Businesses may be ignorant of the specific changes to the VAT law

Apr 09, 2021 Features / Columnists, Peeping Tom

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Kaieteur News – The Senior Minister within the Office of the President, Dr. Ashni Singh, has called on the Guyana Revenue Authority (GRA) to take action against those unscrupulous persons who are still charging value-added tax (VAT) on zero-rated items. He has also expressed concern over the increases in the prices of items for which the VAT was removed.
However, the manner in which the government zero-rated the VAT on certain household necessities leaves much to be desired. In his Budget speech, Dr. Ashni Singh announced that the government was restoring VAT on basic household necessities that were previously zero-rated at the time the PPP/C demitted office in 2015. He said that these items included basic wheaten flour, basic breads, oats, unflavoured crackers, biscuits, cooking oil, locally produced bed sheets and pillowcases, toothbrushes, etc.
It is the etcetera which provides a grey area. The APNU+AFC had misguidedly imposed VAT on a range of household necessities, and now that the PPP/C is determined to remove the VAT on these items, the public needs to know specifically the items for which VAT is now zero-rated.
On its website, the GRA has a list of the zero-rated items. But how many businesses would go to that website to study Section 17 of the Value Added Tax Act and then to examine what items have now become zero-rated? Some businesses may not be aware of the wide range of household necessities which are now zero-rated or were previously zero-rated.
Consumers also may be aware that white and whole wheat bread attracts zero VAT but may not know that French bread, Swiss bread and sweet breads attract VAT. They may know that baby formula, diapers, sanitary napkins and panty liners are zero-rated but do they know that cheddar cheese is also free of VAT? Locally produced garments, bed sheets and pillow cases are zero-rated for VAT. But how many people know that shelf covers and blankets are also zero-rated? Many know that fresh fruits are zero-rated but how many know that this excludes apples, grapes, dates, prunes, plums and berries?
Many retail businesses which are not importers may not know these things and may inadvertently apply the VAT. Not all businesses are therefore unscrupulous.
A special public education programme should be undertaken, targeting businesses and consumers. This should be done by the Ministry of Tourism, Industry and Commerce in conjunction with the Ministry of Finance and the Guyana Revenue Authority. This is all the more necessary considering that the PPP/C is reversing all those taxes which the APNU+AFC placed on consumers. One of the problems which businesses face is if they do not apply the VAT, only to discover later that GRA finds that they should have. These businesses will then have to pay the very VAT which they never collected from the consumer.
But Dr. Singh also has his problems. The Ministry of Tourism, Industry and Commerce should advise him that some of the measures which he announced in the 2021 Budget are in violation of the World Trade Organisation’s General Agreement on Tariffs and Trade (GATT) and the Caribbean Single Market and Economy (CSME).
The GATT provides: “The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or any internal charges of any kind, in excess of those applied directly or indirectly like domestic products.”
The same agreement states: The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution of use.”
These provisions of the GATT are known as national treatment and MFN treatment. They prohibit preferences being accorded to local goods like imported items. The Revised Treaty of Chaguaramas, in turn, requires the elimination of measures intended to protect domestic production or which involve discrimination on the grounds of territorial origin.
In the 2021 Budget, the Minister announced certain measures which appear to be in violation of national treatment under GATT and the aforesaid principles of the Revised Treaty of Chaguaramas. These measures include the zero-rating of construction stone imported from CARICOM, locally produced pre-stressed concrete piles, locally fabricated mild steel beams for construction, locally manufactured roof and PVC products for construction. These measures are likely to be successfully challenged in our courts and at the Caribbean Court of Justice as being discriminatory against like imported products.
No one will want to say that the person who piloted these measures did so with bad intentions. And similarly, it should not be assumed that businesses which are found to be charging VAT on zero-rated items are unscrupulous. Some of them may not know of the specific changes to the country’s tax laws consequential to the Budget measures. Just as how the government may not have known that it is not allowed to zero-rate the VAT only for some forms of domestic production!

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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