-but bakery points to heavy losses last year
The Guyana Revenue Authority (GRA) says it is disturbed that Bakewell has upped the price of its bread and rolls by approximately 20 per cent effective Thursday, but the company says eventually other bakeries will have to follow suit given the rise in input costs.
In a press release, GRA Commissioner-General Khurshid Sattaur pointed out that Bakewell by way of a flier stated: “…the continued large increases in prices for flour, electricity, fuel, vegetable shortening, packaging, shipping costs and increases in the cost of imported raw materials and the consequential increase in customs duties payable etc…” have forced the company to increase its prices.
Sattaur said while international market values do have an impact “we still believe that some of the prices are unjustifiably increased.”
But Naeem Nasir, President and CEO of Nasir and Nasir, principals of Bakewell and The Roti Hut, told Stabroek News he could not operate at a loss, as the GRA Commissioner General seemed to want him to.
He said that for the first time in the 19-year history of the company it has operated at a loss.
He said the GRA was not unaware of this fact and added that the company has had to chase down the agency for its VAT returns.
“For us, the VAT is neutral, whatever we put in, we got back. We have never considered VAT in our costing,” said Nasir.
The GRA said checks made at other bakeries in the city revealed that prices remained the same and some owners indicated that they had no intention of increasing their prices.
But Nasir said that there was no way people could keep bread prices stable unless they dropped the weight of their products.
Nasir explained that his costs for freight, electricity, shortening, cooking gas and diesel have all increased tremendously over the past year and that he made a loss for almost all of last year. He said the company was on the verge of closure because of the losses at one stage.
General Manager of Bakewell, Rajindranauth Ganga, said he was surprised at the GRA statement since on Thursday, two officers from the agency went to the company and were given documents outlining the company’s various expenses, which forced the increase. He explained that when the cost of several inputs, other than flour, went up the company had not changed its prices.
Last week Sattaur warned of the negative implications of the National Milling Company’s (Namilco) announcement that it would retain its 16 per cent VAT price even though the government has zero-rated flour with effect from March 1, 2008.
He explained that while VAT-registered bakeries were able to recover the VAT they would have paid to acquire the flour previously when flour was taxable at the standard rate of 16%, now that it has been zero-rated they would not be able to have any input tax credit for flour. He said if Namilco increased its flour price by 16 per cent it was likely that all flour-related products would increase, as there was no 16 per cent to be recovered and it would be passed on to the consumers.
“Bakewell’s announcement is testimony to what we had predicted,” Sattaur said. “Reflecting on the situation, one would logically think that it might have been advisable to retain flour as a taxable standard rated item.”
He reiterated that the intention of zero-rating basic commodities used by the average household, including flour, was to ensure that consumers were relieved of high prices, which were reportedly associated with VAT.
“We see now that VAT was removed but yet the prices keep going up. It means that the government’s efforts have failed …in this regard solely because of the callous business practices of some businessmen in this country,” he said.
The GRA said it hoped government and more particularly consumers were taking note of what was happening and would take the necessary action to ensure that consumers were not swindled.
Sattaur said that while the GRA has been criticised for defending consumers, the authority will continue to speak out against practices that are bent on exploiting consumers for personal gain and more so because the GRA seems to be the target when prices increase.
