There is no VAT on milk, the price increase is due to a shortage on the world market

Dear Editor,

I am at my wit’s end as I read your letter columns and find that persons are still treating with VAT as responsible for the increase in the price of some basic consumer goods, especially where there is no VAT. I wish to inform Mr Paul Subryan that there is no VAT on milk! So how can VAT be responsible for the increased cost of this commodity?

The answer Mr Paul Subryan is obvious. Since there in no VAT on milk, there must be some other reason why the price for this item has increased.

Did you take the time to find out what the other possible reason or reasons might be? You obviously did not; or such careless statements would not be penned.

There are a number of factors that can contribute to an increase in price. These factors can either be internal or external, or both. I will take the time to enlighten you on some such factors.

Generally supply and demand determine the price at which goods and services are sold.

Other factors that help to determine price include; labour to further manufacture the goods, other overhead expenses to run the business, the profit margin, high mark-up rates, the number of registered businesses in the distribution or supply chain ( in some cases, especially where the final retailer is not a direct importer of the goods being sold to the final consumer, goods change several hands before meeting the final consumer), registered businesses not removing VAT from the cost price before adding their mark-up -hence VAT is treated as a cost (but then there is no VAT on milk.)

Increased cost to acquire goods from suppliers and tacit collusion amongst businesses to simply increased prices are other internal factors.

Among the external or global factors to be noted are the foreign exchange rate, increased cost of imports and shipping and natural disasters such as drought.

While we may have some liquid milk produced here in Guyana, most of the milk we consume is imported. And the countries we import milk from (Argentina, Australia) have been experiencing drought, which would have the knock-on effect of cattle dying, and would in turn affect the dairy industry as a whole.

The fact is that the above experience has led to a shortage of milk on the world market. Basic economics tells you that when there is a shortage, prices go up to ration the limited supply.

It must be noted that this experience is not limited to Guyana. In fact Guyana may want to consider itself fortunate that there is available milk.

A few days ago I read that in Venezuela, a milk producing country, residents were in long queues to purchase milk. I can imagine in that instance what the price for the milk was!

Again, Mr Paul Subryan, there is no VAT on milk in Guyana. Attack another element in price.

A VAT or any other tax for that matter, cannot by itself lead to any sustained increase in prices.

Yours faithfully,

Marcia Harris

Asst. Public Communications Specialist

Guyana Revenue Authority

Around the Web