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New customs tax presents nightmare for small businesses
BY TAMEKA GORDON Assistant business co-ordinator tamekag@jamaicaobserver.com
Wednesday, April 24, 2013
SMALL importers have described the new Customs Administration Fee (CAF) as a nightmare, with many predicting closure of their businesses or massive layoffs.
The CAF, which replaced the Customs User Fee (CUF) and which became effective April 1, should see the Government raking in $1.2 billion as part of efforts to broaden its General Consumption Tax (GCT) base.
The contracting economy and additional tax burdens will force companies to lay off staff, business operators say.
The contracting economy and additional tax burdens will force companies to lay off staff, business operators say.
#slideshowtoggler, #slideshowtoggler a, #slideshowtoggler img {filter:none !important;zoom:normal !important}
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But the new tax measure has left customs brokers and importers scrambling to clear goods and searching for answers.
"This is a terrible situation for small businesses," Ainsworth Mornan said. The St Ann-based businessman, said he has had to reprice his goods to include 18 per cent mark-up "to just about break even" since the new measures took effect.
Mornan, who rents construction equipment, said he currently has a 40-foot container to be cleared and is anticipating huge increases in processing fees on the advice of his custom broker.
In actuality, the $3,500 customs processing fee that was applied to such shipments now costs $20,000. Importers whose containers are inspected on their sites will also need to pay $25,000.
Previously, processing fees, environmental fees and the CUF, which was a flat two per cent customs, insurance and freight cost, were not included in the GCT base.
Among the changes at customs is the C73 authorisation form prepared by customs brokers for their clients, an annual process which previously carried no cost but for which importers will now have to pay $5,000.
Additionally, the C87 prepared for both exporters and importers now necessitates a per shipment charge of $3,000, up from the previous $600.
Emergency shipment clearances jumped from $1,200 to $10,000 per letter clearance.
The businessman said the sale price he calculated when he purchased his shipment overseas in February would not allow him to recover the cost of shipping the goods to Jamaica.
"I'm looking at doing less business because the end user will have to reduce the number of days they rent the stuff for in order to afford the costs," he reasoned.
He said he had already begun to see a fallout as a smaller operator who buys tools through his company has pulled out of their arrangement.
The contracting economy had already forced him to lay off four staff members and he now has to stagger the shifts of the remaining nine people, he said.
"This is a nail in the coffin of many already struggling businesses," Mornan chided, adding that he doesn't feel the measures were properly thought out. "It is harder for us to withstand economic shocks, every little jitter affects us since most do not earn direct foreign exchange."
Another businessman, who wished not to be named, expressed similar sentiments.
Citing the jittery start to the implementation of the CAF and the jump in the site inspection fee, the bulk food products distributor said that "all we (business operators) have to do is pass it on to the consumers".
He added: "pretty soon I'm going to pack up my things and take my business somewhere else, I will not sit here and suffer because of these poorly-thought-out policies".
"All that will happen is that I will layoff people," he charged. "This is a business and I have to think about myself and my family first," the employer of 17 individuals said, noting the residual effect on "the at least 60 other persons" he figured depended on his employees.
The operator chided the "shortsightedness of the new tax measures" adding: "the people making the policies for the private sector don't know anything about the private sector".
Additionally, the operator complained that the GCT credit, which is to be rebated to importers, is not being done in a timely manner.
"You are made to pay 21.5 per cent GCT at the point of entry but told you have to sell your goods at the regular 16.5 per cent GCT, but when you are to be given back the credit, they take months to do so and tie up your cash flow," the operator lamented, noting the "myriad challenges businesses face".
For car dealer Joe Ferreira, the new entry-processing fee of $55,000 for vehicles "will kill my business".
The new car dealer complained bitterly that he did not anticipate such changes when he opened shop in Jamaica just last September.
Ferreria said vehicles within his Tata Nano currently cost less than a million dollars. Formerly, the customs charges saw the dealer paying the two per cent CIF value of the vehicle. However, the new single rate applies to "all vehicles regardless of the size".
"Such measures are discouraging for new investors," he said, adding that the move "is retrograde and also punishes a fuel- efficient and environmentally -friendly vehicle".
The delays caused by the implementation of the CAF has also angered customs brokers who "have lost millions of dollars and come in for much criticism", according to Jacqueline Cole, head of the Customs Brokers and Freight Forwarders Association.
She said the sector had been thrown into turmoil by what she described as "the downright inefficiency with which the CAF was introduced".
"An unbelievable nine different upgrades" to the mechanism geared toward widening the GCT base, and five changes so far on the implementation of CAF, with more expected, have caused serious delays and undue embarrassment for brokers and importer alike, she said.
"MSMEs are at a disadvantaged position with the new system," she told the Business Observer.
For instance, she said "a normal importer of finished goods valued at $2 million, would have paid CIF charges of roughly $40,000 plus the $600 processing fee".
However, Cole said importers of bulk products such as flour, will now have to pay three types of CAF. "They are the I-CAF, E-CAF and PCAF, for item, examination and product fees respectively," she explained.
The disadvantage for small businesses, Cole reasoned is as a result of the now per transaction fee unlike the flat rate of the CUF.
The tax measures have also not gone down well with the MSME Alliance head Rosalea Hamilton, who lamented "Government's continued disregard for the sector and its tardiness in presenting a clear policy direction".
"We continue to see a governance arrangement that excludes the voices of micro, small- and medium-size businesses," Hamilton said.
But for Mornan, "I'm no longer hearing many of the voices of small operators as many on main street in Ocho Rios have already closed their doors; the voices are getting smaller and smaller".
The CAF is intended to provide a truer reflection of the services offered by the Customs Department as well as streamline the department's services since CUF was seen to be in breach of WTO guidelines.
Read more: http://www.jamaicaobserver.com/busin...#ixzz2RPmWo7Ro
BY TAMEKA GORDON Assistant business co-ordinator tamekag@jamaicaobserver.com
Wednesday, April 24, 2013
SMALL importers have described the new Customs Administration Fee (CAF) as a nightmare, with many predicting closure of their businesses or massive layoffs.
The CAF, which replaced the Customs User Fee (CUF) and which became effective April 1, should see the Government raking in $1.2 billion as part of efforts to broaden its General Consumption Tax (GCT) base.
The contracting economy and additional tax burdens will force companies to lay off staff, business operators say.
The contracting economy and additional tax burdens will force companies to lay off staff, business operators say.#slideshowtoggler, #slideshowtoggler a, #slideshowtoggler img {filter:none !important;zoom:normal !important}
1/1 But the new tax measure has left customs brokers and importers scrambling to clear goods and searching for answers.
"This is a terrible situation for small businesses," Ainsworth Mornan said. The St Ann-based businessman, said he has had to reprice his goods to include 18 per cent mark-up "to just about break even" since the new measures took effect.
Mornan, who rents construction equipment, said he currently has a 40-foot container to be cleared and is anticipating huge increases in processing fees on the advice of his custom broker.
In actuality, the $3,500 customs processing fee that was applied to such shipments now costs $20,000. Importers whose containers are inspected on their sites will also need to pay $25,000.
Previously, processing fees, environmental fees and the CUF, which was a flat two per cent customs, insurance and freight cost, were not included in the GCT base.
Among the changes at customs is the C73 authorisation form prepared by customs brokers for their clients, an annual process which previously carried no cost but for which importers will now have to pay $5,000.
Additionally, the C87 prepared for both exporters and importers now necessitates a per shipment charge of $3,000, up from the previous $600.
Emergency shipment clearances jumped from $1,200 to $10,000 per letter clearance.
The businessman said the sale price he calculated when he purchased his shipment overseas in February would not allow him to recover the cost of shipping the goods to Jamaica.
"I'm looking at doing less business because the end user will have to reduce the number of days they rent the stuff for in order to afford the costs," he reasoned.
He said he had already begun to see a fallout as a smaller operator who buys tools through his company has pulled out of their arrangement.
The contracting economy had already forced him to lay off four staff members and he now has to stagger the shifts of the remaining nine people, he said.
"This is a nail in the coffin of many already struggling businesses," Mornan chided, adding that he doesn't feel the measures were properly thought out. "It is harder for us to withstand economic shocks, every little jitter affects us since most do not earn direct foreign exchange."
Another businessman, who wished not to be named, expressed similar sentiments.
Citing the jittery start to the implementation of the CAF and the jump in the site inspection fee, the bulk food products distributor said that "all we (business operators) have to do is pass it on to the consumers".
He added: "pretty soon I'm going to pack up my things and take my business somewhere else, I will not sit here and suffer because of these poorly-thought-out policies".
"All that will happen is that I will layoff people," he charged. "This is a business and I have to think about myself and my family first," the employer of 17 individuals said, noting the residual effect on "the at least 60 other persons" he figured depended on his employees.
The operator chided the "shortsightedness of the new tax measures" adding: "the people making the policies for the private sector don't know anything about the private sector".
Additionally, the operator complained that the GCT credit, which is to be rebated to importers, is not being done in a timely manner.
"You are made to pay 21.5 per cent GCT at the point of entry but told you have to sell your goods at the regular 16.5 per cent GCT, but when you are to be given back the credit, they take months to do so and tie up your cash flow," the operator lamented, noting the "myriad challenges businesses face".
For car dealer Joe Ferreira, the new entry-processing fee of $55,000 for vehicles "will kill my business".
The new car dealer complained bitterly that he did not anticipate such changes when he opened shop in Jamaica just last September.
Ferreria said vehicles within his Tata Nano currently cost less than a million dollars. Formerly, the customs charges saw the dealer paying the two per cent CIF value of the vehicle. However, the new single rate applies to "all vehicles regardless of the size".
"Such measures are discouraging for new investors," he said, adding that the move "is retrograde and also punishes a fuel- efficient and environmentally -friendly vehicle".
The delays caused by the implementation of the CAF has also angered customs brokers who "have lost millions of dollars and come in for much criticism", according to Jacqueline Cole, head of the Customs Brokers and Freight Forwarders Association.
She said the sector had been thrown into turmoil by what she described as "the downright inefficiency with which the CAF was introduced".
"An unbelievable nine different upgrades" to the mechanism geared toward widening the GCT base, and five changes so far on the implementation of CAF, with more expected, have caused serious delays and undue embarrassment for brokers and importer alike, she said.
"MSMEs are at a disadvantaged position with the new system," she told the Business Observer.
For instance, she said "a normal importer of finished goods valued at $2 million, would have paid CIF charges of roughly $40,000 plus the $600 processing fee".
However, Cole said importers of bulk products such as flour, will now have to pay three types of CAF. "They are the I-CAF, E-CAF and PCAF, for item, examination and product fees respectively," she explained.
The disadvantage for small businesses, Cole reasoned is as a result of the now per transaction fee unlike the flat rate of the CUF.
The tax measures have also not gone down well with the MSME Alliance head Rosalea Hamilton, who lamented "Government's continued disregard for the sector and its tardiness in presenting a clear policy direction".
"We continue to see a governance arrangement that excludes the voices of micro, small- and medium-size businesses," Hamilton said.
But for Mornan, "I'm no longer hearing many of the voices of small operators as many on main street in Ocho Rios have already closed their doors; the voices are getting smaller and smaller".
The CAF is intended to provide a truer reflection of the services offered by the Customs Department as well as streamline the department's services since CUF was seen to be in breach of WTO guidelines.
Read more: http://www.jamaicaobserver.com/busin...#ixzz2RPmWo7Ro