Inspectors have been checking prices to ensure stores have been compliant after the introduction of VAT - but some shoppers are doing their own price checks, and deciding to cut back.
By KHRISNA VIRGIL
Tribune Staff Reporter
kvirgil@tribunemedia.net
WITH the roll-out of value added tax consumers are tightening the reins on their finances, telling The Tribune that they expect the new tax system to have serious effects on the Bahamian way of life.
VAT, a consumer-based tax, was implemented on January 1, 2015, at a rate of 7.5 per cent. Several consumers said in this first year of VAT, their main aim would be to save more and spend less.
Father-of-two Joseph Sands told The Tribune that his family has already seen a huge increase in their average weekly cost of grocery shopping.
He added that they are also now in the process of reevaluating their usual yearly family activities. He said before VAT implementation, it was customary for him and his family to travel to either the United States or a Family Island three times a year.
However, he estimated that trips and leisure activities would be reduced significantly. This year, Mr Sands said he would concentrate on how every single penny he earned is spent.
“Our food bill went from around $150 a week to around $260,” Mr Sands said. “There are going to be serious lifestyle changes. Already we are looking at our travel. Where in the years before we would take three trips per year for vacation or just a pleasure weekend trip to get away from here, that will be drastically reduced.
“Because we have to look at tax on tickets, tax on hotels, tax on everything. It’s looking like it would have to be like just one trip per year.”
Mr Sands said he will likely have to cut down on purchasing “luxury” items and donations to church and charities.
“Even the small stuff like buying gifts for god kids and birthday gifts… stuff like that we have to scale back on them. Looking at our finances and how they will be affected, my wife and I are also considering cutting back on giving to the church and patronising cook outs that most Bahamians turn to in aid of different causes.”
Neko Maynard told The Tribune he has now become more price conscious. He said he was more likely now to buy generic brands while grocery shopping because they tend to be cheaper.
Mr Maynard is a married father of a two-year-old son. He and his wife moved into a new home last year.
He said to some, 7.5 per cent might not seem like much, but over the course of weeks or months, it would be surprising to see how the tax adds up.
“Since the implementation of VAT,” Mr Maynard said, “I can honestly say that I have not only cut back on my expenses but I have become a more price conscious consumer.
“Every time you make a purchase now you have to account for VAT. To some, 7.5 per cent may not seem like much but certainly throughout the cost of any given week, it can really add up,” he said.
“You can’t ultimately stop spending because there are certain things you need to get at any given time, but certainly the idea that everything is going to cost a bit more forces you to look at ways to spend less.”
Karen Brennen agreed that with VAT being added to all goods and services, keen attention must be paid to how money is spent everyday.
Ms Brennen said she is now considering taking up another job to generate an additional source of income.
She said: “Now I have to look at all the days that I bought lunch every day. Looks like I will have to spend more time in the kitchen and (less time in) fast food places and restaurants.
“Over the course of the next few weeks, getting another job to sustain me is looking more and more like an option. I have one child and I have to think about how VAT will affect utilities and how I provide for him as well.”
Days after VAT was implemented, Free National Movement Leader Dr Hubert Minnis vowed that his party is looking at ways to repeal certain categories of the tax, if it is elected to office. These categories include breadbasket items, children’s clothing and utilities.
Dr Minnis has contended that the government had no regard for the poor or middle class by introducing the new regime, saying that VAT will no doubt affect each class of society negatively.
• Some names have been changed at the requests of the persons interviewed.
Comments
duppyVAT 9 years, 3 months ago
Waiting for Dept of Statistics to conduct their first post VAT consumer spending survey ...... and then listen to what Brave and Halkitis would say ...................... LOL
Economist 9 years, 3 months ago
It was never going to be just a 7.5% increase on the goods. This is because the businesses now pay 7.5% on all the services that they receive. Not all of the Vat on services is recoverable.
This means that the cost of delivering the goods has gone up, before Vat is applied. Then you have the fact that Vat is added not to the price of the goods when they are imported but to the cost+duty. In effect Government gets Customs Duty of say $100 and then charges 7.5% on that $100 so gets 107.5 in revenue. It is a kind of double dipping by Government.
Real cost is somewhere between 10 and 12%
ThisIsOurs 9 years, 3 months ago
Yep. They're not double dipping, they found a creative way to do exactly what they wanted to do. Since everything is imported, we pay 15%+ on everything. as you said, 7.5% to customs, that item goes in the store and we pay an additional 7.5%. The business doesn't swallow the 7.5% at customs, they include that in the price. Welcome to believing in Bahamians and no new taxes
chairarranger 9 years, 3 months ago
If it were just a 7.5% increase, Joseph Sands (name changed, identity obscured, in Witness Protection, etc) would've seen his grocery bill rise from $150 per week to approx $161 a week. Or if the real effect is somewhere between 10-12% as you suggest, the groceries would now be costing $165-168 a week. Where this (possibly fictitious or otherwise nom-de-plumed) man gets his $260 a week figure from is really anyones guess.
In the old days people (real or imagined) interviewed for stories in the newspaper were asked for simple facts and evidence to back up their claims before they were published. In this case, a couple of grocery store receipts from pre VAT and post VAT, for an equivalent sort of family sized food purchase, might have lent a bit more weight to this story. Followed by a bit of basic analysis of how $150 plus 7.5% could (im)possibly become $260 overnight.
I don't like tax either. But news stories like this do nothing to help the argument because the numbers just don't stack up.
And who knows, perhaps Dr Minnis is not in fact Dr Minnis, but instead someone else whose name, possibly like Joseph Sands, has been changed at their request for fear of grocerical retribution?
DreamerX 9 years, 3 months ago
I agree, this article seems to be biased and focusing on obviously poorly based information. What journalistic integrity would allow someone to say "People" are talking about increased costs and cite random "Name Changed" people as some fair sampling of the people.
Honestman 9 years, 3 months ago
And now to rub salt into the wounds there is talk of the VAT revenue not being used to run down the National debt but to fund more social programmes!!! Is there any limit to this administration's deceitfulness?
RTStorm 9 years, 3 months ago
Deceitfulness?!?! You’re being too kind. They are down-right liars, thieves and professional bandits who cannot be trusted to manage any amount of money. Their next pillaging act will be to increase the VAT rate July 1, 2015 or by the end of the year. Wake Up Bahamas . . . especially you “diehards”.
asiseeit 9 years, 3 months ago
The only choice people have is to cut back on spending. I wonder what would happen if that was the only choice government had? The only thing missing from the crime the government is committing against the people of the Bahamas is the gun stuck to our heads when they steal our money. When they take our money and we get nothing in return, that is outright THEFT!
birdiestrachan 9 years, 3 months ago
Many persons that I have met. have no problems paying VAT. they said they go to the USA and pay their sales TAX so they can pay it in the Bahamas. As for cutting back many Bahamians including me and many children are over weight and we all will do well to eat less. as for my Church I increased my donations in 2015. Bahamians require service and we have to pay , but there are to many civil servants who give poor service. also if you have to depend on the Government medical facilities there is not much hope for you there.
ohdrap4 9 years, 3 months ago
and , as i was about to open my fat farm, people eating less because they cannot afford frozen meatballs anymore.
asiseeit 9 years, 3 months ago
In the U.S. they have Freedom of Information and they know where their money is going. Also in the U.S. you get a "return" for your taxes. They have good schools, roads, water, electric, safety, and a functioning government that works FOR them. The same CAN NOT be said about the Bahamas. In the Bahamas the taxpayer is being ripped off, period! So madam, what service am I getting that is worth the tax I am being forced to pay?
TheMadHatter 9 years, 3 months ago
You are supposed to be getting the "service" of Perry them paying down the international debt to the IMF and IDB so that they don't devalue our dollar. However, Perry them ain't payin on no debt, and just last week he gone over to China to ask to borrow MORE money - so that means he will be looking to increase the 7.5% to probably 9% by June.
TheMadHatter
ThisIsOurs 9 years, 3 months ago
So..VAT will improve customer service and give us a nation of skinny people? This sounds like just what we've been waiting for...
Economist 9 years, 3 months ago
In addition Customs charges for clearing goods has gone up, so add 7.5% to that, and business license fees (by the new method of accounting by consolidating the businesses) went up last year (another increase that gets passed on in increased prices).
If you look at the 2013 and 2014 budgets, government fees have gone up on everything. Businesses are not charitable institutions so all those increases (Government increases) get passed on to the consumer.
The party most responsible for the increase cost of living is not the business community, it is the Bahamas Government.
ohdrap4 9 years, 3 months ago
solomon's at marathon has sectioned off their toiletries, and the customer is required to pay for the items inside the store, separately from the checkout counter.
the cashier computer terminal in that section prominently displays four camera shots for each of the toiletries aisles as a deterrent to shoplifting. i wonder why.
asiseeit 9 years, 3 months ago
What about gas, they tax the hell out of gas already and then we must pay 7.5% on top of that, so in effect they are taxing you on a tax. Utter THEFT!
TheMadHatter 9 years, 3 months ago
"Dr Hubert Minnis vowed that his party is looking at ways to repeal certain categories of the tax, if it is elected to office. These categories include breadbasket items, children’s clothing and utilities."
Doesn't he understand that these are EXACTLY the main categories that NEED VAT? People need to cut down on needing so much children's clothing and having so many children and feeding them cheap garbage food, and they also need to learn how to use a thermostat on an air condition. I cannot tell you how many times I walk into someone's home or a store and see the A/C set at 60 or 65 degrees - the minimum. People should instead be aware that 77 is a very comfortable temperature (compared to 95 outside in summer) and saves a heck of lot more money compared to 60deg.
But, if you want to keep the people poor and stupid - then his plan is a very good one.
TheMadHatter
jt 9 years, 3 months ago
@Birdie, increasing the cost of foodstuffs for people struggling with their finances makes them fatter, not skinnier. Priced out of healthy fresh produce and protein they turn to cheap refined carbohydrates, and cheap sugary drinks like soda over juices (which are actually nearly as bad). Harried single mothers turn to inexpensive convenient fast foods. In the United States, low income areas correspond with obesity and diabetes, whereas higher income areas are fitter.
John 9 years, 3 months ago
THIS Weekend has been the slowest for businesses in a long time. Usually the middle of January is slow as many households are broke after spending for the holidays then getting the children back in school but this weekend was extremely bad. Many streets were like ghost towns, attendants at gas stations fell asleep as there were few or no customers and even a number of food stores had few customers. Those who shopped did so with caution and the reality of vat is now being felt in the pocket of the consumer.
John 9 years, 3 months ago
The higher the customs duties on an item the more VAT is paid at the port since duties and other local charges are added to the cost of the goods before vat is calculated. Never mind what John Rolle says companies with high duty items, slow turnover, high pilferage or high obsolecence of inventory will not be able to recover all the vat paid at the border by charging 7.5% when the government is taking much more. Let's say a boutique brings in a dozen dresses but is only able to sell 9 of them. Then the actual vat paid at the border is over 20%. unless that boutique has a markup of 300% they cannot recover the vat paid on the 12 dresses if they only sell nine. Stores like auto parts with an even higher custom duty rate a larger inventory and similar obsolecence will have an even greater challenge. Businesses that don't track their costs properly can easily find themselves working for government. Those who adjust their prices to cover costs will be branded as price gourging villins.
chairarranger 9 years, 3 months ago
If I could only sell 9 of the 12 dresses I would be equally if not more concerned about the other 92.5% of their original cost of purchase (wholesale price of material, garment construction, freight, storage, handling and labor costs) that I might not recover either. This is normal business risk.
John 9 years, 3 months ago
I guess you meant to say "the mormal business risk has been increased (substantially) by VAT." The things you mention would have been written into the original retail selling price of the dresses if it was expected that all may not sell or some may have to be sold at a reduced price. But when this is done, either the VAT will be lost totally (if the dresses are discarded or given to charity), or it will be substantially reduced if the dresses have to be similarly discounted.
chairarranger 9 years, 3 months ago
VAT is now a cost of doing business. Its not something different, intangible, special or ringfenced separate from any other cost of production that is added and included in the final cost of the sale. That's the effect and proper treatment of a value-added consumption tax. It has no unique character that makes it different from any other cost of production if that product is subsequently marked down, binned or gifted to charity.
chairarranger 9 years, 3 months ago
And you do realize, I hope, that as a dress retailer (for example) your business fully recovers from government (by way of offset) the full amount of VAT you have paid regardless of achieving a final sale of those leftover 3 dresses? The only loser is government, which loses the opportunity to gain tax revenue from 3 dresses that weren't sold (but lost opportunity isn't really actual loss).
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