The Tribune

THE Ministry of Finance and Galleria Cinemas were last night at odds over the cinema’s increase in its ticket prices.

The Ministry issued a statement condeming the cinema’s explanation for why its prices had risen from $8.50 to $10 after the introduction of VAT, an increase of 17.5% rather than the 7.5% rate of the new tax.

The statement said: “The Ministry of Finance takes issue with a statement by a local cinema that attributed a tax inclusive ticket price increase of 17.5% mostly to VAT related costs.

“The statement conveys a misunderstanding about VAT credits to which the cinema is entitled. These are recoverable outlays and not costs.

“The public is encouraged to challenge assertions which convey impressions that VAT is a significant cost for registered business.

“The tax is directly borne by consumers. When paid by the VAT registrant, it is recoverable as credits.”

However, the cinema chain, owned by Chris Mortimer, also issued a statement, denying any allegations of price gouging and saying that businesses and consumers have been dealing with the “shocking changes”.

It said: “In the run-up to January 1, government officials offered nothing but unclear, and often confusing proclamations from on the new tax system. Since its formal implementation, the local business community has been forced to essentially navigate the course with blinders on.

“Over the past few days Galleria Cinemas, like many companies has attempted to adapt our current model in a bid to continue offering our services. In recent days, detractors have attempted to paint Galleria as a company only concerned with its bottom line. A company seeking to pull the wool over the eyes of our long-standing and faithful customers.

“Contrary to popular opinion however, our patrons should be reminded that nearly 70% of revenue collected from the movie theater ticket revenue is returned to the distributors.

“The decision to increase the price of our movie tickets from eight dollars and fifty cents to ten dollars is not an attempt to gouge our customers and any individual making that assertion is either oblivious to the challenges which face the local business community or simply looking to stir up unnecessary controversy. Instead, the move is a legitimate effort on our part to survive.

“Amid the commentary on this issue has also been sweeping comparisons to movie theaters in the United States. The public must be reminded however that unlike US operations Galleria cinemas operates in an environment where the cost of electricity is 150% higher while financing costs locally are up to 600% higher than in the US.

“Now, with the advent of VAT, Galleria Cinemas has faced a 100% increase in its accounting costs to become VAT compliant. Such increases have made the increase imperative if we are to continue operating as a successful entity.”

In addition, following a report that Mario’s Bowling Alley was including a line in its receipt showing a charge listed as tax which the company said was actually a gratuity, the Ministry warned that businesses are not allowed to list any charge as a tax that is not VAT.

Customers are also entitled to refunds, the Ministry said, on any amounts identified as tax or VAT which exceed 7.5%.

Warning letters have also started to be sent out to businesses where product labels have not been changed to show VAT inclusive pricing and signs are not in place to advise that tax is being added to final prices.

The Ministry added: “Later into January, these warnings will be replaced by administrative fines.”

The Ministry added: “The VAT Department also cautions all registrants that, without exception, their responsibility to collect the tax started on January 1, 2015. In particular, some queries have surfaced on whether motor gasoline was taxable from January 1. There was no delay. In this and other cases, the liability to account for VAT exists from January 1 even if it was not charged to the customer.

“At the same time, the consuming public is advised that they cannot be charged VAT by businesses that have not completed the registration process. The proof of registration is the registration certificate with a TIN. The TIN must be shown on all receipts issued and the certificate must be on open display. Businesses that issue VAT receipts without being registrants will face fines.”