VAT sees slump in sale of local meats
By Nicosia Smith
Stabroek News
January 11, 2007
Increases in the price of meat due to VAT have seen consumers cutting back on purchases and producers are worried as sales fall.
Chairman of John Fernandes Ltd, Christopher Fernandes said sales of locally produced meat - fish, chicken, pork and beef - at that company's subsidiary Bounty Meat Centre have plummeted.
The cost of production has remained the same, Fernandes explained to Stabroek News, but the application of the 16% VAT has increased the cost of chicken to the consumer. This 16% tax doesn't go to the retailer but has to be remitted to the Guyana Revenue Authority. Many consumers have apparently not understood this and have berated retailers over the fact that they have to pay the 16%. Previously, chicken was not subject to consumption tax (c-tax). While the government has zero rated poultry feed, previously there was no tax on poultry feed either.
Fernandes contended that the focus on locally produced items "is really something that is missing…because everybody is focusing on imported items."
Bounty has live birds in stock that are seven and eight weeks old and which are ready for the market. If they cannot be sold a storage problem will develop, since the company is maintaining the Christmas level production to satisfy the expected demand during Cricket World Cup in March. But if sales continue to drop, the company will be forced to cut production.
Fernandes noted that consumers were not being told about items which previously attracted no tax, but on which they now must pay 16% VAT. He added that the authorities were mainly using the 30% c-tax example and saying that items which attracted this amount of c-tax will see a price decrease. Because locally produced meats fall into the category of items that were previously not taxed, consumers are reacting unfavourably to the price increases. Bounty and other supermarkets have the task of explaining to consumers that meats are now subject to VAT.
Meanwhile, prices on imported meats like sausages, ham and bacon have decreased because they would have previously attracted taxes higher than 16%. Bounty imports sausages, ham and bacon from Trinidad and Tobago. All the other meats in the supermarket, except chicken, are bought from local distributors.
Before VAT was implemented, Bounty had made representation for chicken to be zero rated but in the end the product was not.
Bounty is the second largest chicken producer in the country. The largest, Didco Trading Company, will soon be exporting chicken to Trinidad and Tobago.
Didco Trading Company Chief Executive Officer Deo Singh told Stabroek News that meat sales at his entity have fallen considerably. Singh pointed out that consumers already pay income tax and having to pay an additional 16% on purchases will have an adverse impact on sales. The consumer, Singh said, believed that all prices would have declined, based on the public relations campaign that accompanied VAT.
Didco also has a lot of stock on hand worth hundreds of millions where taxes were already paid.
Before VAT was implemented Singh also made a decision to close Didco's toilet paper factory. Toilet paper previously carried no c-tax but now attracts VAT.
At C&F Supermarket on Regent Street, Manager Paul Fraser said shoppers are objecting to paying the VAT on meat and are arguing that the GRA said prices would decrease when VAT was implemented.
With regard to stock relief, he explained that his store was not eligible to claim.
Fraser posited that since a balanced meal includes protein and protein comes from meat, if consumers cannot afford meat then their protein source will be cut off.
C&F has added the 16% VAT to its last year prices, since all the stock was bought from distributors. The manager said the supermarket could not reduce its prices.
"Everything in my store I had to apply 16% unless [it is a] zero rated item." Fraser lamented that if he removed the 30% c-tax on his items by giving a 30% discount, he would go bankrupt by February 1. It is estimated that the old stock at C&F will take four months to roll over.
Fraser said that using the 'big stick' method to force businesses to comply with the VAT law will not yield the best results.
The GRA recently stated on record that the prices for items which previously did not attract c-tax or attracted c-tax below 16% will increase. However, the GRA continues to encourage consumers to shop around for the best prices. Consumers are also advised that if VAT is charged their bills must so state, along with the TIN of the business and its address. The quantity of the item must also be stated. It is illegal for a business to charge VAT if a VAT registration certificate is not displayed and if that certificate is not original.
Stabroek News has observed businesses on Camp Street and at Stabroek Market charging VAT without displaying original VAT registration certificates. These businesses used photocopied certificates and others displayed their TIN on cardboard or paper.