Dear Editor,
It is not the Guyana Revenue Authority’s (GRA) intention to get involved in any political debate.
However, the GRA must put the record straight and respond to the letter of Red Thread of the seemingly defunct WPA published in the Stabroek News of Monday, January 15, 2007 captioned “Rise in price since VAT is a tragedy”.
The letter raises certain issues and the Red Thread which takes pride in itself in representing committees should have looked at both sides of the argument rather than seek to shift the blame to the government.
The letter is very anecdotal and does not seek to protect the facts. The Red Thread organisation ignores completely the fact that in excess of 400 items which were previously taxed at 30 percent under the Consumption Tax are now subject to 16 % VAT. It means that this ought to be reflected in people paying less for those items.
What seems to have eluded the Red Thread is that while taxes were charged on these commodities at import, with the introduction of VAT, which is a very transparent tax the consumers will now see the amount of tax they pay when they acquire these commodities.
The Consumption Tax was always embedded in the cost. Consumers were paying it when they purchased those items without realizing it.
It is a fallacy that is being peddled that businesses have now to charge a mark up on VAT because they have paid VAT on those items for resale. Red Thread needs to understand how VAT works and recognize that the same VAT paid by businesses replaces the Consumption Tax which was paid at the point of import.
Unlike the Consumption Tax, VAT is not a cost to registered businesses hence it reduces their direct operational costs.
VAT is a modern tax that revolutionizes the tax system, requires accurate accountability by businesses and leaves a significant amount of audit trail.
This fundamental point seems to have eluded the Red Thread which embraces transparency but which has not studied the tax to understand its positive side of transparency and accountability.
The Red Thread organisation, therefore, totally ignores the fact that with the replacement of the 30 % Consumption Tax by a 16 % VAT, the prices should be lower to consumers.
It seems rather that they are in support of the unscrupulous practices of businessmen who are using as the common excuse that they are in possession of old stock as the basis on which exorbitant prices are charged. How will they explain the atrocious price increase from $500 last year to $1,500 this year for a basin which is more than 200 % as reported in the What the People Say Column of the SN 15/01/07?
How can they explain further the sharp increase in the prices of zero-rated items, for example, the price of a loaf of bread now being retailed for as much as $220 since the implementation when the price of such items should have remained the same?
The GRA has some difficulty with these arguments as our records do not seem to reconcile with such statement either with goods imported or the related Consumption Tax paid.
The GRA hopes that the Red Thread organisation would use their influence on these businesses so as to ensure that the 400 odd items for which old stock still exist would see a remarkable reduction in a few months with the importation of new items and to monitor such importation by their decent friends to ensure that the benefits are passed on to the consumer so that they can benefit from decent, competitive and acceptable prices and to work closely with those businesses, which unfortunately were not mentioned in the letter, which have already taken steps to pass on decent prices to their loyal customers.
The government has indicated that it will be reviewing the impact of the VAT on the prices of various commodities in order to ensure a smoother transition.
The GRA finds the letter extremely biased and ill-informed and wishes to categorically re-emphasize that when VAT becomes truly operational consumers will be better off.
Yours faithfully,
Khurshid Sattaur,
Commissioner- General
