The new Value Added Tax (VAT) which came into effect from January 1 this year appeared to have gotten off to a less than auspicious start with trading in the city being marked by a number of VAT-related controversies between businessmen and consumers.
Between Tuesday and Wednesday of this week Stabroek Business visited various supermarkets, department stores restaurants and market stalls and, in most cases, witnessed vigorous and, on occasion, heated exchanges between sellers and buyers over price rises associated with the implementation of the new 16 per cent VAT charge.
Some of the controversies appeared to be associated with what appeared to be a decision by businessmen to impose the new tax on “VAT-able” goods without removing the now defunct consumption tax. Some proprietors were arguing that since, on the one hand, they were still unclear as to how to treat with stock in hand on which they had already paid consumption taxes and, on the other, they were required under the law to charge VAT, they had concluded that they had been left with no option but to pass the VAT charges on to the consumer while keeping the consumption tax in place.
But some consumers were rejecting the arguments of the business proprietors pointing out that it had been their understanding, based on repeated pronouncements by President Bharrat Jagdeo and VAT administration officials that the removal of the consumption taxes would take effect on January 1 this year and that, in effect, even with the imposition of VAT the prices of several consumer items ought to come down.
What was also evident was that some business houses had simply left to their cashiers and shop assistants the responsibility for addressing the queries of agitated consumers. In each of those cases where the Stabroek Business was present it was clear that the employees knew little more about VAT than the fact that they had been instructed to charge the new tax.
Stabroek Business also witnessed instances in which some businesses that are yet to register with the VAT authority have been, nonetheless, charging increased prices. In one case this newspaper was on hand during a heated exchange between a consumer who was being asked to pay the new tax and a businessman who was unable to produce his certificate of registration. The businessman’s explanation was that he was in the process of registering and that it was his intention to pay all monies collected as VAT, both prior to and after registration, to the competent authorities.
Last Tuesday Stabroek Business visited the New German’s Restaurant in “Tiger Bay” where proprietor Clinton Urling related his concerns over customer protests following his own VAT-related price increases. Urling, whose VAT registration certificate was displayed on his business premises, told Stabroek Business that while he had actually reduced his prices prior to the implementation of VAT the new 16 per cent tax still meant that the cost to consumers had increased.
Most customers, he said, had been under the impression that restaurant food prices would not have been affected by VAT. He told Stabroek Business that since his first concern was with the retention of his customers he was now contemplating reducing his prices even further in order to avert loss of patronage.
According to the south Georgetown restaurant proprietor several businessmen including himself were also concerned that since some of their suppliers had not registered for VAT and, in effect, could not impose the new tax, those persons who purchased from them were unable to secure VAT receipts.
Meanwhile, according to a city market wholesaler the promised reduction in the prices of zero-rated items that no longer attract the consumption tax is far from certain since the prices of several of those items had been increased immediately following the zero-rating announcement by Finance Minister Ashni Singh late last year. He said that even in those cases where the prices had remained the same businesses had now been put in a position where they could effect small price reductions while retaining most of the savings from the removal of the Consumption Tax for themselves.
Clearly concerned about the likely impact of the new VAT charges on customer responses to price hikes Urling told Stabroek Business that while “teething problems” were inevitable at the initial stages of the implementation of VAT the evidence “on the ground” suggested that the protracted public education programme associated with the new tax had clearly not gotten through to large numbers of both businessmen and consumers. He said that the private sector had probably not done enough to make its feelings known on the implications of VAT and to insist that some of the difficulties that were now arising be “ironed out” before implementation date. He said that it was clear that many businessmen “clearly still have not grasped the administrative complexities of VAT” and that in the absence of “good professional advice” they were likely to run afoul of the law.
Urling conceded that in the final analysis unless the existing “anomalies and irregularities” were addressed quickly the period ahead could be a difficult one for consumers since they would be the “final recipients” of any price increases.
