By NICOLE BURROWS
1 VAT is showing itself to be very challenging to implement at the point of sale.
This is the case across an assortment of businesses. Some have no system at all in place. Some have systems which are not set up correctly and are not properly calculating the tax. Some are defaulting to manual receipts and incurring unbelievable human errors.
It has been said that there are temporary rules in place for what is considered acceptable price displays and VAT-exclusive pricing versus VAT-inclusive pricing, but that story changes depending on who you talk to. The rules are not hard and fast and they leave room for a lot of inconsistency in their application. Consumers can’t adjust, because, in addition to being ill-informed or uninformed, there are multiple methods of tax calculation and just as many different methods of disclosure being used, not just one method that all businesses and end consumers must adjust to right away.
2 VAT is being used to disguise price increases across the board and in a cross-section of industries.
Businesses are using VAT as an opportunity to increase their prices all around; from the most miniscule to the most excessive price increases are being implemented on goods and services, and consumers are left to decide whether these increases are reasonable, predatory, or whether the 23 per cent increase in the cost of a hot pattie is too much to pay and if it is necessary to forego eating them altogether.
And I think more of this is happening than anyone – government included – would have thought would or could happen. How the VAT department will separate the sheep from the wolves is anyone’s guess. And when they can make the distinction, what will actually be done to penalise a business that acts outside necessity? And how long will it take to administer said penalty?
While, to an extent, it is an understandable plight of the businessman, any price increases, especially significant ones and those occurring on the heel of VAT implementation, must be conscionable, or consumers will not buy what’s being sold. If the goods are demand-elastic, like movie theatre tickets, sirloin steak and salon services, these businesses will easily price themselves out of operation.
Some will argue that the market will self-regulate, but not before it seizes up. Perhaps, for the first time, Bahamians will get to see what the value of our dollar is really like. I imagine that will be just one of many “firsts”.
As a market observer and contributor to social media agents of change like the groups Stop Gettin’ Swing: Bahamians Against Greed and Corruption, and ConsumerAction Bahamas; and the pages BLACKLIST242, and Bahamas Consumer Price Watch, I’ve received messages from members of the public with records of price increases of as little as a half per cent or less at popular fast food chains, some nearing 25 per cent at non-franchise food merchants, and as much as 45, 70 and over 100 per cent at grocery stores.
Obviously, these businesses are frontloading their earnings to make up for anticipated losses and reduced profit margins; to a point, you almost can’t blame them. But, I get the feeling they’re doing it especially because, on the back end of this first quarter and this first year of VAT, they have little to no confidence that The Bahamas government will refund them at all, on time, or accurately.
3 VAT carries with it an extreme lack of confidence.
If prices are not set up correctly in a point of sale system, if there are errors in calculation, if displays and receipts are not clear, if there are unscrupulous price increases ... these all inspire a general and harmful lack of confidence in the collection of VAT.
Add this to an already existent environment of low confidence, and it leads to consumers and businesses revolting and evading taxes, on the one hand, or consumers withdrawing their patronage, causing businesses to shut down altogether when VAT administration and being a business owner becomes more of a hassle than its worth.
After only five days of VAT, it is clear that the weeks and months ahead will be challenging for anyone living in The Bahamas, to say the very least. And it seems a preponderance of people (Bahamian and non-Bahamian) are on edge because of it, not so much because it is new, or because no one wants to pay taxes, but because few can imagine that the administration of this system is not pre-flawed, with subsequent flaws only making the situation that much worse.
For example, if the large retailers who claimed they would be ready from “day one” are not yet ready and do not present the tax in the manner they are supposed to, then how can we, realistically, expect a clumsy government to manage their own VAT duties efficiently?
The end consumers are livid, on one side of the discussion, because vendors are slamming them with price increases, whether minimal or exorbitant. Vendors are angry with end consumers for having a problem with being slammed with innumerable and inordinate price increases, because they feel they have no other alternative, having been squeezed into a corner by a government intent on doing what it wants to do and finding select people to justify and endorse what may be an otherwise foolish decision.
So who will push back the most against Value Added Tax? Who will suffer the most as a result of its enactment – businesses or end consumers?
I think anyone who pushes back will suffer, because there is a degree of sacrifice in taking a hard line in either direction. To conform, consumers will have to revamp their lifestyles in one fell swoop, trimming the excess from their lives (which may in fact not be excess but necessity) if they’re law-abiding, and taking their pound of flesh if they’re not law-abiding – and that might be applicable both figuratively and literally in our current social climate.
As for the businesses, if they push the consumer too hard, they will lose business, and could potentially fold, because they won’t be able to get away with extorting consumers as perhaps they once did with ridiculously priced goods and services.
And if businesses push back at the government, or go rogue as some already have with respect to the initial public experiences of VAT, they will suffer penalties, government inaction, or become so disgusted that they close their businesses.
It will be interesting to see which businesses can make it to the end of the first quarter of 2015, and which can make it through to the end of the year. The longer they can hang in there, the better an indicator it could be of their ability to at least remain a going concern. But the duration of VAT growing pains is certain to be prolonged, which is in turn certain to lead to greater economic woes … increased criminal activity, and soon other social ills previously regarded as unimaginable.
One of the things I think is already worthy of being deemed a social ill, without hesitation, particularly given the compromising position it places our national development in, is the widespread deficiencies that exist in basic education – English and Mathematics – amongst our population. These failures are being manifested just in the implementation of VAT. Our national exam D average is really showing its true and loudest colours now.
Consider that, in social media dialogue, there are many who seem to think that they’re only supposed to pay 7½ cents on their final bill, whether they spend $1 or $1,000. They don’t comprehend that the tax is levied as 7½ cents on every dollar spent. And it sadly and painfully implies an extreme level of ignorance about taxes – and/or an extreme lack of basic math skills.
There is some outcry that the government – in the persons of VAT representatives – needs to give the whole country a VAT lesson; I think that would be a waste of time, if what they need first is a math lesson. I mean, people truly cannot add. They can’t multiply. They can’t divide. They don’t understand percentages and they can’t calculate them. It is frightening. But it is real.
So, as ridiculously basic as this might appear to the well-educated, here goes:
7.5% is the VAT.
7.5% is also written as 7.5/100.
7.5/100 (7.5 divided by 100) = 0.075
0.075 is your “multiplier” (see chart below).
Whatever your base product price is, multiply (‘times’) it by 0.075 to get your tax amount. The following schedule should be helpful as a very basic guide for every dollar or portion of a dollar spent.
For example: a pair of shoes is $40 before VAT.
VAT on those shoes is $40 x 0.075 = $3.
Your pair of shoes, with VAT, now costs $43.
As rudimentary as this is, there are some people who really do not know or understand this, and they don’t know that they don’t know; that’s the worst kind of unawareness because it’s harder to resolve.
Please share… and help those who don’t know.
• Send comments via Tribune242.com or nicole@politiCole.com.