Manufacturer adds voice to VAT debate

Severin McKenzie

Although Prime Minister and Finance Minister Roosevelt Skerrit has said that the discussion of the removal or lowering of VAT in Dominica is out of the question, one  manufacturer is calling on the government to reconsider the application of the tax – at least at the island’s ports of entry.

Severin McKenzie, owner of Nature Island Paper Products Inc, has said VAT at the ports of entry is one of his company’s main challenges and “an injustice to manufacturers.”

“When we bring in raw material, we deal with five to 10 percent waste … we end up paying VAT on waste material and it is impossible to recover VAT on it,” he explained during a press conference on Friday.

Earlier this week PM Skerrit said the removal or reduction of VAT will not be considered by his administration. “I want to say to the certain groups and individuals who have been calling for the removal of VAT or exemption of VAT, they should not pursue that call if they are really interested in the well being of the country. If they want their government to be reckless and irresponsible, the consequences of these things can be detrimental to the well being of the country,” he said.

McKenzie indicated that he is not asking for the complete removal of VAT but is instead asking that the tax be applied only to the finish product. “We recover VAT on the finished product so the waste is going to waste,” he pointed out. “We have never asked for the removal of VAT; we only ask instead of paying VAT at the port of entry. We should pay it when we sell which would be a true application of VAT because we have added value to the product.”

According to him, paying VAT at the port has been a crippling factor to his operations since thousands of dollars have to be paid upfront for tax which is not recovered.

McKenzie agreed that VAT is important to the country but he said a manufacturer cannot be treated as an importer of finished products. “A manufacturer brings in his raw material, transports it to the factory, pays his debts, then finally sells it then takes 30-60 days to get paid … so it cannot be fair to pay VAT at the port. Government please reconsider this,” he pleaded.

He did admit that his company benefits from government concessions but stated they are not enough. “We get the concessions such as import duty of the machinery but if your raw material is coming from CARICOM there is no import duty anyway so the import duty is irrelevant,” McKenzie stated. “Then there is the concession on motor vehicles but this is also insignificant. And also there is the tax holiday for about ten years, however If you give me tax holiday for ten years and in the first ten years I do not make a profit, the tax holiday is useless. We are trying to see if we can translate it to when you start making a profit the tax holiday should kick in.”

Nature Island Paper Product is comemmorating two years of existence on Friday. The company manufactures toilet and tissue paper.

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  1. "O" STRESS!
    September 12, 2012

    Take that factory to Grand Fond MAN.

    September 3, 2012

    A good businessman should not substitute his negotiation skills for mepuis.

  3. pedroito
    September 1, 2012

    sir all Vat yu pay at customs is a guaranteed credit towards any vat you owe at the end of the month on sales.

  4. ma
    September 1, 2012

    Dominica needs more business people like Mr Mc.kenzie,the government is only running them out to other countries, St. Lucia is always welcoming

  5. Ericx
    September 1, 2012

    Don’t remove vat but….seek ye ways to stimulate the economy. And this idea is one to exploit, but only on raw materials in order to attract more manufacturing.

    Already there’s Domlec’s high electricity rates discouraging enterpreneurship and manufacturing, Gov’t has to seek/(brain-storm???) ways to attract investment (unless they are satisfied just importing JA & TnT products). A no-brainer dat..enough said!

  6. phucet
    September 1, 2012

    I love these comments,make’s so much sense….solution solutions!!!

  7. Bagay wed
    September 1, 2012

    Those who created the monster should be responsible for destroying the monster. I know what i am talking about. Those who created the monster are in hidding, some crying behind curtains, some on radio carefully choosing their words.

  8. Pedro
    September 1, 2012

    Mr. Skerit do not consider the sucess of the Manufacturing Sector as being interested in the country. His idea of sucess for Dominica is his ability to have full control on every economic activty in the country.

  9. Gigg-la
    September 1, 2012

    Vat is value added tax it should be added on consumer goods the final stage. Have any of our economist accountant take note that when vat is added b4 its gets to the consumer the amount of tax this one good gets and hence how expensive that good become to the final user, beside i strongly believe that vat should never be paid on any food stuff it makes the good too expensive to the Dominican public. Our trade minister said we are buying too many sugary juices and his way of fixing that was to make cranberry juice more affordable to our buyers can u believe this man logic..we need more people to stand and say and do something for those who cannot do it for themselves.

  10. September 1, 2012

    I understand where Mr. Mckenzie is coming from, because if he is paying VAT on waste material this is totally unfair. But how many other manufacturers are going through the same problem? This sounds more like a private matter than national.
    And also the 10 year tax holiday should be extended because this will discourage competency in business.
    We have to weigh both sides of the matter. Yes the tax is crippling us directly, but it is very necessary to our nation.

  11. manfacturer
    August 31, 2012

    For some entries the payment of 15% VAT at port of enty is simply a cash flow burden for the manufacturer. It does no bring any money into the Government “pocket” because the exact same amount paid by the manufactuer is claimed back 30 days later and paid whenever the refund is possible. In those cases, a reform is absolutely necessary and the Government will loose no revenue.

  12. HATE
    August 31, 2012

    The Govt is responsible to grow the Nations GDP. The Gov.t puts in place Fiscal Policies to ensure that GDP is equal to the Nations Potential GDP.

    Mr Prime Minister, What is our Potential GDP?

    If the GDP is below the Potential GDP, that means there is arecessionary gap. To correct this, Govt should reduce taxes, and increase spending. If GDP is greater than Potential GDP, Govt should increase taxes and reduce spending to close the inflationary Gap.

    This is basic Economics. Potential GDP is the point at which the economy is producing at full employment levels. So we all know that Da is not producing at Full employment level, Hence we are below Potential GDP.

    Based on what i know, DOminica needs the tax revenue, but a smart Govt must relax at what point the TAXATION discourage production.

    It Cost of production is high, companies will have to reduce employment, or increase prices. An increase in prices reduces the demand. eventually reducing manufactures will reduce the supply which further reduces employment and the real wage rate.

    Mr. Prime Minister, let compete for Caribbean businesses. Lets make our country more attractive to Manufactures.

    How do you think different US States compete for Manufacturing plants? They try to make the state more attractive to that Manufacture. We should be focused on doing the same in Dominica. Lets get our competitive juices flowing.

    The largest pie from total tax revenue should be from income taxes, if that’s not the case, (not the case in Dominica) means that the economy is not producing.

    Stop being short sighted mr. Prime Minister. It is your responsibility to encourage production and not frustrate the producers. at the end of the day we will have less manufactures, and thus tax revenue will degree regardless of increase in percentages. (if you have less companies to tax, the total revenue will be lower)

    HOw do you plan to stimulate economic growth?

    • HATE
      August 31, 2012

      Sorry for the typos.

  13. MET YO
    August 31, 2012

    Mc Kenzie dem fellas will not listen to you. You forget you expose what he did to Pierro?

    “i mean it was painful…it hurt me”

  14. linky
    August 31, 2012

    if only the gorvenment could listen to you sir ang understand the point that u are making.

  15. Little BIG
    August 31, 2012

    All you have to do is to negotiate with the government. Find out what percentage is considered waste and reduce VAT accordingly for the importation of raw materials. I see no reason why any Government would want to stifle local manufacturing.

  16. KIP
    August 31, 2012

    Wake up peoples.We will and can’t NEVER be competitive in manufacturing under the current system its too anti local and unimaginative.

    These are the burning issue one would wish the opposition targets the government on but Mr.James is mesmerized with INTERNATIONAL AIRPORT and Mr John is bewitched by Skerro.

    “The size of Dominica is not a hindrance to growth” Lennox Linton

  17. Morihei Ueshiba
    August 31, 2012

    We paying politicians so much money and none of them improving our lives, none different from the rest, so many Dominicans we send to study, so many boasting their academic achievement, and we have no creative minds to increase revenue without raising taxes, best we close that country cause it is a total failure! :wink:

  18. Rastar-Marn
    August 31, 2012

    Rasta you on point, you appear to be only man in DA that truly comprehend the concept of VAT,,,

    Every matter can be resolved in a court of competent jurisdiction you know Dred,,,

    Interestingly I wonder if them man that taking all that Sand and selling it in foreign lands paying VAT and if so how much are they paying,,,

  19. Way Out There
    August 31, 2012

    As much as I have agreed with the PM in the past, I cannot agree with him now. There has to be some sort of logical approach to local industry. These are the folks that put the average Dominican to work. There has to be fundamental plan inorder to grow our economy. VAT tax on these companies doesn’t as much money to Dominica as much as a thriving manufacturing industry in the long term. Where is the vision going forward. Sad part is, neither party has it.

    • Pedro
      September 1, 2012

      You known ther is no plans to grow the Dominican economy. Things have been going down the drain since the election of the Lobour Party. the people are broke and poverty is spreading like a virus.

  20. Shameless
    August 31, 2012

    McKenzie..I feel you pain and agree that government should not shut the door completely on the VAT issue. However, on the idea that a business should only be required to pay taxes after they start making a profit is a non starter.

    You and I and Skerro know that any good account can make a business look like its NOT making any money. On the paperwork..if you get me. Therefore if the government should adopt your idea, companies will never pay their fair share of taxes because their paperwork will always show a loss while the owners salaries and perks keep rising.

    A country cannot survive without everyone paying their fair share of taxes. But you are right when you refer to the removal of VAT on raw materials. This I think should be addressed immediately.

    Assertive, NOT Agressive!

    • Rastafari
      August 31, 2012

      @ Shameless: You make some great points however, not every company in D/A manufactures goods. Mr. McKenzie’s plea is for reduced VAT on RAW material only. Most companies there DO NOT have to manufacture anything at all. Just so you understand his point and it does not get misconstrued. You’re right, he is not paying his fair share, he is over-paying.

  21. Doc. Love
    August 31, 2012

    I feel for you, Mr. Mckenzie, but because that request is comming from you it will not penetrate the stuborn heart of Skerrit.I cannot
    forget the barrage of mapuis that was leveled at you ……….. However,despite your short commings you are making a trememdous effort in assisting the economy of Dominica by having many Dominicans employed in comparison to the many Chinese who are employed in the Skerrit Labor Party Government projects.

  22. Enough is Enough
    August 31, 2012

    I agree with Severin McKenzie about the applying of VAT on raw materials. My friend there is amply manufacturing space in st. Lucia. move your factory there to manfacture your paper products… no va on maufacturing there… let dominicans understand the ills dlp doing the country… jobs will be lost here while jobs will be crreated there… you have VAT we going… why skerrit dont say let ministers take a 50 percent day ct… intended only for the government ministers :?:

    • domnican
      August 31, 2012

      St lucia is about to implement VAT my friend!

  23. Morihei Ueshiba
    August 31, 2012

    Skerrit u should remove the VAT and increase revenue without increasing taxes on Dominica, u too wicked!~

  24. he he
    August 31, 2012

    mark you talking R……………bish

    • Gigg-la
      September 1, 2012

      HEHE am sure if u were capable of making a contribution positive or negative about what mr severin had to say u would not dismiss it as rubbish but alas for u dumb head hence your response .. keep off this topic like most others who comment here it is not for you. u sound like a person full of rubbish in the head

  25. Piper
    August 31, 2012

    Why doesn’t the government restructure the tax to mimic the GST that has been very successful in Canada for years. Charge the tax on all non-food items. The business people collect the tax when they sell the goods. If they collect more taxes than they pay, they send a cheque to the govenment. If they pay more than they collect, they government cuts them a cheque. That reduces the tax burden on the businesses and frees up more cash to re-ivest in the business, employing more people whose spending will spur the economy.

    Taxing the heck out of businesses does not always translate into more revenue to the government. Dominica is a very difficult place to do business. The government should do everything possible to help them thrive. They should not look at these consessions as doing the businessman a favour. It is necessary to encourage people to invest and create employment. The governments of the past have relied too heavily on the public sector to create jobs. Free up the business sector and let them be the engine of job creation.

  26. Malatete
    August 31, 2012

    VAT payable upon entry is applicable in all countries, which introduced this tax system. I think the real problem is that a lot of our enterprises are chronically undercapitalised. The cost of financing in Dominica is prohibitive, most of our supplies are imported, extended credit terms by overseas suppliers are difficult to come by, most importers have to pre-finance their purchases, have long lead times and because of the cost of shipping must buy in quantities, which have to be carried in inventory for some time before they can be turned into cash. This combined with high energy costs makes doing business in Dominica expensive and hardly helps to make manufacturing here competitive, especially with a view to the export market.

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