Skyrocketing shipping costs: President announces $4.8B reduction in import taxes, duties
…trade-off to be passed on to citizens
With the aim of cushioning the high shipping costs due to the global pandemic, President Dr Irfaan Ali has announced several reductions to shipping-related charges to the tune of $4.8 billion in order to bring relief to citizens and businesses.
While these reductions would result in the treasury losing a consequent $4.8 billion in revenues, they are necessary for dealing with the socio-economic effects of the COVID-19 pandemic. According to the statement, the Government continues to monitor the effect it has on household income, the Private Sector and the economy on the whole.
“In this regard, we have recognised the marked increase in shipping costs from some countries which has moved from an average of 2500 to as much as 15,000 US dollars per 20-foot container and from 3500 to over 20,000 USD for a 40-foot container.”
“Duties, Excise Tax and Input VAT are calculated utilising the cost, insurance and freight of imports, thereby allowing for the increased cost of freight to be passed on to the consumer by the importer,” the statement said.
According to the Office of the President statement, in light of this the President has instructed that further reliefs be granted and the freight charges be reduced to pre-pandemic levels when calculating Custom Duties, Excise Taxes and Input Value Added Tax (VAT) on imported goods.
“Consequently, the relevant aspects of the Customs and Value Added Tax Acts will be amended to reflect this concession. This measure will allow for a saving of $4.8 billion to the consumer and business community over the six-month period, thereby reducing revenue collections by the similar amount of $4.8 billion.”
“Government agencies will be tasked to ensure that such savings are passed on to the consumer and not pocketed by unscrupulous importers. This concession is effective on all invoices dated August 11, 2020 and continues in effect until January 31, 2022,” the statement said.
When it comes to fuel, the prices for which have hiked in recent times, the Government is also monitoring this development. According to Finance Minister Dr Ashni Singh in an interview with this publication, the system whereby they reduce Excise Tax when global prices are high and increase the tax when it is low is still in place.
“We as a Government had put in place an arrangement whereby, we adjust the Excise Tax, depending on the world market price for oil. And this is a mechanism we put in place since we were last in Government. And it’s a mechanism we have reactivated since we returned to Government.”
“Essentially how the mechanism works is that when gas prices are low, we adjust the Excise Tax rates upwards. When gas prices are high, we adjust the Excise Tax rates downwards. Essentially, we cushion the impact of the world market price on the consumer,” he said.
According to the Minister, the Government continues to monitor oil prices closely, including the oil prices on the world market and the fuel prices at the pumps or the local markets. Oil prices have particularly been affected by the COVID-19 pandemic.
“We continue to monitor prices. What has essentially happened is that world market prices have been increasing very steeply in recent weeks and months. A couple months ago we did reduce the Excise Tax rate. We reduced it from 50 to 35 per cent. That helped, but of course prices have continued to increase,” he said.
“I would say it’s something we continue to monitor closely. And depending on how it evolves we’ll make the appropriate decision at the appropriate time. But we are monitoring the situation very closely. We’re keeping a close eye on world market oil prices and prices at the pump.”
Meanwhile, the Private Sector Commission (PSC) released a statement in which they lauded the Government for the measures announced on Monday and their continual efforts to bring economic assistance to the people. According to the PSC, these measures are likely to be welcomed by the business community and consumers.
“Notably, the PSC had crafted several proposals regarding the issue of shipping cost. The PSC is pleased to see that this proposal was largely considered and implemented. This decision will certainly stimulate economic activity and promote growth and enhancement within the Private Sector while facilitating consumer saving. To this end, the PSC urges the business community to ensure that consumers benefit from all savings made as a result of this tax relief,” the PSC said.
Additionally, the Georgetown Chamber of Commerce and Industry (GCCI) said that it has been keenly observing and analysing the prevailing market conditions which have been severely afflicted by the global pandemic, noting that it observed shipping prices increasing by six and in some cases, ten times the pre-pandemic level.
This, it stated, created a sharp impact on the cost at which products are being provided on the domestic market.
The GCCI said that the announcement by President Ali will ease the burden of increased shipping cost by restoring shipping charges to the pre-pandemic level of charges. This is expected to ease the burden on both the Private Sector and consumers.
“The GCCI would like to thank the Government of Guyana for this relief measure which can be expected to stop any potential erosion to welfare of the citizens of Guyana as a result of the global environment,” the GCCI said in a statement.
The Guyana Oil and Gas Energy Chamber also congratulated the Government, with President of the Chamber Manniram Prashad commending the President for his “statesman-like action” to address the increases.
“His instructions to reduce shipping costs to pre-pandemic levels is most welcome by GOGEC. This action will reduce significantly the price on most commodities and will benefit all Guyanese especially the poor and vulnerable.”
“However, the relevant agencies should be vigilant and make sure that these reductions are passed on to the consuming public and unscrupulous importers do not profiteer from this noble gesture by the Government,” Prashad said. (G3)