D-day for implementation of the general sales tax is Saturday April 1st and to make sure the tax is understood, even if it is not embraced, public awareness is a priority for the implementation team. The team began holding public forums on the tax last week in Belmopan and today a session was held in Belize City, the country's largest commerce and population center. 7NEWS was there to find out more about this famous rose by another name.
Alfonso Noble Reporting,
The Tax Department today continued with its countrywide consultations on the general sales tax (GST). Businesspeople and other interested parties gathered this morning to learn about the plan for implementation and the effect it will have on doing business.
Marilyn Ordonez, Assistant Commissioner of Income Tax
"The purpose of the consultation is is to acquaint businesses and customers about the GST, what it is all about and how it will affect doing business; how it will affect the final consumer."
Godfrey Arzu,
"It's a new system of taxation and we need that both businesses and consumers be aware of how the tax system works."
And how it works is very different from the sales tax which it replaces. First, there's the 10% rate, compared to 9% for the sales tax. But that's just a number; the most significant difference will be seen in the implementation, administration and effect of the tax.
Godfrey Arzu,
"Up to 40% of the tax should be collected at import and as such that contributes a major feature to the tax itself. The existing sales tax has a element of cascading. Cascading is the term in tax circles used for the system in place where tax is charged on of tax. A simple example is importation of a material, for example paper to produce labels. That paper at import will pay sales tax then the producer of that label will also be charged sales tax on top of that sales tax that was included in his cost. In the new GST the credit mechanism provides for import taxes to be used as a credit. Therefore the tax paid at import does not factor in the markup of the business. It is estimated that cascading in sales tax is anywhere in the vicinity of 23% to 40% and therefore if we remove that cascading then the cost of doing business or the cost of goods should go down by those percentages. It is a more efficient tax in the sense that the invoice mechanism, the credit mechanism deters people from under-voicing an invoice, for example at Customs and therefore it increases the general revenue."
Marilyn Ordonez,
"The GST should be a tax neutral effect because it's replacing sales tax. We shouldn't be collecting no more than what we are collecting on the sales tax so looking at setting a rate and a base that should bring into effect some revenue neutrality. Perhaps because of the policing effect that it will have, then perhaps we will be seeing better returns from some of the businesses because some persons in the forums indicate that perhaps businesses weren't reporting their true sales under sales tax. We are not sure but with the policing effect that the GST has in place it should ensure that we collect the correct tax."
And Ordonez says that those already familiar with this taxing mechanism through the VAT tax are not very much concerned over its effects.
Marilyn Ordonez,
"The GST, yes it is new but it is not something new they are hearing about so most of the forums that we have been to, people are already acquainted with some of the effects and they've been talking about it but the feel is that GST will be a better tax mechanism where it will reduce the cascading effect that the sales tax had on the cost of doing business."
Godfrey Arzu,
"The business sector, the productive sector, fully embraces the tax and (with) the consumers there is a certain hesitance and that is expected and it is a new system and as such its almost uncharted grounds, or uncharted waters, but generally I think that the apprehension or the hesitation by the consumers is how it will affect the cost of living."
In the end the business people and the general public will not know that until implementation day, scheduled for April 1st of next year.
The first round of consultations will continue in Spanish Lookout, Punta Gorda, Independence, Placencia, ending with a return Belize City on the 19th of this month.
