By Ayanna Kirton, Staff Reporter
Silvera
RED STRIPE will be increasing the prices of all their products except Malta in response to the Government's increase in the Special Consumption Tax (SCT).
However, up to yesterday, the company was still working out the prices.
"We will be increasing the prices of all our brands effective April 28, 2003," said the company's director of communications, Grace Silvera.
Wray & Nephew's managing director of distribution, Larry Watson said the company will also be increasing its prices, but in the interest of consumers it will absorb most of the costs.
"It is very difficult for consumers so we have tried to absorb some of those costs to provide value for money," he said. With that in mind the company will increase the cost of a drink of rum by $10 and its leading brands Wray & Nephew Old Tom Gin and Wray & Nephew Jamaican Brandy will go up by $5.
And the increase in the number of items that will now attract General Consumption Tax (GCT) has been met with severe criticism by members of the public. Most alarming, they say, is the number of formerly zero-rated items used in the agricultural and health sectors that will now be taxed.
Michael Ammar, president of the Jamaica Chamber of Commerce, while not objecting entirely to the move to add pharmaceuticals to the list of taxable items, questioned the Government's differential treatment of brand name drugs and generic drugs.
"This is not equitable, it was not well thought out," he said. "This will cause a lot of confusion. I would have preferred if GCT was increased by one or two per cent across the board instead of targeting vital sectors like agriculture and manufacturing," he said. "This is an indirect way of increasing GCT." Ammar also added that the Chamber opposed the new four per cent cess on imported goods and was prepared to lobby against it. "It is an irrational form of taxation," he said. "It assumes profit. In the public sector mark-ups are guaranteed, private companies depend on sales. Most manufacturing or distribution companies make between three per cent and 10 per cent net profit. Paying the cess will reduce that by four per cent, assuming you are on the higher end of profitability," he said. "This is another way of hiking up import duties but, because this is prohibited according to World Trade Organisation's regulations, they have found another way to implement it, which is totally immoral."
The head of a medical supply distributing company, who did not wish to be identified by name said, "Anything that adds to the cost of health care is considered negative. Though the high cost of health care is not unique to Jamaica, these costs will be passed on to consumers, low income earners in particular, who just cannot afford it."
He also pointed out that "medical suppliers are already working at minimal margins due to the level of competition in the business so taxes will only make it worse." Drugs used primarily in the treatment of asthma have also been added to the list of items that will now attract GCT.
WORRIED
Janet Hinds, a 24-year-old mother of an asthmatic child, will have to bear the cost of these new changes. "I am very worried about all of this," she said. "As a mother, it will only be harder for me. It is almost as if they are working against the people who they claim to put first," she complained.
"People cannot afford to buy the bare necessities and now they have imposed taxes on something as critical as medication that many Jamaicans need to stay alive. What is the rationale behind that?"
Richard Crichton, a 22-year old university student, succinctly voiced his disappointment in the Government's imposition of the GCT on former exempted items. "It is time for the Jamaican Government to stop letting taxpayers suffer for their gross negligence and mismanagement of funds," he said.
Of most concern to one economist is the GCT on items that are essential to production. "I would expect that if you are going to impose taxes on items, the last things you would consider are inputs in the production process like agricultural supplies which can effectively displace the level of goods imported into the country," she said. "Taxing energy-saving devices is also a contradiction for any country suffering from the increasing energy costs we're now faced with. Putting G.C.T. on many of these items may have the opposite effect. The demand for many of these items may fall, decreasing the Government's anticipated yield," she added.
The economist also added that the Government may also have to consider GCT evaders who may opt to sell their goods without tax in an effort to retain customers and keep business going.
Henry Rainford of the Jamaica Livestock Association (JLA) shares the same sentiment. He feels that imposing GCT on agricultural items is counter productive. "Most farmers are bankrupt or on the verge of bankruptcy," he said. "Farmers already have a rough time and taxing animal feed and raw material will wipe out the industry - it is almost as if they are promoting a no-start situation," he added.
"I know that some basic food items are tax exempt, including corned beef. However, imported corned beef is the local beef farmer's biggest competitor. Why do it? It will not help the poor in the end because merchants apply mark-ups anyway."
Mark Hart, managing director of Hart, Samuel & Sons Ltd., a distribution company for wines and spirits, will be affected by the increase in the special consumption tax (SCT) on alcoholic beverages.
"The cost of landing wines and spirits is 126 per cent. Because the new SCT is based on the selling price of the good it will have an effect of increasing this percentage by 30 per cent. Adding the new four per cent cess will make it an even 160 per cent," he explained.
According to Hart, the market is already dominated by unofficial importers who beat the high duty regime by evading taxes and make it difficult for legitimate importers to survive.
He also said that in a comparative study of Caribbean tourism destinations carried out by KPMG, it was concluded that Jamaica had the highest duties for importing wines and spirits. An additional cess will make the situation even more frustrating. High prices for importers will lead to high costs for hotel owners and other players in the tourist industry, forcing them to impose increase costs on alcoholic beverages for tourists.
"These high prices will make our tourism product falter and further stifle the growth of an already suffering economy," he said.
