The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Many Bahamian food retailers will suffer “catastrophe” unless there is some Price Control relief prior to Value-Added Tax (VAT), the Retail Grocers Association’s president has warned, after talks with the Government kicked-off on Friday.

Philip Beneby told Tribune Business that food stores, especially those based in inner-city communities and which sell the highest proportion of price-controlled items, “definitely need some relief” from the existing regulations.

He linked this directly to VAT, which will allow food retailers to recover as little as 15-20 per cent of their ‘input’ tax payments, something that will exacerbate the existing losses they incur on ‘breadbasket items’.

Mr Beneby said that despite the “tremendous increase” in operating costs that many Bahamian businesses have experienced in recent decades, retailers’ price control mark-ups had remained stuck at 18 per cent.

And Rupert Roberts, Super Value’s owner and president, warned that maintaining the existing price control regime - especially if VAT was introduced as planned - would create “mass unemployment and store closures”.

He told Tribune Business that food retailers were currently enduring a seven percentage point ‘loss margin’ on breadbasket items - the same products that will be treated as VAT ‘exempt’.

“They went to price control this morning,” said Mr Roberts of his colleagues. “Shane listened to the position put to him; that all city stores have 18 per cent price controlled items, and that’s all they sell.

“Expenses are 25 per cent, so there’s going to be mass unemployment and mass store closures.”

Food retailers are especially concerned that the Price Control-imposed restrictions, which effectively force them to sell so-called ‘breadbasket items’ as loss leaders, will be exacerbated by VAT in its proposed form.

The Government’s current VAT plan will only allow grocery retailers to recover ‘input’ VAT in proportion to the ‘taxable’ items they sell.

The industry has argued that with up to 75-80 per cent of their inventory likely to be treated as VAT ‘exempt’, they will only be able to recover 20-25 per cent of their input tax payments - a situation that will force them to either increase prices on ‘taxable’ items or cut costs, such as employee numbers.

And Mr Beneby and others have already argued that increasing prices on ‘non-breadbasket items’ will only serve to exacerbate an existing, and growing, customer trend - that of consumers turning to purchasing ‘breadbasket’ items.

Mr Beneby, following the meeting with Shane Gibson, minister of labour and national insurance, who has responsibility for price control, said “the door is open” for discussions between the industry and the Government.

He added that Mr Gibson had asked food retailers to present their concerns and analysis to the Government in writing, backing up their concerns with facts and figures.

“No decision has been made. It was just a discussion we had,” Mr Beneby told Tribune Business of the meeting with Mr Gibson. “It was a cordial discussion, and I think it was positive, if I may say so.”

He added: “The Price Control Act came into effect in 1972 or 1973, and we’ve had the same mark-ups from then until now.

“There’s been a tremendous increase in the cost of doing business in the country from then until now; everything has gone up. There’s been a tremendous increase.”

Mr Beneby said the food retail industry now had “to come together and make a definitive decision” on Price Control, in terms of providing the Government with a detailed analysis and their subsequent recommendations.

“That’s what they’re asking for,” the Retail Grocers Association’s president said of the Government. “Some formal proposal to present all the figures, studies and analysis, and they would take a look at it.”

Asked how important Price Control reform is to the food retail industry’s future, Mr Beneby told Tribune Business: “It’s very important, because the way the VAT legislation is being rolled out right now, with the exempt and non-exempt items that the food stores have to carry, and with the exempt being such a high percentage over the non-exempt..... with that kind of disparity, we’re definitely going to need some relief.

“If we don’t get relief somewhere along the way, it’s going to be a catastrophe, especially for the smaller food stores. We’re happy that the door is open for that discussion. It will continue, without a doubt.”

The Price Control problems, combined with VAT’s impending implementation, have served to unite the food retail/wholesale industry and cause it to speak with one voice.

Dionisio D’Aguilar, chairman of BISX-listed food group, AML Foods, recently called for the Government to abolish price controls, arguing that high levels of competition in the food retail industry meant it no reason to “meddle”.

He suggested that the Christie administration consolidate price control abolition as part of its fiscal reform programme, describing the regime as antiquated and not serving consumers in the way it is meant to.

“Price control is not doing what it’s intended to do,” Mr D’Aguilar told Tribune Business. “The Government should not feel the need to control prices of basic items.

“There is so much competition in the food store marketplace that there is no need for the Government to step in and meddle with the prices.”

“In the current environment, it’s very difficult for food stores to make money with price control,” Mr D’Aguilar added. “We’re having to jack up the prices on everything else to have all these loss leaders.

“It’s [price control] been in place since 1971. My God, let’s get rid of it now. It doesn’t work. All it’s doing is artificially lowering the price on certain goods, and everyone’s screaming about how expensive the prices are on other items, the healthy ones.”