Clifford Reis said that the Value Added Tax (VAT) would cost the company between $200 to $300M per year and that the "jury is still out" on the new tax regime's revenue neutrality.
Speaking at the company's 51st Annual General Meeting held at the company's Thirst Park location yesterday, Reis said that costs to the company's operations would increase because of VAT. In response to the Guyana Revenue Authority's (GRA) assertions about the tax he said, "Our calculations tell a different story."
The Private Sector Commission (PSC) has been engaged in a bitter exchange with the GRA over the implementation of the new tax and has blamed the authority for the chaos experienced by the business community.
Reis said that most of the company's beverage products would face increased prices owing to the fact that they were previously subject to Consumption Tax at a rate of 10 per cent, while the VAT rate is 16 per cent. He said that some of the new costs would have to be passed on to the consumer.
Compounding this, he said, was the already high taxation rate to which the manufacture of beer was subject. This was one of the highest in the Caribbean, and the company had been speaking with government on the issue for some time but there had been no action.
Nevertheless he said the company would continue to engage government in the hope that in the future good sense would prevail.
Reis went on to say that with the prospects for businesses in Guyana not looking too good, the company would have to do some restructuring with a view to cutting costs and making operations more efficient. Some of these restructuring measures had already commenced and as a result, some of the company's outlets had new hours of business to maximise on peak periods.
"We have to trim the excess fat in our company," he noted, adding that some of the other initiatives directed towards this end were 'just in time' purchasing, labour force reduction and leaner operations.
Reis said that in spite of the difficulties, the company would continue to train staff with the hope of retaining their services.
The group's turnover for 2006 was $14 billion as against $13.2 billion in 2005. After tax profits attributable to shareholders for the group were $781.4M compared with $823.8M in the previous year. Reis attributed the company's reduced profits to the steep increase in fuel prices which he put at 49.9 per cent. During last year increased fuel prices cost the company a further $335.8M in expenditure which the chairman said had not been budgeted for and could not have been passed on in total to consumers.
The chairman says in his report on the performance of the company for the year ended September 30, 2006 that the failure of the Government of Guyana to honour its obligations for the repayment of bonds to Citizens Bank Guyana Inc was the primary reason for the less than anticipated level of after tax profit achieved by the bank in 2006.
He said that the bank and the government had been meeting on the issue and it should come to a conclusion in the coming weeks. Last year, Citizens Bank, a 51 per cent owned subsidiary of Banks DIH Ltd, recorded an after tax profit of $347.3M compared with $345.5M in 2005.