VAT in isolation - the consumer suffers
By Peter R. Ramsaroop
Stabroek News
May 18, 2007
This column explores initiatives to improve the business climate of our nation and make Guyana Open for Business a reality. Peter R. Ramsaroop, MBA Chairman, RoopGroup
Last week we observed the Government proudly flaunting the IMF report about the implementation of the VAT. They also claimed victory in avoiding this discussion in parliament with the opposition and its impact on the consumer. While it is true that the IMF is hoping for a timely repayment of their debt with an over 44% increase in revenue collection, it may lead one to ask, "Who, then, is looking out for the consumer?"
While I support the VAT as a means of revenue collection, its implementation was done in isolation of other key areas that should have been part of a comprehensive overhaul of the entire tax system. The private sector initially came out with its disagreement on the percentage of what the VAT should be, but since then has fallen silent. It gets worse, many of us have called for the raising of the tax threshold on low- income workers - this did not happen. I am not aware of any employer who has given wage increases to their workers to cover the rise in the cost of living from the implementation of VAT. I feel that workers making less than $50,000 who are required to pay VAT should not also have to pay income taxes.
In Florida, for example, there are no state income taxes but one pays higher property taxes. Here we pay income taxes, property taxes, consumption taxes, double taxes on vehicles and we are taxed on money brought in for investment. Therefore, those who praise the VAT in isolation of these other taxes, demonstrate an acute insensitivity to the consumer. Most government officials are tax exempted on all those items so it is understandable that they should forget as they cruise in their brand new Pathfinders and newly purchased BMWs. Guess who is footing these bills. Yes, we the taxpayer.
With recent reports showing the magnitude of revenues collected by the Government, it causes one to wonder what it is to be used for. The IMF also commented on our stable dollar but failed to outline that that is due mainly to the large underground economy and the major money laundering programmes in place. In addition, the IMF report said public workers wages were increased in line with inflation. However, most public workers are the ones suffering the most with the additional cost of living expenses, a fight that the trade unions have been waging unsuccessfully.
The consumer continues to be the loser in this entire process. Although it was touted that prices will go down due to the reduction in consumption taxes, the lack of sound analysis in government failed to calculate that in a few short months, gas prices have risen, shipping costs have increased, and prices of all goods are at an all time high. Therefore, with prices of raw goods up, adding an additional 16% on top of that now becomes the burden of the consumer. This past week, it was acknowledged that food prices are at an all time high.
Recently, I went to Windies Sports Bar and ordered a salad and I was surprised to find that the cost of my meal was now 16% higher due to the VAT surcharge. When Governments fail to recall that they are elected to represent the concerns of the people, this is when the people must face reality and speak up. We continue to ask for a friendly investment code where tax holidays are fair across the board. To my detriment I have experienced first hand the cost of investing in Guyana. One is confronted with continual adversity when you are outspoken in regards to your political differences. Yet, there are others who receive major incentives for one-time events.
When challenged, the private sector must relentlessly and aggressively pursue unfair and inconsistent practices. I have been working together with other private sector leaders over the course of the last few years and it has become apparent to me that we have to reenergize and revitalize the spirit of free enterprise in Guyana. With a healthy tolerance for risk, the optimism of the entrepreneur, and faith in the people of Guyana we can build a private sector that will influence the public sector directives to ensure that at the end of the day, the consumers are treated fairly.
Until next week "Roop"