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12th JANUARY 2007
MEDIA RELEASE
“PSC DEEPLY CONCERNED AT PRICE INCREASES RESULTING FROM VAT INTRODUCTION ”

The Private Sector Commission (PSC) is deeply concerned, though not surprised, that the introduction of Value Added Tax (VAT) has immediately resulted in an increase in the prices of a wide range of basic food and other goods and services to consumers.

The Chairman of the PSC had earlier warned of the probability of an increase in the cost of living because the wide range of basic goods which had no consumption tax, or were previously taxed at a rate of 10 percent, will now be subject to VAT at a rate of 16 percent.

The PSC had made strong representation to the Government, prior to the introduction of VAT, for basic goods to be zero-rated or exempted when the application of VAT was being considered.

It is important for the consumer to understand that under the VAT system businesses are responsible for the application and collection of VAT for the Government and are not responsible for the increase in prices which result. Businesses have to remit all the taxes collected to the Government which is the sole beneficiary.

The PSC has met with and expressed to the Government, its dismay at the highly irresponsible and dangerously provocative statements which have been made by the Commissioner General, GRA, obviously intended to lead the public to believe that it is the business community that is responsible for the increase in the prices of goods and services following the imposition of VAT.

The PSC has pointed out to the Government that these statements have resulted in consumers threatening violence at business places which are obligated by law to apply VAT to goods and services. The PSC has urged the Government to publicly correct the false impression being given to the public.

The PSC has suggested to the Government a number of proposals for their consideration which could relieve the burden now being placed, especially, on the lower income consumer.

In the case where goods are sold from stock held prior to 1st December 2006, the consumer must now pay both the Consumption Tax and the VAT levied on those goods. The Government, in fact, will be the beneficiary of double taxation on the consumer. Where retailers are concerned, no form of tax relief for goods in stock has been granted.

It is important that the consumer should note that a very wide range of basic foodstuff which did not previously attract Consumption Tax such as beef, fish, chicken, pork, butter, margarine and a range of everyday consumer items, now attract the 16 percent VAT, thus contributing to the increase in the cost of living.

The PSC must also point out that the majority of everyday consumer items which are imported and locally produced and which were previously taxed at less than 16 percent and are now being charged for VAT will increase in cost.

The PSC fully endorses the statements and advertisements made by its members, The Georgetown Chamber of Commerce and Industry and The Guyana Manufacturers Association, with regard to the impact of VAT on the consumer.