VAT on Food Flopshttp://www.guardian.co.tt/news/2013-06-02/vat-food-flops• Consumers still feel the pinch • $400m in revenue down the drain
Published:
Sunday, June 2, 2013
Shaliza Hassanali
Seven months after Government slashed Value Added Tax (VAT) on 7,000 food items, president of the Supermarkets Association of T&T (Satt) Vernon Persad has admitted that the benefits consumers enjoyed from this initiative have since been eroded. Co-ordinator of the Network of NGOs Hazel Brown feels the move was just a “fallacy decision made without thinking it through, except for the political impact on it.”
Minister of Trade, Industry and Investment Vasant Bharath, whose ministry was responsible for the removal of VAT on the items, said if it were true that prices had increased, a lot of hard work and money would have gone down the drain. Bharath admitted that the matter was now a worrying concern. VAT was removed by the People’s Partnership Government on November 15, 2012 in an effort to lower food prices and curb food-price inflation.
This move resulted in Government foregoing $400 million in revenue. On Tuesday, Persad said Satt had observed increases on a number of non VAT items over the past few months. Among them are snacks, curry, baby items, sugar, peas and beans, dairy products and juices—many of which we import, Persad said. There are 1,200 supermarkets in T&T. He blamed the increases on suppliers. “A lot of the benefits of the VAT removal have been eroded.”
Persad said many factors influenced food price volatility, including world population growth, supply and demand, natural disasters and high oil, gas and wheat prices. Persad said consumers were “almost back to square one” and were now digging deeper in their pockets, while some have been buying less. “If you walk down the lanes of every supermarket the prices have changed. In a lot of categories we’ve seen movements already. We have seen food prices move up since January.”
Satt has written to the Government seeking its intervention on the matter. How are consumers coping with the growing increases? Persad said: “I can tell you, it is tough.” Satt has advised supermarket owners that memos from suppliers outlining new price increases be displayed on shelves to guard against abuse and complaints by customers.
Bharath: Increase in food prices worryingOn Wednesday, Bharath said once VAT was removed from food items, the Prices Council was supposed to monitor prices and inform consumers of price differentials. “What it appears, in the interim, it seems that wholesalers and importers have increased the prices that they were charging previously. I don’t know whether, in fact, their prices have gone up or whether they are utilising a sort of vacuum to put up their prices.”
Bharath said this information could have been provided by the council who “need to do more work. I think they need to be given more teeth to do their work.” He admitted that the council had no legal teeth to take supermarkets to court, but could only use persuasion to inform consumers that supermarket A sells far more than supermarket B. Insisting that T&T operates in a free market state, Bharath said there was little that could be done.
“We operate in a small environment controlled by a few players, therein lies the problem. I think there needs to be some legislative measure in place to ensure that if supermarkets are caught making higher margins than they ought to, then there should be some mechanism to ensure that consumers go to other places.” Asked if the council should have been provided with more teeth before the initiative was implemented, Bharath said “yes.”
For weeks, Bharath said his ministry worked tirelessly with Satt to remove the VAT. “Having gone through all of that, I think it is a lot of hard work down the drain, if in fact the claims that prices have gone straight back up to what it was before. It is worrying.”
Initiative not in vainQuestioned if Government’s initiative had now gone in vain, Bharath said they were well-intentioned in reducing food prices in the manifesto. “I don’t think it was in vain. I think the Government did everything it could do and had to do to reduce prices. One has to ask if these are genuine increases, then it would have meant that prices would have been 15 per cent higher had we not removed the VAT. That really is the issue.” Asked if the initiative was a political ploy, Bharath begged to differ.
If it is proven that importers are jacking up prices at their whim and fancy, how will they be dealt with? On Tuesday, Bharath said the Customs Amendment Bill will be debated in the Senate. Once it is passed in both Houses, Bharath said Customs and Excise would be obligated to share information on how much importers pay for food items abroad.
“That will assist us in determining the absolute truth behind this (prices.) If it is that the imported prices are not what they have been declared to be by the importers, then I think the sharing of information will force the prices down.”
Lee Yuen: No clout to make recommendations workWendy Lee Yuen, whose term ended as the council’s chairman last December, said despite taking blows from consumers, it was frustrating to work with professionals who came up with recommendations that did not help rising food prices. “You see no action taken. We had no clout to make any recommendation work. When you are looking to sweeten the electorate sometimes you take action that you hope will find favour with the electorate, without necessarily putting checks and balances in place.”
Since her departure, Lee Yuen said a new council was yet to be appointed, which gives the impression that no one was looking out for consumers. She said she could imagine that consumers were feeling hoodwinked and duped to a point. Lee Yuen said she wrote Consumer Affairs Division advising that it needed to operationalise the Fair Trading Commission, which was passed and assented in Parliament several years ago.
Appointing a commission, she said, will ensure that importers do not work in collusion, stop monopolies, advise the Trade Ministry of the rate of taxes on food items and streamline imported product. If asked to serve again, Lee Yuen said she would accept but only under certain conditions. “If it is going to be the same old same old, there will be no positive outcome for consumers.”
T&T affected by what happens globally—Harford-RooksElizabeth Harford-Rooks, president of the Food Distributors Association, admitted that prices of some commodities had increased—mainly bacon, imported chicken and some canned vegetables. “There are issues right now with beef coming out of the US because of short supply. We are affected by what happens globally.” Harford-Rooks said the association always tried its best to keep prices down. “We will not increase a price just for increasing a price. It will not be beneficial for us.”
Brown: Concept flawedInsisting from the onset that the concept of the VAT removal was flawed, Brown said the move cost the Government $400 million in revenue. Brown believes that the move only created opportunities for importers and not consumers. She urged consumers to exercise collective buying power and start growing vegetables at home. On Thursday, the Network of NGOs sold seedlings to the public and also gave advice to consumers on how to utilise spaces in their homes to grow crops.
A message left for T&T Manufacturers’ Association president Nicholas Lok Jack, who is out of the country, was not returned.
