Government forgoes $4.8 billion in revenues to cushion rising international shipping costs
President Irfaan Ali on Monday instructed that freight charges be reduced to pre-pandemic levels to cushion to effects of rising international shipping costs which have resulted in increased prices for various commodities on the local market.
The concession is effective on all invoices dated August 2020 and continues in effect until January 31, 2022.
Lowering of the charges means that the government will be foregoing $4.8B in revenues.
The government has noted 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 US per 20-foot container and from US$3,500 to over US$20,000 for a 40-foot container.
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.
Consequently, having carefully assessed the impact of COVID-19 on the economy to date, and on the prices passed on to the consumer due to the increased shipping costs of imports, President Ali has instructed that further reliefs be granted by reducing the freight charges to the pre-pandemic levels (March 31, 2020) in the calculation of customs duties, excise taxes and input VAT on goods imported.
The relevant aspects of the Customs and the VAT Acts will have to be amended to reflect this concession.
The measure will allow for a saving of $4.8 billion to the consumer and business community.
Government agencies will be tasked to ensure that such savings are passed on to the consumer and not pocketed by unscrupulous importers.