Dear Editor,
After reading the minister’s budget presentation and the windfall collected over and above the projections (about 76%) I am still convinced that the value added tax is being wrongly administered here. The market dynamics are very different in many other countries where VAT is implemented.
My observation is that about 75% of imported goods change hands 2/3 times before it reaches the final consumer and therein lies one of the underlying causes of rising prices and excess taxes being collected. For instance an importer brings in a consignment of goods and pays G$400,000 in VAT to clear the goods. He then sells the goods to a distributor. At this point VAT is calculated after adding mark up and the difference from input VAT (from wharf) to output VAT (sold to distributors) has to be remitted to GRA. The distributor then sells to wholesalers and again the cycle repeats itself. From the importer (400,000 input) to the distributor (600,000) an additional 200,000 or 8% is to be remitted to GRA and from the distributor to the wholesaler (output VAT 800,000) another 200,000 has to be remitted (8%). That makes the total VAT collected on this consignment to 32% and bearing in mind that previously consumption tax was calculated on cost, VAT is calculated on sales, making it even higher.
