In an attempt to further stimulate the forest industry, the government has approved an increase on the Common External Tariff (CET) from five percent to 40 percent for a period of two years.
This announcement was made by the Minister of Finance, Winston Jordan in November’s budget presentation for 2018 following representation by industry stakeholders.
“Following strong representation at the recent meeting of the Council for Trade and Economic Development [COTED], an organ of Caricom, Guyana’s request for suspension to increase the Common External Tariff [CET] on Pinewood and Pinewood Products, from five percent to forty percent, has been approved,” Jordan said, while pointing out that the decision would take effect from January 1, 2018 and remain in place until December 31, 2019.
In November last year, the government had also announced that importers of Pinewood would be required to obtain a permit from the Guyana Forestry Commission (GFC) in order to continue their operations.
The initiative by the government comes after the Guyana Manufacturing and Services Association (GMSA) and the Forest Products Association of Guyana (FPA) had made calls for the 14% VAT on forest products, such as pinewood to be recalled.
The two groups had explained that the importation of pinewood was creating an unfair environment in the logging market, since persons were being able to import the logs and sell them in the local market at a cheaper price.
Speaking to Stabroek News recently, a source from the GMSA related that the step by the government would support and prioritize local products and business, but there are still other interventions that are required to further boost the industry.
“I think anything that supports and prioritizes local products is welcomed by manufacturers. I think it’s for the manufacturers to also improve their standards and quality, because taxation by itself is not going to solve all of the problems and challenges, and so while it is expected to bring some positive results for the locally produced [Pine] wood products, there are other interventions that are required such as lowering the cost of production. We would’ve also expected some more budgetary support on infrastructure such as roads,” the expert said.
After the 14% VAT was added to finished wood products last year, the GMSA had made calls for its reduction and, or complete removal. While no such measure was taken by government last year, Jordan also announced that the supply of logs and rough lumber to the sawmilling industry will be exempted from VAT from the beginning of this year.
This, he said, would improve the cash flow of operators in the industry by at least $80 million.
While the source lauded the government’s actions, it was also explained that the GMSA is still of the opinion that there is a need for a reduction or removal of VAT on all finished wood products, since the additional tax has driven the cost of the construction sector up and has affected the furniture market negatively.
“…this by itself has driven the cost of construction up by as much as 14 percent and VAT was only introduced on all wooden products in February of this year, prior to that, VAT was only applicable to logs and raw materials. So, 2017 would’ve felt the impact on the construction sector and of course, the value added sector such as the furniture market would’ve went up,” the source explained, while stating that the “players in the industry greatly appreciate” the removal of VAT on logs.
Jordan also announced that $120 million has been set aside to start a forest inventory and an additional $50 million has been allocated to assist with a public-private partnership to establish a Dimension Stockyard.
This decision, the source said, is greatly appreciated and is going to assist the industry greatly. “…So with this initiative, it would help greatly with the industry knowing what is out there in the natural forest, which can then create a direct market linkage to what can be promoted and be available to the market,” the source added.
Additionally, the source related that the decisions that were made would’ve been related to matters that were addressed at the Ministerial Round Table between the Government and the GMSA.
“Some of the things that were discussed were addressed and we expect other items that are still pending and [we] will continue to engage the parties for next year and hopefully all issues will be addressed,” he said.