
GMSA response to Peeping Tom article “The GMSA is seeking impermissible protection”
Dear Editor,
In response to Columnist Peeping Tom’s article in the Kaieteur News dated August 21, 2023, captioned ‘The GMSA is seeking impermissible protection’, the GMSA wishes to advise as follows:
The Guyana Manufacturing and Services Association (GMSA) is fully aware of the references made in the published article.
““Article 3 (2) of the General Agreement on Tariffs and Trade (GATT) states: “The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products.”””
“”Article 3 (4) then states: “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.”””
To clarify, GMSA is simply asking the government to expand the VAT-free basket of goods to include more categories of locally manufactured goods. We are in no way implying that the government should impose VAT on identical imported goods. This would not violate international or regional trade laws, as it would not give domestic goods an unfair advantage over foreign goods once the product has already entered the domestic market. It therefore means that foreign producers would be able to import their goods (i.e., identical items) into Guyana without paying VAT. Thus, we are accorded the same treatment pursuant to Articles 3(2) and 3(4), provided that our proposal is approved by the government.
It was from this perspective that the President of GMSA, Mr. Ramsay Ali, made this statement at GMSA’s Mid-Year Dinner and pointed out two locally manufactured agro-processed goods, namely: chowmein and guava cheese. Local manufacturing of these products, along with others such as chinese sauce, fruit mixes, green seasoning, pepper sauce, tamarind, and mango achars, constitutes a large portion of the local market with negligible imports.
In fact, removing the VAT on locally manufactured goods will benefit consumers since it is a consumption tax. This would reduce the cost of the products, which would make them more affordable for the consumer. GMSA also supports the removal of VAT on data, especially at the small and medium business level, as this would reduce transaction costs and encourage technology usage.
In addition to the foregoing, Guyana has a small population of less than a million people and therefore a small domestic market. Consequently, removal of the VAT on locally manufactured goods could lead to increased revenues and expansion for businesses and allow Guyanese agro-processors in said categories of goods to become more competitive in the export market.
Consider as well that the manufacturing sector accounts for 5% of non-oil GDP (2022) and is a major employer in Guyana. Removing the VAT on the proposed list of locally manufactured goods would help to create jobs and boost economic growth by virtue of the sector being more competitive. This is pivotal to diversifying the economy.
VAT is a regressive tax that disproportionately affects low-income families/households. Removing the VAT on locally manufactured goods would help to make these goods more affordable, especially for low-income consumers.
Moreover, the removal of VAT is not an uncommon policy for catalyzing manufacturing. In 2021, for example, Trinidad and Tobago removed VAT on an expanded list of basic food items. According to the Ministry of Trade and Industry, these items include vegetable/soya bean oil; olive oil; coconut oil; canola oil; ghee; peanut butter; black pepper and other spices; cereals; condensed milk and milk substitutes; instant and ground coffee; black and green tea; orange and apple juice; bottled water; seasoned meat and pigtail; canned sausages, tuna, mackerel, peas, beans, corn and mixed vegetables; mayonnaise; ketchup; roti skin; packaged soups; soya chunks and minced; ground dhal; cheese slices; table butter; ham and turkey slices; chicken lunch meats; bologna and biscuits and crackers. ‘These items now form part of the list of items under Schedule 2 (Zero-rating of the Value Added Tax Act). Additionally, these items will also be zero-rated when imported into the country.’
It is against this background that the GMSA’s request is neither impermissible nor protectionist. We believe that it is a reasonable request that would benefit both domestic producers and consumers. The government should carefully consider GMSA’s request and weigh the potential benefits against the potential costs.
In closing, the GMSA finds the claim that it is ‘shooting from its hip’ unpalatable as the organisation incessantly does due diligence, engaging internal and external stakeholders before making public claims.
Sincerely,
Nikeshia Castello
Communications Officer – GMSA