By NEIL HARTNELL
Tribune Business Editor
Food stores' early 12 percent VAT collections have exceeded predictions by double digits, with Super Value's owner admitting: "We were all wrong about breadbasket sales."
Rupert Roberts told Tribune Business that VAT "zero rated" food products were up to 30 percentage points below forecast as a percentage of total sales, resulting in supermarkets collecting significantly more Treasury revenue that forecast during the first six weeks of the 2018-2019 fiscal year.
He revealed that Super Value collected "54 percent more VAT than expected" for July, before the bread basket foods' "zero rating" took effect. And tax revenues collected from consumers during the first two weeks of August, after the VAT exemption took effect, were 33 percent up year-over-year.
These figures contrast sharply with Mr Roberts' prediction to Tribune Business on July 20, 2018, that the "zero rating" of "bread basket food items would slash Super Value's VAT take by two-thirds
He based this on the estimate 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.
However, Mr Roberts conceded that his and industry predictions that breadbasket items would account for 50 percent of sales had proven widely inaccurate to-date. He suggested the true proportion could be less than 20 percent, meaning consumers are purchasing more VAT-able grocery products.
He added that the breadbasket percentage could even be as low as 15 percent in locations such as Abaco, due to the high number of second home owners, renters and yachters who were likely less VAT-conscious than Bahamians when it came to their shopping patterns.
Mr Roberts also revealed that another "terrible concern" for the retail industry - that they would be unable to "cover" the 12 percent VAT paid on imported inventory at the border, thus requiring the Government to pay them a refund - had also failed to materialise to-date.
The sector had feared the Government would be unable to effect timely refunds, thus impairing their cash flow, and Mr Roberts described its ability to cover the "border VAT" as "a God send".
The Super Value chief branded the immediate results from 12 percent VAT as all-around "good news", since retailers' cash flows were not impaired; the Public Treasury was likely earning more revenues than anticipated; and the lower-than-expected breadbasket sales percentage would aid Dr Duane Sands' quest to make these foods healthier.
"I think we were all wrong about the amount of bread basket items we're selling," Mr Roberts told Tribune Business. "Definitely the Retail Grocers Association (RGA), of which I'm secretary, we're wrong.
"I'm pleasantly surprised that I'm wrong and how low it is. I say that because I thought it could run up to 50 percent, but I know it's now going to run under 20 percent. I know it's going to be under the 20 percents, and hopefully in the range of 15 percent."
Mr Roberts expressed hope that "the whole country" would follow Abaco, where bread basket items were on target to hit 15 percent of total sales. "In Abaco they have the tourism; they have the foreign residents and the yachters that are out buying from local stores, and they're not buying the bread basket items," the Super Value chief added.
"They're [Abaco's bread basket percentage] is going to come in lower than New Providence, which is great. We're selling to the tourists in this country at 12 percent and they're paying our taxes."
As for Super Value's experience, Mr Roberts told Tribune Business: "In July, we collected 54 percent more VAT than expected. And, in the first couple of weeks of August, we collected 33 percent more VAT than last year.
"Therefore, the 50 percent bread basket estimate was wrong. For the last 50 years we've been promoting bread basket items in the newspaper, the radio and TV. Now, the good news is we expect bread basket items to be less than 20 percent of sales, and hopefully they will be in the vicinity of 15 percent.
"We're collecting 33 percent more, which is indicative we over-estimated the percentage of bread basket items we are selling."
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, meaning the 12 percent has not been added to the final sales price from August 1.
This also benefits food stores, wholesalers and all elements in the local supply chain, as they also do not have to pay the new 12 per cent rate. If a product has 'zero rating' status, businesses are exempt from paying VAT on their input costs in proportion to the amount of inventory accounted for by these items - in a food store's case, the bread basket.
Mr Roberts, meanwhile, expressed surprise that retailers had largely been able to cover the "border VAT" on imported inventory without having to resort to government credit or refunds.
"We're covering 12 percent of VAT at the port, which means merchants do not require a refund. That was a big concern of merchants," he explained. "We're collecting the VAT to cover it, and that's a God send.
"We don't want the Government owing us and they're not able to pay, which strangles cash flow and puts small and big merchants out of business. This was a terrible concern among merchants that the Government would start owing us money they were not able to pay, summed up in one word: Barbados."
Mr Roberts also revealed that Super Value had to resort to using its bond, "without paying the duty" immediately, to move imported inventory from the dock after Customs' reclassification of codes and tariff headings - without informing major importers and brokers - caused temporary clearance issues earlier this summer for the private sector.
Still, Mr Roberts praised the Ministry of Finance and government revenue agencies for working with retailers, wholesalers and others to accomplish the transition to 12 percent VAT and associated 'zero ratings' with a minimum of fuss - something he described as "a first time in 50 years" event.
He added that there was "a great difference" between this government's approach and that taken by the Christie administration, as the current one was "not penalising us for mistakes" but working with the private sector to get it right.