Businesses grapple with declining sales as first VAT returns deadline passes
By Nicosia Smith
Stabroek News
February 22, 2007
Even as the Guyana Revenue Authority (GRA) begins to reap the proceeds from the first Value Added Tax (VAT) and Excise Tax returns, businesses are still grappling with declining sales.
On Tuesday, the GRA reported that over 40% or 832 VAT registrants of a total of 2,000 such registrants had filed returns. Unless there was a major surge in returns for the deadline yesterday, a number of late returns would be expected.
"VAT being a new tax, we foresee that there will be some late filing. Therefore, VAT registrants may be granted an extension of time for submitting their returns. However, this is not automatic and good cause will have to be shown before the Commissioner General could approve an extension," Hema Khan, the GRA assistant commissioner had said Tuesday.
Manager Paul Fraser of C&F Supermarket on Regent Street told this newspaper that his VAT returns were filed on Tuesday and his business had VAT to remit after off-setting input VAT he may have paid. The meat sales at C&F Supermarket were severely affected during January, as consumers refused to pay VAT on local meats. However, on January 29 the government zero-rated local meats and Fraser said yesterday that meat sales did "pick-up a bit" but he acknowledged it's still "slow."
Speaking of the VAT returns process, the manager told Stabroek News that the VAT returns form required a lot of details, and his accountants did their best to provide adequate information. C&F on a daily basis separated its input and output taxes to facilitate the VAT returns process.
Paul Fraser
Fraser would like to see more essential items zero-rated to boost consumer spending, since he argues that consumers are not spending as before.
In Linden Dunstan Barrow of Cabs General Hardware Store said his business was experiencing a 40% decline in sales and at least two positions were made redundant. The declining sales were attributed to the situation where some consumers were still querying the tax while some VAT registrants were not applying VAT.
Barrow filed his VAT returns yesterday and he, too, had taxes to remit.
This businessman told Stabroek News that during the Christmas season he hired two temporary staffers and would usually retain one for a permanent position. However the store was unable to retain any of the temporary workers and in addition he was forced to make redundant the post of a permanent employee, to cope with declining sales.
Some not applying VAT
For example, Barrow said, a consumer purchased binding wire, steel and stone and promised to return for additional purchases of cement. The consumer subsequently did not return, and later disclosed to Barrow that he was able to purchase the cement without the VAT charges for $240 less than Barrow's price of $1,940, which is VAT inclusive.
He is charging that some businesses are offering consumers VAT-free purchases without the issuance of receipts.
"I welcome competition… but on a level playing field."
Barrow would like the GRA to increase its VAT monitoring in Linden.
Managing Director Edward Boyer of the National Hardware Guyana Ltd group of companies was of the view that VAT is here and "businesses will have to adjust to VAT."
Boyer explained that the filing of the returns was an issue of checks and balances and the tallying process was tedious but he expects with time this will change. To this end, the managing director noted that the hiring of accounts staff was ongoing as of yesterday.
It was also reiterated that the group of companies will be upgrading its salaries in a bid to attract and keep qualified staff.
Two companies within the National Hardware group of companies had VAT to remit while two forwarded a credit, since the input taxes exceeded the output taxes (VAT collected). He also believes that a general extension should be granted for those persons who were unable to file a VAT return.
Speaking of his retail chains, Boyer said that consumers have accepted the fact that VAT is here.
The managing director also noted that items that had attracted 30% consumption tax will now be cheaper, since 16% VAT is applied, while items that attracted taxes lower than 16% will show an increase.
Stabroek News has also received complaints that retail prices for items like curry and potatoes published by the GRA were much lower than the wholesale prices at some businesses. One businessman supplied this newspaper with receipts which showed that potatoes which the GRA recommended to be sold at $50 a pound was bought for $66 per pound wholesale and a pack of 400g curry powder produced by Beharry Group of Companies bought for $348 by this businessman, was recommended by the GRA to be retailed for $305.
The GRA had indicated that the old price for the curry was $350. Meantime, the GRA has maintained that businesses should remove the VAT paid on purchases before adding a mark-up and then compute the VAT since they are eligible to reclaim the VAT paid.