2008 Guyana Business Outlook Survey released -VAT takes high priority

2008 Guyana Business Outlook Survey released
-VAT takes high priority
... Not too late for a review by the Government – Ram and McRae
By Alex Holder
Guyana Chronicle, 18 December 2007


From left Public Relations Consultant –Alex Graham, Managing Partner of
Ram and McRae Christopher Ram (Centre) and Rakesh Lachana –Partner Ram
and McRae
THE thirteenth (2008) Guyana Business Outlook Survey, a review designed
to obtain general information on respondents including turnover,
industry and number of employees; the performance of their business in
2007, was yesterday released.


Aside from the above mentioned functions, the study also seeks to
highlight views on the business and economic environment prevailing in
the country; while toughing on the issues impacting on their
performance; their plans for the future and their goals, strategies and
expectations for 2008.

Launched some four days earlier than anticipated, Managing Partner of
Ram and McRae; the entity responsible for the execution of the annual
project; Christopher Ram, stated the exercise which was conducted
towards the close of the year, witnessed significant developments, all
of which the company assured have been addressed by the seventy-four
persons who responded.

According to Ram, the survey reflects growth in several key sectors of
the economy including sugar, rice, construction, mining and quarrying,
gold and distribution.

Though there have been notable growth in some sectors, the report also
highlighted a 12.2 percent increase in prices by the end of the first
half of this year; an increase which the Finance Minister has
attributed to a combination of imported inflation and ‘the
misapplication of the value-added tax by retailers and other vendors in
the marketplace’.

In a statement on the findings based on the responses of about
seventy-four members of the private sector, respondents highlighted 14
issues that affected optimism about the economy for the past year;
these included the Guyana/Suriname Border Dispute, along with other
border issues; The Free Movement of Skills and Government Support for
Business and Investment, which both had a positive impact; and the
Jagdeo (CARICOM) Initiative on Agriculture.

2007 Business performance
In last year’s (2007) Business Outlook Survey, 68 percent of
respondents had projected increases in turnover for that year, while 71
percent projected increases in profitability, and a mere 12 percent and
29 percent expected turnover and profit respectively, to decrease.

One year later, when asked to provide information on the actual
performance of the business, 39 percent reported performance was worse
than expected, 46% in line with expectations, and 15% exceeded
expectations.

VAT
After close to one year of operation of the Value Added Tax (VAT)
system, businesses have expressed their concerns beginning with the
system’s impact on consumer spending; the existing rate; absence of
corresponding adjustment to rates of other taxes; its inflationary
effect and the absence of information on tax collection.

In its previous release, the survey had highlighted that the majority
(54 percent) of respondents predicted that VAT would not affect their
ability to compete, while 9 percent felt that competing would be easier
and 37 percent felt that competing would be more difficult.

The results underlined in yesterday’s release are in line with those
expectations with 56 percent reporting no change, 39 percent reporting
greater difficulty and 4 percent indicating that VAT made it easier for
them to compete.

Further, the survey’s findings revealed that 58 percent of respondents
have indicated that VAT has had a negative impact on the level of their
business, while 35 percent reported no impact and 5 or 6.8 percent
reported that VAT resulted in a slight increase on the level of their
business.

In a direct address to the responses received on the issue of the new
tax system it was noted that VAT should not be considered ‘tax reform’
at any level.

It was also noted that the current rate of taxation is extremely high
and stands as a system that has done nothing more that impose more
taxes on the Guyanese populace, securing Guyana’s place as one of the
highest taxed economies in the world.

Ram and McRae, Managing Partner -Christopher Ram, stated that “We need
to review the operation of the VAT, it is not six months –it is now
eight months and the government and the Minister of Finance must stand
by their commitment to make VAT revenue neutral and immediately cause
reduction in VAT and other areas.”

It was also noted that it is not too late for a review by the
Government of the VAT issue.

While VAT is not a tax on business, its contribution to inflation and
purchasing power of consumers, the report stated, are affecting
turnover and profitability.

Moreover, the results of the Survey indicate that a number of fears
expressed by citizens and stoutly resisted by the Government have in
fact materialised.

However, even as confidence continue to waver, the survey has indicated
that most businesses remain optimistic about their own performance with
the majority expecting profitability and turnover to increase by
varying percentages, while smaller numbers expect decreases in
profitability and turnover ranging from under 5 to over 20 percent.

The respondents, who expect their turnover to increase, attribute the
principal reasons for the increase to product and service improvements;
new products and services; competitive pricing; entering new markets
and winning market share.

In line with previous years, over half of the respondents, 55 percent,
indicated that they do not plan to raise capital in the year 2008.

When asked about their view on Government’s handling of seven issues
which arose or were considered critical in the previous publication of
the Business Survey, the Government won overwhelming support on the
issue of the Global Warming Fight, Opening of the markets for flour and
its continued Campaign against motorists.

However it did score poorly in as it related to the allocation of
Government advertisements and its handling of appointments to the
Judiciary respectively.

The respondents to the study represented sixteen of the nineteen
business sectors surveyed and the largest number of responses came from
the Distribution and Retail sector (28%), Construction and Architecture
(14%) and Manufacturing (12.2%), and twenty-six percent of the
respondents had turnover of over one billion Guyana dollars while
twelve percent employed over two hundred and fifty persons.