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‘No justification for increase of prices because of VAT’

Jan 11, 2013, 9:32 AM | Article By: Osman Kargbo

The Acting-Commissioner General of the Gambia Revenue Authority has made it categorically clear that the escalation of prices of goods and foodstuffs that has gripped the nation in the wake of the Value Added Tax (VAT) cannot and should not be linked to the introduction of VAT on January 1 this year.

Ag-Commissioner General Yankuba Darboe, who made these remarks at a press conference held at the GRA Board Room yesterday, said VAT has not been introduced to increase prices of commodities; rather “it is just a question of replacing sales tax” that was in existence prior to VAT.

“There is no reason why business people should be increasing the prices of their goods and services because of VAT,” Mr Darboe emphasised, saying that increasing prices of goods and services on account of VAT is illegal and unscrupulous because the rate of 15% that was being charged on goods and services prior to the introduction of VAT is the same rate that is charged now under VAT.

“This should not lead to the increase of goods and services in the country,” the GRA commissioner general said.

VAT is a general tax on consumption applied at each point of exchange of goods or services from primary production to final consumption. It is levied on the difference between the sale price of the goods and services (outputs) and the cost of bought-in (inputs).

At each point of exchange the tax is levied on the goods and services taxable, which is different from the Sales Tax method in which the tax is accumulated and applied at the final end of the exchange or the consumer end point.

The business community has been engaged in series of intensive discussions months ago before the introduction of the VAT to let them know that it is a mere replacement of Sales Tax, said Essa Jallow, Commissioner of Domestic Taxes at GRA.

Mr Jallow said post-implementation issues, such as the increase of prices since the advent of the VAT on January 1 will be addressed head on by the GRA to avert the myth that VAT is out to cause rise in commodity prices and hardship for the people of The Gambia.

“VAT is applied on imports and taxable supplies of goods and services,” said Essa Jallow, adding that “it is a mere replacement of Sales Tax, and in compliant with ECOWAS requirement.

More importantly, he said, government is using VAT to raise funds to provide basic facilities, goods and services for the public.

All the countries where VAT has been applied revenue collection has increased substantially as it covers a wide-range of tax collection, Mr Jallow noted.

“Businesses and goods taxed before are to continue to pay VAT as they are merely paying Sales Tax,” he said, adding that businesses that have registered and have certificates for the VAT regime could apply VAT on their products and services, which they in turn pay to GRA.

“Inflationary costs started on January 1 to make it looked like it is as a result of VAT,” Mr Jallow said, adding that “what is happening  in practice has seriously defeated the intention of VAT” because VAT charge still remains 15% as obtained in the sales tax regime.

He also said that all goods imported into the country four months prior to the introduction of VAT on 1 January got a refund of the Sales Tax paid on those goods, to pave the way for VAT introduction.

Mr Jallow added that under VAT, businesses are given import tax credit, wherein all import taxes paid on goods into the country before VAT is applied, get refunds for such taxes paid, which was not the case under the Sales Tax regime.

So there is no justifiable reason for businesses to increase their goods and services in the name of VAT, he affirmed.

Some businesses, goods and services do not attract VAT, whilst exports are zero rated and bear no VAT. Therefore, Mr Jallow said, VAT is pro-poor because consumption of goods and foodstuffs such as rice, sugar, cooking oil, flour, salt, meat in its raw form, fish, and other basic foods, attracts no VAT.

“Business people should not apply the VAT on these items; that is not proper under the law,” he said.

Companies that are to pay VAT must maintain invoices detailing the important aspects of their business and financial transactions, he also noted.

“Receipts must be given to the consumer to ensure VAT is accounted for,” Mr Jallow added, saying people must demand for receipt to know how much VAT is collected from them.

“Every one of us should be vigilant by way of ensuring prices are not increased unnecessarily because of VAT,” the GRA commissioner reiterated.

Other speakers at the press conference were Senior Taxpayer Education Officer Matty Njie-Senghore and Senior Corporate & Public Affairs Officer Lamin Jassey, who moderated the briefing.