‘V.A.T. will force the price of bread basket items to go up’

As of Wednesday, April 30, 2014

By SANCHESKA BROWN

Tribune Staff Reporter

sbrown@tribunemedia.net

DESPITE assurances from the government that food prices will not rise with the introduction of Value Added Tax, New Zealand Tax Expert Dr Don Brash said yesterday that the costs of bread basket items will increase to some extent.

Dr Brash told The Tribune that all food prices will increase despite the government exempting some products from the controversial tax.

According to the VAT bill, many basic foot items will be exempt from the tax, including beef, chicken, pork milk, milk products, cheese, fish, cereal, flour, oils used for cooking, sugar, fruits, laundry detergent and dishwashing detergent.

However, Dr Brash said as the cost of owning and operating a food store increases because of VAT, the cost will be passed on to consumers, causing increases in these every day items.

“First of all even exempt items will go up in price to some extent. Why? Because the VAT paid on the imports has to be passed on in some way so the price of food will go up, not as much as it would be it it were Vat-able, but it will go up anyway, he said.

“Secondly, most of the money spent on food in the community is not spent by low income people, it’s spent by middle and high income people. So to spare a low income family, let’s say 20 bucks a week, you spare a high income family 60 bucks a week. Why would you give away 60 bucks a week to a high income family? It makes no sense, it will be much better to have no exemptions and protect low income people directly. You have to protect them because the cost of living is going to go up to some degree depending on what the VAT is.”

Last month, Super Value’s owner, Rupert Roberts, urged consumers to “say not to VAT” warning that food prices will increase across the board as a result.

In response, Finance Minister Micheal Halkitis dismissed Mr Roberts’ comments and denied the increase.

“As a matter of fact,” he said, “a lot of misinformation is being disseminated in the public, with these advertisements and stuff that are going around, but I just want to encourage people to log on to the Government’s website and see for yourself what is the truth. Look at the VAT draft law and you will see a whole list of items that will be exempt; bread basket items and basic food items. You will see that the oil and chicken and rice and fish, you know, things that you use all the time, they are not going up, there will be no VAT on those items. This kind of talk is designed to frighten the Bahamian people and cause the government to retreat from its position. We know it is not a popular position, but it is something that needs to be done and this type of talk will not deter us.”

Dr Brash said the only way to ensure that the average person is not adversely affect by the VAT is to “get rid of exemptions all together”.

B_I_D___ 10 years ago

Cha-CHING!!! Even the 'experts' are refuting the bullcrap our government has been spewing to the naive masses. NICE. Open your eyes people, demand the government put forth a formal plan for budget cuts, put forth the essential Freedom of Information Act BEFORE VAT , collect the revenues they are currently NOT collecting!! It's just easier for them to blindside the 'dumb' masses with a new tax, tell them what they want to hear.."yeah man, it's not going to impact food prices'...and just carry on with business as usual of spend spend spend, you scratch my back I scratch yours.

ohdrap4 10 years ago

that would have been possible, had the vat refunds not been restricted to the percentage of vatable items.

BahamianAway 10 years ago

Maybe they should first start by enforcing price control on these items...you can go one place get a loaf of bread for $4 go somewhere else and it's $6- mind you it's the same loaf of bread.

So as long as these supermarkets have the ability to adjust prices as they see fit of course they will attempt to recoup whatever tax they paid as well as make a profit. And who will pay the price- the consumer purchasing. And more likely it will be the middle income family who shops every week and purchases more than just simple generic bread basket items.

jerzy 10 years ago

Exempting items will not have the effect of preventing price increases. This is because the overhead costs of transportation, storage and so on are subject to VAT that is not reclaimable. The VAT inevitably must be passed through to the customer even though it is not explicit on the invoice or bill.

There is no case to date where price controls have had any positive effect. The only effective control of prices is competition. It is purely a political gimmick falsely used to give the impression that prices will not rise.

Creating exemptions in VAT makes it extremely difficult to administer and enforce. The only viable option is to "zero-rate" items. This means that the VAT on overheads is reclaimable. While this would solve the issue that prices would need to rise on exempt items and the complications of accounting for exempt products; it would mean that VAT would have too collect the revenue elsewhere on non zero-rated items. Revenue does not come from thin air, the whole point of the exercise is to raise more revenue.

As Dr. Brash rightly pointed out zero rating items will create more benefit for the wealthier person than the poorer person because wealthier persons spend more. It is also wise to point out that wealthier individuals save more money and spend more overseas so they pay much less VAT as a relative proportion of their income. This is what makes VAT a very regressive tax.

The only established way of offsetting the regressive nature of VAT is to have income tax thresholds (but there is no income tax) or social benefit payments to the lower income sector through mechanisms such as child support benefits and so on.

I hope everyone realizes the most of the government claims on VAT are not factually correct. They are more designed to persuade people that VAT is good with little regard for the true facts. You will find that no government official has been or will be prepared to answer questions in an open debate (such as on radio or TV). They will only campaign for VAT on sound bites, press releases and web sites where they are in control of the message and the do not have to answer awkward questions. That says it all.

The Tribune