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Super Value Chief Eyes 2/3 Vat Collection Slash

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value's owner yesterday predicted that the supermarket chain's VAT take will be slashed by two-thirds once the "breadbasket" food exemptions take effect on August 1.

Rupert Roberts, pictured, told Tribune Business that the government will have to earn its forecast $400m increase in VAT revenues from industries other than food retail, suggesting it was unaware just how much of the sector's inventory fell into the soon-to-be "zero rated" breadbasket category.

He revealed that at least 50 percent of Super Value's product range would be VAT-free, and suggested this could apply to 100 percent of "Mom and Pop" food stores' inventory, given that they typically sold only "breadbasket" items.

Mr Roberts said his business had experienced a top-line decline similar to that of rival AML Foods, with Super Value's group-wide sales dropping by 5.7 percent in the week immediately following the 12 percent VAT's introduction.

This resulted in a 28 percent week-over-week decline in VAT collected on the government's behalf, but Mr Roberts told this newspaper he expected the supermarket chain's sales to increase - rather than decrease - once the "breadbasket" zero rating kicked in some 12 days from now.

He added that few consumers seemed to realise the magnitude of these potential savings, and suggested that the Government should have better protected its revenue base by not including so many "fancy" varieties within the 25 'breadbasket' categories.

Mr Roberts said "a couple of thousand items" will be VAT 'zero-rated' come August 1, including expensive varieties of cheese, rice and cooking oil, which he suggested did not merit inclusion.

Analysing the VAT change's immediate impact on Super Value's operations, Mr Roberts said some stores saw up to a 45 percent sales spike the day before the new rate's introduction, but this amounted to only an 8 percent increase for the full week.

"That week we took in $67,000 from VAT. That was the last week at 7.5 percent," he told Tribune Business. "The first week of 12 percent we took in $48,000 for VAT. I estimate that on the first week of the VAT exemptions, we'll take in $24,000 from VAT.

"We're only going to take in one-third of what we took in [monthly] years ago. I hope they're [the Government] making that up somewhere else. It's not going to come from the food retail industry."

The 2018-2019 Budget 'zero rated' so-called 'breadbasket' food items as one of the protections designed to insulate lower income Bahamians from the VAT increase's impact. This benefits both food stores and retailers, as neither will have to pay the new 12 per cent rate - the latter now being exempt from paying VAT on their input costs in proportion to the amount of inventory accounted for by 'breadbasket' items.

Mr Roberts, meanwhile, said Super Value's sales in the immediate aftermath of the VAT hike were "running" in line with AML Foods, having fallen almost 6 percent in the first week of July.

He, however, argued that this is unlikely to represent a long-term trend, with Super Value expecting sales to increase - not decrease - once consumers became alive to, and were able to access, the 'breadbasket' tax relief.

"I don't expect that to hold," he told Tribune Business of the first week post-VAT rise decline. "I expect that when the non-VATable items kick in there will be more sales. I don't expect a drop-off in sales. I expect sales to increase now that we're going to offer lower-cost food. I don't see why people people are going to hesitate to buy.

"On half of what we sell we're cutting the price by 7.5 percent, or 12 percent from this month. That's half of what we sell. The other half only goes up by 4.5 percentage points. The cost of living for the middle class and the masses has just gone down."

Mr Roberts continued: "It's really the people's time. The Government didn't sell it that way, and I don't know if they see it that way, because they don't realise the magnitude of 'breadbasket' items. They might have thought it was 5-6 percent, and don't know it's going to be 50 percent. All the 'Mom and Pops', all they sell is 'breadbasket' items so they won't bring in any VAT.

"If the Government intended to give people lower prices they've done it. If they intended to raise more revenue they're going to have to find it somewhere else."

Mr Roberts expressed doubt, though, that increased grocery sales would result in a matching rise in the sector's VAT contribution to the Government given the 'breadbasket' zero ratings.

"I don't know if selling it cheap we're going to get enough volume to get back up to what we were paying the Government at 7.5 percent," he added. "I hope so, but don't see it unless the economy picks up.

"There's really going to be a big drop in the cost of living on food come August 1. I don't think the public understand it. I never did understand the uproar, as the Government is giving this to all.

"I haven't heard a single person complain about 12 percent VAT, although breadbasket items have gone up 4.5 percentage points. No complaints. Consumers are bearing with it until August 1."

Mr Roberts said Super Value was planning to adjust to the 'breadbasket' VAT zero ratings by introducing two symbols on its scanners and computers; 'F' for VAT-free foods, and 'TF' standing for 'taxed food'.

"I think we're going to have to start with half of the tape being 'F'," he added. "That is not our biggest problem. There are about 25 categories that are bread basket commodities representing a couple thousand items."

Mr Roberts suggested there were too many product varieties, including specialist and "fancy" lines, included in the 'breadbasket' definition. He cited peanut and almond oil, as opposed to standard cooking oil, as products that should not be categorised as such. The same applied to grated and block cheese, and "fancy rice", all of which are now VAT-free.

"The 'breadbasket' item list is just oversaturated with fancy items in these commodities," he told Tribune Business. "Asking the Government, they said it was tied into these new Customs codes and they can't do anything about it until next year.

"I'm sure if the Government had realised they were there, they would have eliminated them and taken them out. I don't think wild rice should be a 'breadbasket' item, but they're all there, and that's where they're not going to collect VAT on."

Mr Roberts said computer technicians working for Super Value and other foods store chains now have "the tedious job" of inputting these several thousand 'breadbasket' items so that the overnight transition from 12 percent to VAT-free is seamless.

He urged the Government to show leniency to retailers if there were any glitches come August 1.

Comments

ohdrap4 11 months, 1 week ago

well, when is the govt going to publish this new breadbasket item list?

i have to wait until august 1st to buy my caviar. Isn't that canned fish?

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John 11 months, 1 week ago

So when the zero-rated VAT kicks in on the breadbasket items, the economy will experience the reverse of what happened when the VAT was increased and maybe even a little better. Remeber the VAT was increased from 7.5% to 12% but come August 1, it will be reduced from 12% to zero. So consumers will not only experience a decrease in the cost of essential foodstuffs, but the 'feel good' effect of having more purchasing power tends to drive shoppers to spend more. The only concern, like Mr. Roberts indicated, was will the government be able to make up for the 2/3 reduction in VAT it will be experiencing on food items. And if not this can spell trouble down the road as the increase in VAT to 12% will be nullified by the removal from breadbasket items. But if the government can sustain the numbers, this will serve as an additional boost for the economy and stimulate more growth in the economy. And if there are no hurricanes and tourism can experience another booming winter season, next year will be better.

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ThisIsOurs 11 months, 1 week ago

That analysis is shallow if you weren't actually watching prices. The same thing happened before the 7.5%, every few days prices would jump a couple pennies by the time VAT was implemented the base price was up by a dollar or more. The base prices at Super Value have won the Olympic triple jump medal. So people may say wow it's cheaper than after they added the 12% possibly not realizing it's more expensive than when they had the 7.5

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John 11 months, 1 week ago

RE:That analysis is shallow if you weren't actually watching prices...fortunately I was watching prices and even yesterday I lamented how the price for lamb chops moved from $1.99 a pound pre VAT to $5.39 today. And many other prices have increased. Apparently Super value and other stores add a percentage on to the VAT because they have to lay out this money when they purchase goods so it does add to the cost of doing business. And if you are watching prices, the banks have scheduled increases in their fees to begin August first. But some prices, like lamb chops have more than doubled over the past two years.

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ThisIsOurs 11 months, 1 week ago

Mr Roberts is being disingenuous here, he knows he raised the base price in his products. My apples that were 99c the week before the 12% are now 1.67 before VAT is added. So whether he includes VAT or not, my bill will still be higher. Many other retailers took the opportunity to just add a dollar here and a dollar there, just because they could.

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licks2 11 months, 1 week ago

The merchant have already "hogged" that up by adding on to other items. . .so when the government move the VAT they will not feel anything when it goes right back of other things. . .the kicker here is. . .THE RICH AND MIDDLE CLASSED ARE THE ONES MOST LIKELY TO GET SCREWED! MOM AND POPS THEM WILL GET THE FREE RIDE ALL THE WAY TO THE BANK. . .then the light bills and other deductions will take VAT down for the poor some more. . .they ger be paying so little VAT. . .hahahahahahahahahahahahahahaha!

I did not see that one coming. . .I guess some of yinna were right when ya said that doc "still on campaignin" aye?

Me and some friends were discussing that and we came to the conclusion that "we get swing" by doc. . .but we een mind. . .we are making the money and the nation need our help. . .our working class can afford it. . . just as long as they don't PLPise out taxes.

This truly is the poor man budget. . .

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ThisIsOurs 11 months, 1 week ago

Lol. Wow that really is the best crap you put together to date. "The poor mans budget". I'm praying for people to lead this country who truly care about this country more than they do power and their pocket so they won't try to sell pig slop to Bahamians and tell them it's caviar.

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John 11 months, 1 week ago

For the record Super Value pays $1.00 on each of its shares every year.

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