By NEIL HARTNELL
Tribune Business Editor
The VAT "zero rating" of breadbasket food items has been delayed until August 1 to allow merchants time to adjust their systems and pricing, a top official revealed yesterday.
Marlon Johnson, the Ministry of Finance's acting financial secretary, told Tribune Business that the month's delay would enable retailers' point of sale (PoS) and inventory mechanisms to account for the multiple tax exemptions.
"The reason for that is to give the retailers time to adjust their point of sale systems, their inventory systems and receipts to account for the exemptions," Mr Johnson said, indicating that the government would be lenient when it came to merchants adjusting all their pricing, labelling and signage by July 1.
He added that the Ministry of Finance was "working furiously" to complete the "guidance notes" that will advise the private sector on the transition to a 12 percent VAT, with their release set to potentially occur as early as tomorrow.
Mr Johnson reaffirmed, though, that "the unassailable message" is that the 60 percent VAT rate hike will take effect from July 1. And, notwithstanding the wait for the guidance notes, the Ministry of Finance is expecting all businesses to be "well advanced" in their preparations for 12 percent VAT so they can be compliant by the deadline.
"That'll be happening this week," Mr Johnson told Tribune Business of the guidance notes' release. "It may be as early as Wednesday, but certainly this week. The team is finalising them as we speak.
"We've been working furiously on them. We want to make sure they're correct. We've also been in talks with key industries to inform them of the government's position on key matters. VAT will be 12 percent on July 1, and that remains the government's policy; there's been no waiver from that.
"It's just important to get the questions answered, the information out there, because questions come to us. We want to let consumers know what to expect come July 1." That date is now just 12 days away.
The Ministry of Finance official added that the government would be lenient when it came to large retailers meeting the July 1 deadline to alter their pricing and labelling for the 12 percent VAT, given that thousands of products are affected.
"The government will look at things around signage and price tags," Mr Johnson told Tribune Business. "As far as price tags and labelling, we understand those big retailers will take time to get that done. There may be instances where not all price tags are updated but that's part of the transition."
He added that the Government had already moved to ease the VAT transition for specific industries where it was warranted, pointing to the hotel and tourism industry in particular.
"The Government is providing an accommodation where they have bookings and reservations made in which we will honour the existing VAT rate," Mr Johnson confirmed. "A lot of the bookings done by hotels for large groups and conventions are fixed bookings."
But, while the Government may have smoothed the process for hotels, he said no further changes were likely for sectors such as the automobile industry. The sector had been seeking an increase in the 1.5cc engine size limit for the new 25 per cent duty rate, and an "offset" in the form of tax credits for the Excise Tax they will have to "eat" on existing stock.
"There's been no indication from the policy level of anything further for the auto dealers," Mr Johnson said. "The Ministry felt confident that change to allow a drop in duty rates for small vehicles, hybrids and electric vehicles creates substantial opportunity for them regardless of any other adjustments being made."
The financial secretary said feedback from the private sector suggested many businesses were already well on their way to compliance by July 1 and adjusting their systems for a 12 per cent VAT.
"We hope and anticipate businesses are well advanced in their plans to be ready for July 1," Mr Johnson told Tribune Business. "The vast majority of them are on electronic, very sophisticated Point of Sale systems.'