Consumers must be more prudent

01.June.07

EDITOR: The VAT system, if implemented by the business community honestly and properly, should reduce the high prices on a number of products. Even if there is an increase in the local and international market of say 5%, prices should still be cheaper in the case of those products, which were previously at 35% Consumption Tax. It would make these products tax at 25%, 10% cheaper.{{more}}

Even before VAT, prices were always rising and falling depending on the availability of the products. There is a noble saying that “what we know does hurt us and what we don’t know doesn’t hurt us” but in this case it is what we don’t know is more of a problem to us.

What we don’t know is that most business places don’t genuinely offer discounts; what they do is increase the prices of commodities and then offer a discount which in real sense make the prices higher even after the discount. What we don’t know is that we were paying VAT all the time in Consumption Tax but we never knew how much we were paying, but with VAT we will know how much tax we are paying.

What we don’t know also is that business places were abusing consumption tax by not paying their fair share of tax but would still charge consumers on the whole imported stock. They would have cheaper invoices drawn up for example: a business place would import products valued at $300,000 taxable at 35%, the total payable in tax would be $105,000 but would reduce the value of the products at $114,286; they would pay $40,000 in tax and $10,000 elsewhere to avoid paying $105,000 they would save $55,000 but would still charge the $105,000 in the cost of the products to the consumer.

I would agree with the Opposition that more basic items need to be zero rated, but the Prime Minister made a strong point that VAT is at the trial stage and that we need to wait and see how it would work. If the tax collected is greater than what were collected before VAT it is only natural that more items would be zero rated. My major concern is about those agents who import products for which they are sole distributors. They would have to charge VAT to the wholesalers, retailers who would in return charge VAT to the consumer. The double-vatting would be a serious problem. I don’t know if there are special arrangements in place by which distributors and wholesalers would be able to sell at the same price and the VAT in this case could be shared half/half.

This situation needs addressing to avoid hardship caused by high demand products that were taxed lower previous to VAT. For example, with cement and steel, in order to avoid reducing the high growth in the construction industry and to avoid increasing the cost of the very important low income housing programme. With the rapid increase in the price of land, civil servants and poor people would not be able to borrow money to build houses because the

cost of construction would increase, should their salaries remain at the same level? At this very crucial stage of our country’s development, consumers/citizens have to be very prudent in their shopping and shop for the best quality and priced product and avoid buying what they want as against what they need.

Try and save 20% of what they earn at a credit union. The very important economic word of choice comes into play. Twenty dollars would buy approximately four tins of corned beef; it could also buy a suit of clothes. That same twenty dollars could also buy a combination of things – 1 dozen eggs, 1 hand of plantain and 1 pound of farine together which is more cost saving? It seems to me that foodstuff is more expensive than clothes. I wonder why? We need to shop for local produce.

Ariston Dennie