The VAT changeover on Monday has seen a range of improper practices by businesses leading to consumers complaining about an across-the-board 16% hike in the cost of living but the government has hailed the transition as a relatively smooth one.
Finance Minister Dr. Ashni Singh yesterday called on consumers to immediately demand adjustments if they are charged Value Added Tax (VAT) for zero-rated items. Yesterday, there were several complaints from consumers that VAT was being charged on zero-rated items like milk, potatoes, rice and sugar. Singh at a press conference at NCN stressed that it is illegal for businesses to charge VAT on zero-rated items. The minister noted that consumers should receive separate bills for zero-rated items and items being charged VAT at the standard rate of 16%. Dr. Singh explained that consumers should not leave the place of shopping without seeking an adjustment on their sales or tax invoice for those zero-rated items.
In the event that the consumer leaves the store, this matter should be reported to the Guyana Revenue Authority (GRA), the Consumer Affairs Division of the Ministry of Tourism, Industry and Commerce or the Finance Ministry, he said.
The Finance Minister also pointed to what he called “worrying and unacceptable” developments. For instance Dr. Singh said that a few businesses did not have their VAT registration certificates displayed as is required by law but were charging VAT. This development, suggested the minister, could be that the businesses have failed to display their registration or were not registered. In addition, the minister told the press that there were concerns that some businesses were saying that if consumers demanded a receipt VAT would be charged and if they did not then VAT would not be charged.
In another case consumers are receiving bills which do not have the VAT clearly distinguished but were still being charged VAT. The prices must clearly be marked as either VAT inclusive or VAT exclusive. Some businesses, said the minister, did not have prices on their products and others simply left their old prices and applied VAT.
At this stage Singh said that he would not attribute increased prices for items that should drop to price gouging since the business might not have placed adequate emphasis on the input credit.
Nevertheless, “It is unacceptable and we would continue to monitor it closely,” the minister said, adding that “we are concerned about these developments.”
Commissioner General Khurshid Sattaur, also at the press conference said that the GRA may even go as far as publishing the names of businesses that persist in applying VAT contrary to the legislation.
It was emphasized that businesses should re-calculate their prices to reflect credit for input taxes. The government is also giving a tax credit at the rate of 16% for stock bought in December 2006 up to March 2007 if the businesses registered before December 15. Of the 1603 businesses which have registered as of December 29, 2006 it is not clear how many registered before December 15. Registration applications are still being received and penalties apply.
The GRA in a press release distributed after the press conference stated that, “Consumers were concerned because they were not seeing a reduction in prices. It should be noted that this would not be possible immediately unless the business qualified for stock relief (importers and manufacturers).” Sattaur in the press release said that the relief when granted should have the same effect as if VAT was charged on imports since those businesses will be reclaiming the C-Tax they would have paid.
Some businesses have reportedly said that their prices are the same so that they could recover for the Consumption Tax (c-Tax) paid before December.
The GRA press release yesterday also stated that there were some businesses which were registered but were not charging VAT; businesses were adding on a mark-up to the old price and then adding 16% VAT and some smaller businesses were having difficulties issuing bills to their customers who bought numerous small items (market vendors).
Consumers are being advised not to pay VAT if a bill isn’t issued to them stating that VAT is being charged, to be vigilant and to shop around for the best prices. Businesses are also being advised to see the changeover as an opportunity to be price competitive by applying VAT correctly, that is, taking into consideration the fact that they will be receiving input credit for VAT and tax credit now on the stock on hand.
It is hoped that competition will stabilize prices.
The prices of electronics, household items, cosmetics and imported fruits which carried a 30% C-Tax should decrease and zero-rated food items like baby formula, onion, garlic, oil, split peas and bread should not increase and should even be lower.
The GRA is expected to continue its VAT monitoring and will be issuing advisories on prices. Commissioner General Sattaur emphasized that big businesses have a moral and legal obligation to ensure that the small businesses that retail their items maintain practices not contrary to VAT.
Nevertheless, the transition to VAT was lauded as a relatively smooth one.
It was noted that a number of businesses have made efforts to get prepared and to understand how VAT will affect their costing structure.
The GRA statement noted that there were some public-spirited businesses which were willing to retain their old price and declared that their prices would be VAT inclusive. Sattaur in the statement also reiterated a comment by President Bharrat Jagdeo that businesses will be monitored to ensure that consumers benefit from stock relief that businesses will be getting.
GRA teams also visited Regent and Water streets, North Road and the Stabroek and Bourda Markets yesterday to observe VAT processing and to offer assistance and help where necessary.
Senior staff of the GRA yesterday also visited some of the wharves to look at the operations. Information Technology (IT) officers were at the locations in the event that the Total Revenue Integrated Processing (TRIPS) system failed.
The VAT law which was passed in the National Assembly and amended on December 14, 2006 paved the way for the implementation of the new tax system in Guyana from January 1, 2007. (Nicosia Smith)
