Talk to the GRA!

Feb 08, 2023 Features / Columnists, Peeping Tom

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Kaieteur News – Rice farmers have reportedly complained that they are being subject to high mark-ups on spare parts used in the sector. One farmer reportedly said that he previously paid $25,000 for a starter but that the price has since climbed to $46,000.

It was also reported that some spare parts dealers are charging VAT on spares.  In response, one government official is reported to have said that the matter will be raised with the Guyana Revenue Authority.

As far as it is known, the VAT on capital machinery and equipment and all-terrain vehicles (ATVs) used in the forestry, mining, manufacturing and agricultural sectors were all zero rated. This was done in the 2020 Budget.

There has been no announcement that spare parts for these sectors are now free of VAT at least not in the 2021, 2022 and 2023 Budget speeches. The GRA website speaks to the zero-rating of capital machinery and equipment used in the agricultural sector. It says nothing about the removal of VAT on spares.

It is therefore perplexing why anyone would be approaching the GRA to complain about VAT on spare parts used in the agricultural sector. Unless there was some announcement which was missed by the media, spare parts are not free of VAT.

When it comes to high mark-ups for anything, including spares, complaints to the GRA will not yield any result because the GRA is concerned the relevant taxes and not to moderate mark-ups by spare parts dealers. Guyana operates a free market system. There are no price controls.

There have been calls however for the government to consider price controls in order to limit inflation. But this is easier said than done. Past experience in Guyana is that imposing price controls leads to hoarding and black-marketing. Consumers, especially those who need supplies the most, tend to be more disadvantaged as a result of price controls.

Last year, the Bahamas implemented price controls of basic food items. Wholesalers were limited to a 15% increase and retailers to 25%.

Unfortunately, such measures will not be effective in Guyana. The government offered local importers a concession on taxes paid on freight. They were only required to pay taxes on pre-pandemic rates. The freight rates have plunged since that measure was put in place but prices have not been reduced.

This column has called for government to exercise greater surveillance over prices in the markets and to link concessions to businesses to them reducing prices. The government recently reduced taxes on vehicles with an engine capacity of 1500cc. But have any checks been done to determine whether the actual selling price of the vehicles has been reduced?

All of this points to imperfections in our market economy. Government can play a role of correcting these imperfections including by using State corporations such as the Guyana Sugar Corporation to compete with the private sector. It does not mean that the sugar corporation should be given more favourable treatment; but the sugar company, for example, is already a large importer of fertilizers and can be used to import bulk fertilizers for the rice industry.

The idea was floated during the APNU+AFC government to convert GUYSUCO into a food corporation. But this suggestion gained no traction.

Presently, the government is subsidizing the production of ‘brackish’ water shrimp. It is reported, for example, that the NDIA is being used to increase the size of ponds and the government is reportedly also assisting with better drainage. We are told that this year the government will spend another G$350M on these farms.

Since the project started in 2020, production has been said to increase seven-fold. But who are benefitting from this investment by the government? What is the economic status of those who are engaged in brackish water farms?

The government should publish the names of those who have benefitted from government assistance in cultivating brackish water shrimp. And why if there is such a glut on the shrimp on the market, has process not dipped more appreciably.

There is no reason why GUYSUCO, as a food corporation, cannot be engaged in the production of brackish water shrimp. So why is this not happening? This will create jobs and income for the corporation.

Why is the possibility of converting GUYSUCO into a food corporation not being pursued despite the potential of the corporation to produce food in large quantities? Perhaps, like the issue of VAT on spare parts and high mark-ups on the agricultural spares, this is a matter which must first be raised with the GRA.

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

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• Bahamas, Guyana Revenue Authority, GUYSUCO, Peeping Tom, VAT

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