Meats, toothpaste, local clothing, eggs and soap powder are among 40 more items that are to be VAT zero-rated, President Bharrat Jagdeo disclosed yesterday.
An announcement of the additional zero-rated items under the Value Added Tax (VAT) Act is expected to be made today by the Finance Ministry, President Jagdeo said during a briefing at the Office of the President.
Basic food items such as rice, sugar, oil and milk were zero-rated in an Amendment of the VAT Act on December 14, 2006, but items like matches, salt, margarine, soaps and deodorants, meats, biscuits, toilet paper and paper towels are not zero-rated and these items also did not previously attract Consumption Tax (c-Tax).
The president said that with the zero-rating of these additional items the government anticipates that some of these items would be sold at lower prices than last year, inclusive of VAT. Zero-rating of meats like chicken, beef and pork and fish is expected to bring significant relief to consumers who have been lamenting increased prices.
Over the past weeks, Jagdeo said, the government has identified food items where prices have moved upward and with the zero-rating of these additional items there will be no excuse for businesses to increase the prices of these items.
Since VAT was implemented on January 1, consumers have faced a virtual 16% increase in the cost of living at a variety shops, municipal markets and at supermarkets. This development has had an adverse impact on businesses in the city and outlying areas as many have reported decreased sales. Meantime, consumers continue to complain after almost a month into the implementation of the tax but the government had said that the implementation of VAT will bring lower prices although to date the opposite has occurred.
The government, the president said, had expected some transitional difficulties, but he noted, however, that VAT was unscrupulously implemented in many quarters.
The president said that the government with the VAT tax had aimed to make it a broad-based, fair and transparent tax, and to this end had removed six taxes, namely the Entertainment Tax, Telephone Tax, Service Tax, Hotel Accommodation Tax, c-Tax and the Purchase Tax.
The head-of-state also mentioned that over 460 categories of items were reduced from 30% to 16%, while some 100 plus categories that attracted 10% c-Tax increased as a result of VAT. But for the first time, the president said, consumers will be seeing the taxes that they are paying. He said too that the government recognized that the prices of items that were previously taxed at 10% will increase.
Addressing the situation of stock on hand prior to the implementation of VAT, the president said that the ‘old stock argument’ is being used by businesses even though the government could not verify legally this imported stock.
The government and the Guyana Revenue Authority have maintained that the stock relief for the month of December for items that will be sold by March was based on records of the stock imported. But businesses have complained that they are unable to completely remove the c-Tax paid prior to January 1 and have applied VAT to their old prices. Some businesses have also said that to remove the c-Tax completely will bankrupt them. So in many cases consumers are facing double taxation (c-Tax and VAT) leading to higher prices.
Meanwhile, Jagdeo decried the fact that prominent businesses still do not understand the tax. He remarked that on Wednesday he spoke with some businesses and they had a distorted view of the tax. “The government,” he said, “still needs to work through this.”
The rural areas also present a concern, said Jagdeo, since there are reports that businesses there are charging VAT on zero-rated items like rice and sugar. Stabroek News has also received reports that in cases where the bill does not state the VAT charges on zero-rated items, these items have had their prices increased as seen for example in the higher prices for milk, potatoes, onions and garlic which are zero-rated.
President Jagdeo emphasized that the administration will continue to monitor the situation and in rural areas the New Guyana Marketing Corporation (New GMC) plans to begin selling zero-rated items to ensure that the price levels are maintained.
He also reiterated that not all the monies collected as VAT from the consumer is paid over to the government since businesses are allowed to minus the VAT they would have paid during their purchasing and only remit the difference to the GRA.
There was also a warning from the president that the VAT tax system leaves a paper trail of all transactions which can be followed by the GRA, so no longer can businesses bribe their way out of paying the correct taxes. President Jadgeo argued that opponents of the tax were concerned about this paper trail that VAT will leave.
Tax evaders, said the president, did not pass on lower prices to the consumers but pocketed those monies.
