The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Supervalue’s owner has urged the Government to make a Value-Added Tax (VAT) review its top priority, disclosing that the requirement for inclusive pricing had slashed the supermarket chain’s sales by 10 per cent.

Rupert Roberts told Tribune Business that the former administration “shot itself in the foot” by mandating that retailers shift to VAT-inclusive pricing, as the reduction in sales automatically equated to a reduction in potential tax revenues.

Mr Roberts also lamented the absence of a clearly-defined VAT appeals process, where businesses could challenge fines they thought were unfair and unjust.

He argued that the VAT and Inland Revenue Departments were too eager to fine businesses for infractions, suggesting that the Government sought to penalise firms whenever it needed extra revenue.

Calling on the Dr Hubert Minnis-led administration to reform Business License fees as well as VAT, the Supervalue owner said “it boggles the mind” when the number of issues facing the new government are assessed.

He added that there was “a laundry list of complaints” from the private sector that needed to be addressed, and said: “You don’t have enough Tribunes to go down the list of what is wrong in this country.”

The new administration is set to unveil its legislative and policy agenda on Wednesday, with the opening of Parliament and ‘Speech from the Throne’, and Mr Roberts urged it to tackle long-standing business grievances over taxation.

“When the new Government gets their feet on the ground, they have such an enormous job,” he told Tribune Business,”but they seem to be out the gate very early. I’m surprised they’re moving so fast, but they have so much to do that it boggles the mind.

“I think that the VAT legislation has to be reviewed. I will give you an example. We started out pricing [VAT] inclusive and non-inclusive. I came to the conclusion that the non-inclusive pricing we started out with was breaking the law.

“After a while, the VAT Department came in and fined us $75,000, saying we were breaking the law [with non-inclusive pricing].”

Criticising the absence of a proper VAT appeals process that businesses can use to challenge such penalties, Mr Roberts said the imposition of VAT-inclusive pricing created unintended consequences for both private sector and the Government.

With VAT’s introduction on January 1, 2015, merchants were given a transition period during which they were to convert all product labelling to inclusive pricing, meaning the 7.5 per cent levy was incorporated in the shelf price seen by consumers.

“We started pricing inclusive, and sales dropped 10 per cent,” Mr Roberts told Tribune Business. “We sell jumbo melons and cantaloupes for $2.99, and the consumer knew they had to pay an extra 7.5 per cent at the register.

“They made us instead price at $3.21, and the consumer had in the back of their minds that they still had to pay 7.5 per cent at the register. They thought they couldn’t afford it.

“Our sales are off 10 per cent because of VAT inclusive. Our VAT returns to the Government also dropped off 10 per cent. They blew their head and foot off.”

Mr Roberts contrasted the Bahamas’ seeming lack of flexibility on VAT retail pricing with New Zealand. He added that Dr Don Brash, one of the New Zealand advisers to the Government on the new tax, had disclosed that companies in his country had the freedom to adopt inclusive or non-inclusive pricing provided they were transparent.

“There’s a laundry list of complaints that the business community presently have that need to be corrected. There’s a lot of problems,” the Supervalue owner told Tribune Business, turning to Business License fees.

“I can give you another complaint. The Internal Revenue Department fined us $317,000 for late payment [of Business License fees] because the legislation doesn’t allow you enough time to audit your sales.

“Our auditors had to audit 300 cashiers and over $200 million in sales, and that takes time. And, when they did sign off, the Inland Revenue took two weeks to respond to us,” Mr Roberts continued.

“They can find us, but we can’t find them. We’re getting the impression that every time the Government needs money, instead of going to the bank they go to Supervalue.”

SuperValue’s last Business License fee was $3.18 million, and Mr Roberts said the supermarket chain was informed that five letters it sent to the Inland Revenue on the matter received no response because they were not sent via the correct filing system.”

Business License fees have become increasingly perceived as a regressive tax, as they are based on top-line revenues and fail to account for a company’s profitability.

They penalise high turnover, low margin businesses such as food stores and gas stations, imposing a disproportionate burden on them when compared to low turnover, high margin companies.

Business License fees also further complicate matters for companies under price controls, often with the result that many companies pay more of this tax to the Government than they make in annual profits.

“What I hate about it is the more sales you do, the more you have to pay,” Mr Roberts told Tribune Business. “Once you get up to a certain level of sales, the Business License should level off. It’s like income tax; the more you make, the more you have to pay.

“Please quote me on this. Our small merchants find it very difficult to meet the Business License fee. Almost 18 months ago, Robert D’Albenas, head of the Bahamas Wholesalers Association, Philip Beneby, president of the Retail Grocers Association (RGA), and myself as secretary of the RGA, met with Roger Forbes and his assistant at the Inland Revenue.

“We said: ‘There’s this big pill for our members to swallow, and hopefully you could let them pay quarterly. He was adamant it [Business License fees] had to be paid annually,” he continued.

“This was while Michael Halkitis [former minister of state for finance] was saying if you can’t pay all at one time, pay what you can. On the meantime, we knew companies that are paying quarterly and still are.

“I recommend that the new government make that one of the changes to the Business License pretty quickly.”

Noting that SuperValue and its Quality Supermarkets affiliate were one of the Government’s larger taxpayers, Mr Roberts added: “We’re hoping for better co-operation from the people that we pay our taxes to.

“If we don’t demand better co-operation, it’s our fault.”