WTO compliance necessitated removal of GCT from raw foods

THE JAMAICAN Government has defended its decision to remove general consumption tax (GCT) from all raw food, imported or domestic, indicating that it chose the lesser of two evils to avoid trade sanctions.

Finance Minister Dr Nigel Clarke told yesterday’s post-Cabinet press briefing at Jamaica House in St Andrew that the island was on the cusp of being blacklisted by the World Trade Organization (WTO) for its years-long “flouting” of international trade rules.

Clarke said one such rule requires that for any category of goods, where vaule-added tax is applied to one, it must be applied to all, regardless of origin.

“So, if you have a value-added tax on shoes, you have to have it on all shoes, not just shoes from Westmoreland or shoes from America. It has to be all shoes,” Clarke clarified.

“We have not been abiding by it. If you’re adding GCT on raw vegetables and raw foods, you have to have it on all foods – foods made here, foods not made here. Because we have not been abiding by those rules, WTO is about to blacklist us and sanction us,” the Cabinet minister disclosed.

Duties still apply

He said the Government had the option of either putting GCT on local vegetables or local food stuff but, in the current economic environment, that is not something it was prepared to do. He said it would make conditions worse.

“So we’ve done the next best thing under the circumstances, which is to lift GCT off raw imported food. That makes Jamaica compliant with our international obligations.”

He said, at the same time, that duty still exists, and in some cases, can be as high as between 70 per cent and 100 per cent.

But local farmers remain peeved, arguing that the decision is “bad news” for them.

Jamaica Agricultural Society President Lenworth Fulton said that, over the last 15 years, food imports have steadily increased, reaching US$1.43 billion in 2022.

He said local exports for 2023 amounted to US$273 million.

“So, to balloon the import, can we really afford it? It’s not good news for the economy, and there are issues which would have to be addressed, in my view, before we could go to that issue,” Fulton told Radio Jamaica’s Dionne Jackson Miller, host of the station’s Beyond the Headlines programme.

He said if it was mandatory for the Government to remove the GCT, for balance, it ought to have also increased the stamp duty, making it equivalent to the percentage being removed.

Farmers burdened

He said local farmers are burdened with paying GCT on feeds and planting materials, tools, and equipment.

“So you would like to see something there to balance the book to make our farmers more efficient,” he said, pointing to local egg farmers, who, he said, are struggling with GCT.

He said removing the tax would expand the sale of eggs, offering them a lifeline.

Meanwhile, Kathryn Silver, deputy president of the Jamaica Manufacturers and Exporters Association, agreed with Clarke’s position, noting that it is important for the country to be compliant.

At the same time, she cautioned that state agencies must become more vigilant about imported food items, ensuring that there is proper supervision of the import licences granted and putting forward heavier fines for non-compliance.

She pointed to a review by PricewaterhouseCoopers, which concluded that the Government’s decision could place pressure on Jamaica’s local agricultural sector and could impact food-security efforts.

“Caution will need to be exercised against any dumping of cheap subsidiaries,” she told Jackson Miller while noting concerns.

kimone.francis@gleanerjm.com