Minister of Natural Resources, Raphael Trotman says the Ministry is currently looking at various options that will “cancel out what is seen as an oppressive 14% VAT” on value-added forest products.
Speaking to Stabroek News on Wednesday after a community outreach in Lethem, Trotman said, “Any tax, whether it is 1 or 14% will be seen as being stressful and I believe that as we find fiscal discipline as a nation, we will find these complaints and 14% is not 16%.”
He pointed out that the Ministry is currently looking at other incentives that it can apply to the industry, particularly in relation to forest products, and one of them is restricting the importation of Pinewood.
“There is one such proposal, which I have on my desk right now and (this) is a restriction on the importation of Pinewood, which is crowding out our local species. We are working together with the Ministry of Communities and the Ministry of Public Infrastructure to ensure that local loggers can have their logs and lumber added to the government’s infrastructure drive,” Trotman said, while explaining that the government believes that the incentives and opportunities they are offering will “cancel out what is seen as an oppressive 14% VAT.”
“We want to ensure that lesser used species and local loggers have a percentage of all government contracts which will guarantee an income for them,” Trotman said, while stressing that the proposed restriction will not be a ban. “It is not a ban but a restriction because Pine[wood] can’t be imported and sold at a price cheaper than those in Guyana. What we are doing, it’s not going to be a ban,” Trotman stressed.
He said that the Ministry is going to write to the Guyana Revenue Authority (GRA) for a list of all of the importers and will be consulting with them. “We want to ensure that what we do is in the best interest of Guyana, Guyanese and those who rely on the forest for a livelihood,” Trotman said, while noting that they have received complaints from several associations.
Last month the Guyana Manufacturing and Services Association (GMSA) and the Forest Products Association of Guyana (FPA) issued a statement in which they called on the government to repeal the 14% VAT on forest products, which they said would cause a decline in the already “ailing” Industry.
The statement had explained that while the sector supports approximately 17% of the population through direct and indirect employment it had experienced its lowest production last year, when compared to the last 17 years and the imposition of a broadened VAT base on forest products could not have been “more untimely for the sector.”
The statement related that the imposition of VAT has resulted in the cost of products being increased, which ultimately gives imported substitute products a stronger advantage and also could result in the loss of jobs and businesses closing. “Please note that the forest products are considered the greenest products when compared to any other substitute products available on the market and is a positive contributor to the Green Development Strategy that the Government is currently promoting,” the statement had added.
An official from the GMSA had also explained that there would be job losses since the imposition of VAT would’ve created “cash flow tie ups” that the industry could not handle at the moment.
“If a primary producer [sawmill] buy logs from a concessionaire he will charge 14% VAT on the logs so that sawmill will have to carry that 14% at best for three months so that’s cash flow tie up. So when that sawmill provides lumber and supplies to furniture manufacturers they have to pay VAT, which they will claim back, but will take more than three months,” the official had said, while noting that just to produce one piece of furniture or value-added products there are various stages of VAT implications and “cash flow tie ups”.
When summed up, he pointed out, the industry could see an estimated figure of some US$900,000 per month and US$11M annually being tied up because of the VAT which would have gone back into reinvestment, marketing, improving the quality of the industry or even into producing more raw materials for businesses.