–as President Ali orders reduction in freight charges to pre-pandemic levels

IN direct response to increasing commodity prices fuelled by the pandemic-induced astronomical shipping costs, President, Dr. Irfaan Ali, has ordered that freight charges be adjusted to pre-pandemic levels, that is, rates charged before March 2020, effective August 1, 2021.

The ultimate result of this adjustment to customs duties, excise taxes and input value added tax (VAT) on goods imported, would be the return of $4.8 billion to the pockets of consumers and the business community over the next six months.

Duties, excise tax and input VAT are calculated utilising the cost, insurance and freight of imports, thereby allowing for the increased cost of freight to be passed on to the consumer by the importer.

“…we have recognised the marked increase in shipping costs from some countries which has moved from an average of US$2,500 to as much as US$15,000 per 20-foot container and from US$3,500 to over US$20,000 for a 40-foot container,” President Ali said in a statement released by Office of the President on Monday.

It is evident that rising commodity and service prices are not unique to Guyana, as countries the world over have been contending with the COVID-19-induced situation since early 2020.
The International Labour Organisation (ILO), in a report issued in December last year, said that the pandemic, along with the associated lockdowns, mobility restrictions and physical-distancing rules, have not only led to a significant increase in unemployment and considerable income losses for many people, but have also altered the spending patterns of consumers and the level of price inflation [the rate of increase in prices over a given period of time] that they face.

In particular, the lockdown measures have affected the supply of, and demand for, certain products and, hence, their prices.
In August 2020, according to the ILO, the prices of all goods and services were on average 2.7 per cent higher than in August 2019.

It has been proven that increases in food prices could have a dire impact on living standards of lowerincome households, which generally spend most of their incomes on food. Even a small increase can confront the members of such households with difficult decisions, the ILO cautioned.

While Guyana is revered as a food-secure nation, the cost of various imported commodities which are oftentimes a necessity, have affected consumers and, by extension, households.
Consequently, having carefully assessed the impact of COVID-19 on the economy and prices passed on to the consumer due to increased shipping/importation costs, President Ali, has ordered that the necessary adjustments to freight costs be made.

Essentially, those adjustments will be made through amendments to the relevant aspects of the Customs and Value Added Tax Acts.
“This measure will allow for a saving of $4.8 billion to the consumer and business community over the six-month period, thereby reducing revenue collections by the similar amount of $4.8 billion,” President Ali said.

Wary that the benefits are often not transferred to the average citizen, the President affirmed that government agencies will be tasked with ensuring that such savings are passed on to the consumer and not pocketed by “unscrupulous importers.”

This concession granted by the government will be effective on all invoices dated August 1, 2021 to January 31, 2022.
The announcement of this impending adjustment follows a report that other tax relief measures to support individuals and corporations amid the COVID-19 pandemic were extended to December 31, 2021.

According to a statement from the Guyana Revenue Authority (GRA), COVID-19 prevention, care and treatment supplies are exempted from custom duty, VAT and excise tax.
The list of specific items exempted from the aforementioned taxes include COVID-19 test kits, equipment for face and eye protection, thermometers, alcohol solutions, hand sanitisers and other disinfectant cleaners, wadding, gauzes, bandages, cotton sticks and similar articles, multivitamins and syringes among a series of other medical equipment and supplies.

The government’s decision to reduce freight costs also come at a time when the World Trade Organisation (WTO) has said that the pandemic represents an unprecedented disruption to the global economy and world trade, as production and consumption are scaled back across the world.

To this end, in recognising the significance of the government’s decision, the Private Sector Commission (PSC) expressed its gratitude to the Government of Guyana deciding to reduce the freight charges to pre-pandemic levels.

According to a statement from the PSC, the commission is quite confident that this new measure is widely welcomed by businesses and consumers alike.
“Notably, the PSC had crafted several proposals regarding the issue of shipping cost. The PSC is pleased to see that this proposal was largely considered and implemented. This decision will certainly stimulate economic activity and promote growth and enhancement within the private sector while facilitating consumer saving,” the statement noted.

To this end, the PSC urged the business community to ensure that consumers benefit from all savings made as a result of this tax relief.
Further, the President of the Guyana Oil and Gas Energy Chamber, Manniram Prashad, commended President Ali for his “statesman-like” action in addressing the spiraling increase in the importation of goods due to the astronomical increases in shipping costs.

“This action will reduce significantly the price on most commodities and will benefit all Guyanese especially the poor and vulnerable.
“However, the relevant agencies should be vigilant and make sure that these reductions are passed on to the consuming public and unscrupulous importers do not profiteer from this noble gesture by the government,” Prashad said.

The Georgetown Chamber of Commerce and Industry (GCCI), which has been keenly observing and analyzing the prevailing market conditions, also thank the Government of Guyana for this relief measure which is expected to stop any “potential erosion” to welfare of the citizens of Guyana as a result of the global environment.

“The Chamber of Commerce would like to take this opportunity to strongly urge importers to not behave in an unscrupulous and unpatriotic manner by profiteering off of a measure designed to ease the burden on the Guyanese people,” the chamber said.

The GCCI urged that these benefits be translated to the consumer who, through greater disposable income, will serve to continue the drive in rebooting the Guyanese economy out of the difficult economic fallout which occurred as a result of COVID-19 and the prevailing global conditions.