MANUFACTURERS UP IN ARMS AGAINST GOVERNMENT

Not happy with the new rebate system

Several manufacturers on the island are up in arms against a new move by the government of Prime Minister, Dr. Keith Mitchell to disqualify them from getting VAT rebates under a new regime that was announced in the 2013 budget that was presented in April.

THE NEW TODAY has been provided with the copy of a letter from Comptroller of Inland Revenue, Pauline Peters which seeks to bring an end to them getting any form of rebates as was the case under the former National Democratic Congress (NDC) government.

An irate manufacturer who called this newspaper on Tuesday feared that the move is intended to punish those companies that did not participate in a study on the 15% VAT and its implications on manufacturers.

The study, conducted under the auspices of the Grenada Chamber of Industry & Commerce (GCIC), was done by agricultural economist, Dr. Patrick Antoine, now the Chief Policy Advisor for the Mitchell-led New National Party (NNP) government.

The manufacturer complained that only thirteen companies have apparently qualified to get rebates based on their participation in the study.

“I didn’t pay for any study so I am not on the list”, the official said, adding that government’s action will have very negative and adverse effects on his company which has been operating in the country for over 30 years.

He spoke of initially welcoming the new system as announced in the budget by Prime Minister Mitchell in his capacity as Minister of Finance but is now worried about the new turn of events following the letter from IRD.

The Comptroller of Inland Revenue did not return calls made to her cellphone

According to the manufacturer who did not wished to be identified, he formed the impression that the new system that was unveiled by the Prime Minister on Budget Day would have definitely improved on the cash flow position of his company but this is now apparently not the case in light of the IRD letter.

He said that it would now have tremendous negative impact on the company’s cash flow at a time when it is already cash-strapped.

“They have now told me that I cannot enjoy the benefits. I have about 20 persons employed and once I do not have the cash then I cannot continue to employ people”, he remarked.

The business executive charged that it is now clear that the only persons who will benefit from the new system under the current government are those who paid for the Dr. Antoine study.

He said the government by its letter is telling his company, although in business for over 30 years, that it is not considered a bona-fide manufacturing enterprise and as such not qualified for any rebates under the new structure.

He said the playing field “is not level” in light of government’s decision to implement the new regime as outlined by the IRD letter.

He charged that something is smelling “rotten” over the move against some manufacturers to bar them from rebates for non-participation in the GCIC-funded study.

“It is also telling me that this government does not have the manufacturer’s interest at heart”, he said.

During the budget presentation, Prime Minister Mitchell announced the following regime change on the VAT rebates for manufacturers:

 

Stimulating Manufacturing

 

“Mr. Speaker, the manufacturing sector accounts for 6% of Grenada’s Gross Domestic Product (GDP); employs 4.5% of the employed labour force and contributes nearly 60% of total domestic exports. This sector comprises small to medium size businesses with linkages to agriculture, construction, tourism, and other productive sectors.

After presenting proposals to the previous Administration and pleading for a review of the VAT rebate mechanism for the past 18 months, our Government has heard the cries of our manufacturers.

Effective May 01, 2013, Government will replace the Manufacturers Rebate with the Manufacturers Competitiveness Programme (MCP) as follows:

 

(1). The MCP will be composed of two (2) parts.

(2). Part A is equivalent to 5% of sales (VAT exclusive) for qualified manufacturers.




(3). Part B is equivalent to 5% of sales (VAT exclusive) and can ONLY be used against accumulated rebate balances.

(4). The Part “B” amount will be subject to a “sudden death” provision in the sense that once the accumulated rebate balances are liquidated, the Part “B” component will cease and the beneficiary firm will only continue to benefit from the Part “A” provision.

(5). The MCP will extend for a period of four years, with annual reviews to ensure conformity with the criteria. These criteria are: Employment; Investment; and Tax Compliance.

 

Mr. Speaker, we believe this decision will preserve our manufacturing jobs and create additional jobs from this sector over the next two years”.

 

As a public service, THE NEW TODAY reproduces the letter that was sent out from IRD to several of the manufacturers on the rebates

 

This letter serves to advise that the 10% Manufacturer’s rebate implemented in 2010 with the introduction of the Value Added Tax (VAT), ended in April 2013 (tax period). As was announced in the 2013 Budget Address, effective May 1st 2013, a new facility – Manufacturer’s Competitiveness Programme (MCP) has been implemented.

A review of the genesis of the “facility” has revealed that it was intended for bona-fide manufacturers who subsequent to the introduction of VAT, voluntarily participated in a study of the impact of the VAT on the operations of the said companies. Your company did not participate in the study and as such was not classified as bona-fide in the context of the criteria previously established.

As you aware, our records show that under the Manufacturer’s Rebate Facility a total of …… $…. in tax, interest and penalties have been given as credit write-offs to various tax accounts belonging to your company to date.

The Ministry of Finance has agreed to forego the reversal of these amounts, given the expectation that was created through the granting of the facility by the Inland Revenue Division.

In light of the foregoing, effective May 1st 2013, the company will be expected to pay all taxes due to the Inland Revenue Division for which it is registered to pay.

The Inland Revenue Division apologises for any inconveniences caused by this action and expects the company’s full compliance with respect to payment of all taxes and adherence to the provisions of the tax laws.

 

 

Sincerely

 

Comptroller

INLAND REVENUE DIVISION

 

Cc: Permanent Secretary, Ministry of Finance

Chief Policy Advisor, Ministry of Finance

Executive Director – Grenada Chamber of Industry & Commerce

 

 

 

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