The baby party is over

Dec 04, 2016 Features / Columnists, Peeping Tom

Local manufacturers will have no choice but to increase the prices of each bottled or canned product to compensate for the environmental tax which will now be levied on both local and foreign goods. This will mean increased prices for local manufacturers and the loss of the unfair competitive advantage which they had enjoyed for years until that advantage was challenged by a Surinamese company operating in Guyana.
The environmental tax was imposed by the PPPC government many moons ago. It applied only to foreign imports. This gave an advantage to local manufacturers. It was clearly in violation of the Revised Treaty of Chaguaramas (RTC).
The RTC proscribes certain forms of tax discrimination. It was inconsistent also with WTO rules. WTO Rules, which are embodied in the RTC, make provisions for ‘national’ treatment. What this means is that any measure applied to imports must equally apply to local goods. In other words, a principle of trade law must be upheld: there should be no discrimination against imports.
The environmental tax imposed by the PPPC regime was challenged in the Caribbean Court of Justice. It was deemed inconsistent with the RTC. It was deemed to be a tax which was imposed on regional goods when the RTC outlawed any such tax.
Before the final judgment of the Court was delivered, the Donald Ramotar government had attempted to prevent an adverse ruling by putting the government’s house in order. It tabled a Bill which sought to levy a lower rate of environmental tax on both foreign and local production.
APNU and the AFC, then with a combined one-seat majority as opposition parties, vetoed the Bill which the PPPC brought in order to regularize the situation. The argument of APNU was that there was need for the impact of the Bill on the private sector to be studied. The AFC’s position was not dissimilar, but it did not feel that the proposed Bill was consistent with the RTC.
The law was not amended and the CCJ ruled against Guyana, which was saddled with a billion-dollar judgment. The PPPC blamed APNU and the AFC for the judgment, claiming that the combined opposition had rejected its proposed amendment. The PPPC never paid the billion-dollar judgment.
When the APNU+AFC coalition came to power in 2015, it paid a negotiated billion-dollar settlement and said this was part of the debt which the PPPC saddled it with. The PPPC has always criticized that decision on the grounds that admissions during the court case had tax implications which APNU+AFC should have considered in arriving at a settlement. The APNU+AFC government has never explained the basis upon which it arrived at the settlement sum.
The APNU+AFC government has now turned around and introduced, as part of Budget 2016, a tax measure which mirrors the very Bill that it rejected under the PPPC. It is now proposing that the environmental tax be imposed on both local and imported items.
Logically, local manufacturers will be up in arms. They will be cry-babies and say that they will lose competitiveness. Well, they had nearly twenty years of protection under the PPPC’s environmental tax. They now have to pay the tax, because the APNU+AFC government is attempting to do what it had vetoed under the PPPC – that is, regularize the environmental tax to make it consistent with RTC rules.
The APNU+AFC will be criticized for this measure. It will be criticized for vetoing the PPPC’s earlier attempt to regularize the problem. But the bottom line is that the situation had to be regularized. The PPC environmental tax was never repealed. It was simply being ignored after the CCJ judgment.
The situation has to be put right. All the Finance Minister is doing is remedying a problem which has to be remedied. The cry-babies have no case. If after 20 years of a protective environmental tax, they have not achieved a competitive advantage over importers of foreign goods, they should not expect to do so now. The baby party is over.

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