Regent Street and downtown Georgetown seemed less busy than usual this week and some businesses blame low consumer spending on the Value Added Tax (VAT) which has tacked on 16% to prices in the majority of cases.
Three city businesses Stabroek News spoke to have attributed their lower than usual sales to VAT, as consumers continue to argue that based on the Guyana Revenue Authority’s (GRA) media campaign, VAT was expected to bring decreased prices.
GRA Commissioner Ge-neral Khurshid Sattaur has since said that items that previously did not attract tax will see price increases along with items that attracted taxes below the VAT rate of 16%.
One Regent Street store supervisor told Stabroek News that the store has given so many reductions that they are selling at wholesale prices but still consumers are asking for lower prices.
“A lot of customers complaining,” said supervisor Natasha Arjun of Singh’s Electronic World and Variety Store at 136 Regent Street.
Regular shoppers and walk-in customers visiting Singh’s Electronic complain that it is difficult to afford the prices and Arjun says only a few customers are buying.
90% decline
in sales
“Business is very, very slow,” she said, putting sales at a 90% decline in comparison to last January. After VAT was implemented on January 1 some items at this store increased beyond their retail prices and others reduced to wholesale prices.” The supervisor stated that all of the stock on hand was imported in December so the prices were calculated to reflect the VAT rate of 16% if the items would have been imported at taxes above this rate. But items that were imported previously below 16% would have attracted higher prices.
Arjun also noted that some customers were willing to buy the product without VAT. However, the store must apply VAT to the price, since the VAT is remitted to the government. More alarming, said the supervisor, is the low level of shoppers on Regent Street.
One importer and distributor has found himself in a very unique position in that his prices were already scheduled for an increase from January as a result of increased procurement costs, and the implementation of VAT has not brought any relief.
The US suppliers of Paul’s Mufflers – Motor Spares and Accessories at 70 Garnett Street notified the company in November 2006 that grease prices would increase by 3% and oils and sprays by 6% effective January 1. These price increases, said the supplier, were as a result of significant cost increases in steel, zinc, and brass due to global demands.
Managing Director Jaipaul Bharat told Stabroek News yesterday that normally there is a slow period for the months of October to January but sales would start picking up by February as persons begin motor vehicle repairs. In addition, because the store knew of the price increases on certain products in the new year and taking into consideration the expected low sales, prices were reduced late last year to maintain a cash flow.
But with the implementation of VAT, the sales have slumped below what was expected.
VAT, Bharat said, brought an additional charge to the consumer and since he had already dropped his prices last year in light of an expected price increase from suppliers this year, he could not drop them further. Items, which will now only be subject to 16% tax but were subject to 30% before, were reduced to reflect this and others were reduced by 10%-15%. However, the prices of domestic and industrial cleaners were not previously taxed and these increased when VAT was applied.
Reduced prices expected
“A lot of people still not buying,” he said, noting that persons who are buying have reduced their quantities.
Consumers, he said, are maintaining that the GRA has said prices should be lower than that of last year.
“We in the eyes of the consumer are increasing prices,” he said, adding that his mark-up is small, since the business must remain competitive. One week ago the GRA told the business that it must reduce its prices even further.
He is worried that legitimate businesses like his will be faced with unfair competition from counterfeit motor accessories and spares on the market. Paul’s Mufflers is a dealer in Wagner parts and accessories.
The cost to the transport sector has also increased in light of certain products used by the industry such as oils and accessories which have increased, said Bharat.
Cold room
shutdown
Manager of C&F Supermarket on Regent Street, Paul Fraser said sales across the supermarket have dropped 50%. Meat sales have dropped so significantly that C&F was forced to shut down its cold room at its Regent Street location, as consumers are not prepared to pay VAT on meat purchases. Meats were not previously subject to tax. The meat display freezer may have to be closed because, Fraser lamented, if the meat is not being sold he may as well save on the electricity bill. The large meat producers have complained that sales have slumped.
Government agencies and large scale companies have kept the sales up at one city business, but these large scale shoppers are themselves complaining about the VAT charges.
Salod Marketing Agency at 185 Charlotte Street has experienced stable sales but consumers are still expecting their prices to be lower than they are, said the agency supervisor, who preferred not to be named.
Consumers, she said, are noting the GRA public relations campaign which states that VAT will bring reduced prices. Items like pencils, rulers and cartridges are zero-rated and as such those prices have decreased, but items like rubber bands are not zero-rated and are liable to VAT, said the supervisor. For example, she said, consumers are asking why taxes must be paid on rubber bands when the VAT inclusive price is quoted. However, sales were not affected, she indicated, since consumers are buying but complaining. This supervisor explained that the items being sold are those needed by businesses and government agencies such as office stationery, office furniture and filing cabinets.
But walk-in customers are not taking the VAT prices without resistance. For example, she said one consumer was given the VAT inclusive price of a diary after asking for the item, but was not willing to pay the VAT charges.