The introduction of a tax rebate system may be an option exercised by government in its quest to ensure that the public fully benefits from the removal of some taxes, including VAT, on some consumer goods, Minister of Finance Winston Jordan said Monday.
Jordan was responding, at a press conference at his office, to a question about whether price control would be reintroduced.
“I am not a fan of actions or policies that tend to disturb the regular function of markets, however fragmented they are… I am a fan of doing things that would improve the function of the market. Price control has never worked,” he said.
Jordan added that there are different mechanisms to use to ensure that the increases “trickle” down to pensioners and public servants. He said so far government has been using “a mechanism that says if we reduce the rate of VAT or whatever tax, that there is a high level of altruism and good faith in the manufacturer or producer.”
He told reporters that in Guyana’s case this has not worked and therefore “we have to look at other mechanisms. One such mechanism is a rebate system, for example.” Jordan stated that people could be allowed to pay the VAT and seek a refund when income tax returns are submitted “with the relevant evidence.”
He said the consumer would benefit as opposed to reducing “upfront” and the producer not effecting the necessary changes to ensure the consumer gets something back. “I am surprised that there is not more advocacy in Guyana concerning the consumer items,” he said, while pointing out that there is continued talk of the absence of a “poor man’s budget.”
“The reality is when you remove VAT on poor people items, you expect to see a reduction in the prices.
You are not seeing it,” he said, while adding that when inquiries are made, the excuse is always that another business had increased prices, hence others followed the trend.
“That wasn’t the thing. The idea was when you remove the VAT or reduce it…. that it would feed through and to the extent of it not feeding through means that we have problems within the distributional arrangement that will allow these taxes to be appropriated,” he said.
Jordan said that the time has come for more studied approaches, other than just merely a reduction. “We have to find other ways of redistributing income in this format that gets to the end as opposed to being stuck at the producer/manufacturing level,” he said, while adding that he is amazed at the lack of advocacy concerning failures to reduce the prices for “poor people foods.”
