By NEIL HARTNELL
Tribune Business Editor
AML Foods chief executive yesterday agreed that import tariff ‘tweaking’ would have little impact on food prices post Value-Added Tax (VAT) implementation, but quickly added: “The sky is not falling.”
Gavin Watchorn, who is also the BISX-listed food retail and franchise group’s president, told Tribune Business that VAT would inevitably cause a cost of living increase for all Bahamians.
Yet he suggested that the new tax’s impact might not be as bad as some were suggesting, adding that there were many “self-serving statements” being made.
Asked by Tribune Business about VAT’s likely impact on consumer spending in early 2015, Mr Watchorn replied: “That is the $64,000 question, isn’t it?
“There is going to be an impact; no one can deny that. The cost of living is going to go up.
But, suggesting that some may be exaggerating VAT’s effects, the AML Foods chief quickly added: “Yes, there is going to be an impact. But there’s a lot of self-serving statements being bandied about.
“The sky is not going to fall. We’ve kind of taken a very pragmatic approach to this. From May 2013, we knew it was going to happen. Business persons and consumers knew it was coming, and we’ve just gone on to get ready for it.”
Expanding on this theme, Mr Watchorn said: “I’m not doom and gloom on VAT. We need better taxation, improved tax collection. Whether it’s new or existing taxes, we’ve moved beyond that.
“I think, eventually, whether it’s six months or six year, it [VAT] will become the norm. I think we should enjoy Christmas, and pray the New Year is not the sky falling scenario some people think will happen. People need to be honest about what will happen.”
Mr Watchorn said he was also anticipating a “pre-VAT rush” by Bahamian consumers, as persons stocked up on products while they could prior to the new 7.5 per cent levy’s introduction.
“I think we are going to see consumers, where they can afford it, they will stock up,” he explained. “That’s going to throw out or skew your business.
“People will have a stronger December than normal, which may affect January, as people will have spent money a week earlier than they normally would.”
Mr Watchorn, meanwhile, agreed with fellow Retail Grocers Association (RGA) members, president Philip Beneby and Super Value owner Rupert Roberts, that the import tariff reductions announced by the Government would have minimal impact on food prices.
Messrs Roberts and Beneby told Tribune Business on Tuesday that the combined impact of the tariff cuts, and switch to Freight on Board (FOB) calculation method, would lower food prices by a mere 0.5 per cent - not enough to compensate for 7.5 per cent VAT.
Mr Watchorn backed their 0.5 per cent estimate, telling Tribune Business: “I do agree with them that the duty decreases are not going to be that impactful on the grocery business.
“There’s 47 tariff headings that were amended, and 25 of them have absolutely nothing to do with food.... They are not in the average food basket.”
He added: “There are only four or five [tariff reductions] that impact on the everyday shopping list; milk, pasta, vegetables. There’s small duty savings in them.”
As for the switch to the FOB, as opposed to the Cost, Insurance Freight (CIF) method for import tariff calculation, Mr Watchorn said this, too, would result in minimal cost savings.
“The majority of dutiable charges are on ocean freight, which is the smallest portion of the freight bill,” he explained. “The other parts are generally non-dutiable. On a $30-$40,000 container, you’re looking at a couple of dollars.
“I tend to agree that the savings are not going to be much greater than that. On a $20,000 container, it’s about $100 spread over thousands of items in that container.”
Messrs Roberts and Beneby had argued that misleading government statements were giving Bahamian consumers the incorrect impression that the import tariff cuts, and calculation method change, would result in blanket food price drops.
While Mr Watchorn agreed that such a message was “a bit disingenuous”, he added that to suggest “the sky was falling” over VAT “is a bit of overkill”.
He told Tribune Business that Bahamian businesses would have to “mitigate the impact on the consumer” from VAT-induced cost of living increases, or otherwise lose increasing amounts of business to Florida and self-imports.
“It’s in business interests to help consumers mitigate the impact of VAT,” Mr Watchorn told Tribune Business, adding that AML Foods’ focus on quality and value would stand the BISX-listed group in good stead come 2015.