Dear Editor,
The implementation of the Value Added Tax (VAT) from January 1, 2007 is creating an atmosphere of uncertainty and consumer frustration. It is a clear indication that the officers of the Guyana Revenue Authority (GRA) are trying desperately to ensure that the transition from Consumption Tax to VAT is smooth.
The Government of Guyana’s position states the following:
1. In order to implement the VAT price, businesses must calculate the 16 percent on new stocks and no one must include the 30 percent Consumption Tax on these items
2. The companies can keep their old prices and bear the cost of VAT and subsequently submit their tax documents so that they can be reimbursed 14 percent.
One example that causes consumer uncertainty is the mysterious increase in the cost of the Stabroek News newspaper by 20 percent i.e. from $50.00 to $60.00. That newspaper has explicitly cited VAT as the reason for the increase. Several basic mathematical approaches leave us with the conclusion that the increase for the newspaper has increased mysteriously by 20 percent. These are as follows;
If Stabroek News wants to ignore the principle of VAT and go ahead like unscrupulous businesses and calculate 16 percent on their old prices, the cost of the daily newspaper will still not be $60.00 By way of illustration: 0.16 percent X $50 (old price) = $8.00 . Adding the $8.00 to the old price of $50.00 will give us $58.00 so even the unscrupulous approach in calculating VAT will not give us Stabroek News price of $60.00
If Stabroek News decided to use the correct approach to VAT as recommended by the Guyana Revenue Authority and subtract 30 percent Consumption Tax on the old price, that will be 0.3 multiply $50.00 (old price) = $15.00. This $15.00 represents the Consumption Tax to be removed from the old price. $50.00 minus $15.00 = $35.00 . This $35.00 represents the price without Consumption Tax.
The law states that VAT is 16 percent on the cost of the item, ceteris paribus. Therefore 0.16 multiplied by $35.00 (price without Consumption Tax) will give us $5.60 . This $ 5.60 represents VAT.
To arrive at the new price, one must take the $35.00 price without Consumption Tax, ceteris paribus, and add the VAT which is $5.60. The new price will be $40.60. Since basic preparatory mathematics states that any value that is 0.5 and above must be converted to the whole, this will give the new Stabroek News price to be $41.00. Therefore, Honourable Editor, can you please explain to the reading public how your newspaper has arrived at $60.00 .
Further, if Stabroek News wanted to bear the VAT cost for the consumers, then the price should remain the same.
Yours faithfully,
Lloyd A. King
Editor’s note
Our price increase was announced in a notice in the front page of our issue of Sunday, 24th December, 2006, which read as follows:
“From January 1, 2007 the price of the daily newspaper will be increased to $60. The price of Sunday Stabroek will remain at $100. There are two main reasons for this price increase:
1) the price of newsprint, a major expense in producing a newspaper, has increased considerably.
2) Newspapers will be subject to VAT from the beginning of the year. The $60 for the daily will be the VAT inclusive price.
Management has decided to absorb the VAT on the Sunday paper for the time being so the price of $100 will be VAT inclusive. This position will be reviewed after three months as the cost involved is considerable.”
The primary reason for the price increase was the increased cost of newsprint. The consumption tax on newsprint had been 10% and not 30% as the writer suggests. It is true that one recovers the VAT of 16% unlike the consumption tax so there is in effect some saving with the abolition of the consumption tax and though a lot of additional accounting costs are involved in the collection and payment of VAT that by itself would not have justified the price increase.
