Suspension of VAT will cost millions in revenue loss

Suspension of VAT will cost millions in revenue loss – GRA

Dec 24, 2008 News

Following repeated calls made by sections of society for the government to suspend the Value Added Tax (VAT), Commissioner General of the Guyana Revenue Authority (GRA), Khurshid Sattaur, said that this will be harmful for the country, as millions in revenue will be lost.
In a statement issued to the media yesterday, Sattaur stated that the GRA is ‘taken aback’ by the irresponsible statements by the prominent figures, whom he noted seem bent on seeking opportunities to criticise the VAT which was implemented last year.
“It is appalling that these persons, including Parliamentarians and political leaders, do not seem to want to understand the VAT. Instead, they continue to mislead the innocent Guyanese populace in what seems to be an intention to serve their narrow political or self interest,” Mr. Sattaur said.
He said that the problem is also exacerbated from having a very “shrewd” business community, which seems to want to prey on the gullibility of the public.
He explained that it is the view of the GRA that the ignorance fuelled by these mischievous public figures contributes to businesses charging unconscionable prices for basic commodities.
Sattaur stated that earlier in the year a media report attributed to the opposition People’s National Congress Reform blamed VAT for price increases on items such as garlic, milk, potatoes and even locally grown vegetables that are zero rated in law and then there were calls to reduce VAT so that the price of locally produced rice could reduce, but according to Sattaur, rice does not attract VAT.
“In fact, following concerns by rice farmers, they were granted zero-rated concession on spare parts for machinery used in the rice sector…Now the tune has been changed from “reduce VAT” to “suspend VAT.” It therefore bothers me that persons continue to make such careless statements, which only lead to the continuing exploitation of consumers by some businesses,” Sattaur said.
He noted that not only would millions of dollars be lost in revenue if VAT is suspended, but the steps taken to improve Guyana’s fiscal position would go in vain, along with the time and money invested.
Mr. Sattaur noted that there is now a society where, when prices go up, businesses find every reason why they should keep them there in spite of Government interventions.
“There are numerous examples that can be cited in support of this fact. For example, the second month after the introduction of VAT, more than 80 items were zero-rated including basic food items, educational supplies and other essential consumer goods and services and prices went up for these items.
Further, with effect from March 1, last, the government again removed VAT from another 35 items including basic food items, medical supplies and items for use in the fishing sector. However, rather than seeing a sixteen percent reduction in these items, prices increased. Gas price reduced and minibus operators refused to lower their fares.
It was explained that the full benefits of VAT will only be felt when businesses use the system as designed. According to Sattaur, some businesses try to evade the VAT by offering consumers the option of not paying VAT so as to avoid the Tax Invoice, hence defeating the purpose of widening the tax base.
He added that prior to the introduction of VAT, the tax system did not allow for much flexibility in making fundamental changes.
“However, with higher revenue collection, there is so much that can be done to reform the other taxes. This is why we have been saying that VAT is the first major step to reforming our tax system and already we have seen a positive change to the Income Tax threshold” he said.
He urged that politicians with a vision for the development of the country should guard against making VAT a political issue, and stop creating an illusory basis for its suspension and should seek ways to encourage businesses to do the right thing and stop fleecing consumers.

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Suspension of VAT will cost millions in revenue loss – GRA

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