Dear Editor,
At the introduction of the Value Added Tax, businesses were advised to display at their place of business a sign indicating prices of items on display and whether they included or excluded VAT. This is to help consumers know beforehand that they will have to pay (or not) VAT at the cash register.
Businesses have a choice to go either way that is VAT inclusive or VAT exclusive if the cost of the item is below $10000.00, since the GRA does not decide for them. However, for the amounts above $10000.00 the VAT must be stated separately.
For the items that attract VAT, a business person can choose to add the total of 16% at the end of the list of items which will be correct, this being the VAT exclusive way.
On the other hand the business person can choose to go the inclusive way where he can use the fraction of 4/ 29 to calculate the VAT which will be equivalent to 16% VAT.
In response to Mr van Beek’s letter (07.02.02) captioned “The tax fraction to calculate the VAT in an inclusive price is 4/29”, I would like to state that Mr. Stan Smith the proprietor of Jacs Hotel, restaurant, snackette and bar who is referred to in that article is calculating the VAT correctly. In addition, I must say that Mr. Smith did not say that the items he referred to in the article were VAT inclusive. What he did say is that the items are taxable.
However, I must commend you on highlighting the method of calculation for both inclusive and exclusive items. I trust that businessmen who are still at a loss at the calculation would find it useful.
Yours faithfully,
Brian Watson
