Opposition Leader Bharrat Jagdeo has said that the imposition of Value Added Tax (VAT) on lumber at different stages of production is in direct conflict with the Government’s stated objective of promoting value-added production. In his opinion, taxing the sale of plywood will in fact deter individuals from buying the commodity.
During a recent interview with this publication, Jagdeo said the coalition government had previously been critical of loggers and logging companies summarily cutting down trees and exporting them, but now the Government is not giving loggers any incentive to add value to the product.
“Let me give you an indication of how contradictory the Government’s policy is: The Government said it wants to support more value-added activities in the forestry sector, that we export too much lumber,” Jagdeo said. “And then simultaneously it put on processed lumber — (such as) plywood and a whole range of value-added products in the forestry sector — the 14 percent Value Added Tax. That’s a disincentive to value-added. Why would anyone want to add value when they now attract a 14 percent VAT that they never had to pay before? And similarly, VAT (has been put) on heavy-duty equipment for processing and (on) everything else. So it’s contradictory,” the former President said.
The Forest Products Association (FPA) has been vociferous against any taxation measures on lumber. It has stated that taxes, including the ones placed on lumberyards, will drive up the cost of lumber. The group has also complained about the removal of certain concessions.
“The FPA is very concerned and alarmed at the recent imposition of VAT on lumber at all stages in the production chain — be it intermediary or final sale. In addition, locally produced items, including plywood, are also subject to VAT. Previously there was no VAT on final sale of lumber and plywood,” the group stated earlier in the month.
“Further, the concession whereby if 50 percent or more of your products was exported you would have been exempted from VAT has also been removed. These measures are very punitive, anti-development and frightening for the forest sector,” the FPA has argued.
Interior travel taxes
The application of 14 per cent VAT on local airfares was also a source of concern for Jagdeo. He said Government’s pledge to open up the interior does not accord with taxes being borne for airfares. Moreover, the mining and hinterland communities would have seen an increase in the prices of commodities, since much of the mining goods going to the hinterland regions are transported via planes.
“They said they want to open up the interior. That’s one of the President’s main planks that he operates on — the green economy; the interior should be opened up,” Jagdeo said. “And then they put VAT on local travel to the interior; and not just travel, but freight too! So it pushes up costs in the interior. How are (they) going to do that?” he asked rhetorically.
The tax measures have also been criticised by the National Air Transportation Association (NATA), which had said that this additional financial burden makes it prohibitive for persons seeking to travel to the interior. NATA President Annette Arjoon-Martins was quoted in the media as saying: “The big challenge to us is all of our customers who depend on hinterland transportation. For example, our tourism clientele and our mining clientele will be affected because the cost of interior travel will go up. We feel as well that this will have an effect on those sectors.”
The Guyana Revenue Authority (GRA) has, however, announced that it has approved a number of hinterland airstrips to be exempted from the VAT. Commissioner General of the GRA, Godfrey Statia, has said that some 60 locations have been identified for this exemption.
In a brief interview with Guyana Times yesterday, Chief Executive Officer (CEO) of Roraima Airways, Captain Gerald “Gerry” Gouveia, noted that it was still too early for a comprehensive evaluation of the impact the tax has had on business. He said an analysis of the situation is underway, but as a preliminary, he has opined that the cost of doing business would likely increase.
