FPA says VAT on local lumber discouraging consumers from purchasing

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… as forestry sector reports increase in cheaper substitutes

The Forest Products Association of Guyana (FPA) is again raising concerns about the imposition of Value Added Tax (VAT) on local lumber at all stages in the production chain.

FPA President Ricky Ramsaroop on Tuesday said consumers were now going after plastic wood substitutes and concrete, and in some cases importing alternative construction products instead of lumber.

The main reason for this, according to Ramsaroop, is the VAT that was imposed on the sector this year. He said this was now taking a toll on the local industry and persons were now feeling the squeeze.

“So, people prefer to go for concrete products and all of that is putting pressure on the wood sector. This is where we expect the Government will intervene,” the FPA head asserted.

Ramsaroop, who also serves as a Director on the Guyana Forestry Commission (GFC), was quoted in the media saying that this issue was brought up for discussion at a Commission meeting.

He said now that it has the attention of the GFC, it is hoped that the matter would be raised again with the Government, to look at ways of possibly reversing or reducing the VAT rate.

The FPA head claimed the tax imposition could cause a virtual shutdown of the sector, create mass unemployment in specific Amerindian communities and for other persons living in the interior.

A forest concession in Guyana’s rainforest

Ramsaroop said it also had the potential to increase illegal logging and deforestation and forest degradation, thus endangering the Green Development Plan and access to future carbon funds.

Meanwhile, the VAT to some extent is already causing a reduction in forestry activities, and hinterland roads and other infrastructure maintained by forest operators could be threatened also, he posited.

Opposition Leader Dr Bharrat Jagdeo has said that the imposition of VAT on the sector was in direct conflict with the Government’s stated objective of promoting value-added production.
Locally-produced lumber-based items, including plywood, are also subject to VAT. Previously, there was no VAT on the final sale of lumber and plywood. Jagdeo said this would only deter individuals from buying the commodity.

The former President said the coalition Government had been critical of loggers and logging companies summarily cutting down trees and exporting them, but its position had now changed.

According to him, while Government claims it wants to support more value-added activities in the forestry sector, it has simultaneously placed 14 per cent VAT on processed lumber.

Last year, the forestry sector contracted more than 30 per cent, principally as a result of Barama halting the production of logs and the United Kingdom’s restriction on greenheart logs originating from Guyana.

In its March 2017 monthly bulletin, the Finance Ministry said that forestry production for February 2017 amounted to 21,300 cubic metres compared with 25,319 cubic metres in February 2016. According to the report, this has resulted in production reaching 37,074 cubic metres, year-to-date, compared to 51,052 cubic metres in 2016.

Finance Minister Winston Jordan had said in May of this year that he is willing to remove the 14 per cent Valued Added Tax (VAT) on forestry products if evidence can be provided to show that the tax was hurting the lumber industry.

Jordan explained that representation was made to him by the private sector that the “VAT was killing the industry.”  The Minister expressed the view however, that he did not believe that the industry was being killed.  “If it was killed, it was a long time ago, when we allowed pine and sheet rock to come in at undervalued price and we allowed it to knock out our own fledging industry, but they have said that this VAT is killing them, so I said bring the evidence and if it is, not only will we remove the VAT, but we will give further incentives so that the lumber industry can grow and be competitive in Guyana,” he had said.

Forest products that have since February 1, 2017 begun attracting VAT include, logs, shingles, staves, lumber (rough and dressed), piles, poles, posts, spars, veneer, plywood, charcoal, firewood, wattles and manicole palm.

 

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